"When the chain catches the sprocket"

Jim Bianco of Bianco Research was on Bloomberg earlier today and he had quite a few comments on the Federal Reserve's most recent move to provide up to $540 billion to shore up the ailing money market industry.

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This is a rather lengthy interview with the most interesting part coming at about the 14 minute mark when Jim was asked what we should be worried about - in-flation or de-flation.

As long as all these bailout programs don't work, de-flation is the order of the day and prices will keep going down and you really have to worry about de-flation with a "d".

But, the Federal Reserve and world central banks have engaged in activity, even up to today's money market fund action, that can best be described as hyper-inflationary. They are inflating their balance sheets and they are inflating the world money supply to a degree no one ever thought we would see.

The fear is that "when the chain catches the sprocket" and the credit starts flowing and everything starts moving again, then we flip into a hyper-inflationary environment because of all the money that's been put into the system.

And so, the debate continues.