Is the dollar in the initial stages of a hyperinflation? We very strongly doubt it, although we would no longer assert categorically that such an outcome is impossible. Even so, there is only one course of political action we can conceive of that would put the U.S. economy on a hyperinflationary path, and it is not one that we have heard discussed. Indeed, while inflationists have always insisted the Fed would do 'whatever it takes' to avoid deflation, they've always fudged the details. And even when details were forthcoming, the scenarios they described were preposterous ' such as that wage inflation was about to come on full-bore. Does anyone actually believe that United Airlines, Chrysler, Beazer Homes et al. will somehow find a way to pay their employees enough to scrape by in hyperinflationary times? Another crackpot vision of the inflationists has Helicopter Ben dropping $100 dollar bills from whirlybirds. This tableau was metaphorically appealing but implausible, since the only legal and legitimate way to put fresh money into people's hands is to get them to borrow it. And by the way, this is true even of the stimulus checks the IRS recently mailed to taxpayers. It may have seemed as though the money dropped from the sky, but in reality the hundreds of billions of dollars worth of free lunches disbursed by the Treasury Department will increase the federal deficit and therefore the amount for which taxpayers are ultimately on the hook. No Need to Speculate In light of the above, what options does the Fed have to fend off deflation? Actually, we needn't speculate any longer, since, by its recent attempts to arrest the collapse of America's financial system, the central bank showed us exactly what it would ' and will -- do. Recall that the Fed did
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