This pretty much sums it up, folks:

The fundamental problem, as outlined in a post on iTulip, is that debt exceeds the value of the assets that collaterize that debt. There are two solutions to this conundrum: (1) allow deflation and preserve a strong currency, as Japan did in the 1990s or (2) allow inflation and create a weak currency, as Germany did in the 1930s. The folks here expect inflation of over 25% in the future.

It is interesting to note that Japan is a net creditor nation and the United States is, like Germany was during the Weimar Republic, a net debtor nation.

For an easy-to-read, understandable essay on the predicament that we are in, read “The Road to Serfdom”, by Michael Hudson. It appeared in the April, 2006 issue of Harper’s Magazine.

For a prediction of the next bubble, read this fascinating article, also in Harper’s Magazine, by Eric Jantzen, who is the founder of iTulip.