In order for inflation to come under control...

[Hyperion]

...we need a healthy recession.

Anyone who claims inflation is not a problem is either ignorant or plain and simple lacks the intelligence to realize that. Now, there are individuals who could care less about the price of anything but they are in the minority.

The two biggest day-to-day expenses for consumers are food and energy and both have increased dramatically and, thanks to Bernanke, will continue to do so. Health-care costs are the third biggest burden on consumers, which are the back-bone of the economy, and are on the rise as well.

The economy can neither expand with inflation at current levels nor can the economy expand without a recession. A recession is needed and actually healthy for the economy as a whole just as bear markets are required for healthy equity markets and to balance out bull markets. Both scenarios are equally important to the markets just as an economic expansion and recession are necessary for the economy.

Consumers get eaten alive by inflation which continues to take out a big bite of disposable income which is used to fuel the economy. The majority of consumers carry a debt load which is extremely above the levels they can support and the collapse of consumer spending is on the verge.

A recession together with a bear market is required for the following reasons:

1. A recession will bring inflation under control as demand for commodities will deteriorate and therefore help inflation to recede (A few rate hikes would stop the bleeding and give a boost to the currency which will help drive down commodity prices which will help out on the inflation front).
2. A recession will punish bad management decisions and force them out of the corner office.
3. A recession will force weak businesses into bankruptcy and wipe them off the map along with their poor management teams.
4. A recession will teach management teams from their mistakes.
5. A recession will force companies who will survive to innovate and come up with new solutions to solve problems.
6. A recession will create new opportunities for businesses and consumers.
7. A recession is as natural and healthy as an expansion and a recession will fuel the next expansion (just as the next expansion will fuel the next recession).
8. A recession will create an equilibrium which will bring the economy back into balance (and that will fuel the next expansion).
9. A recession will ensure that the next expansion is based on a strong foundation.
10. A recession will help to reduce the overall debt level especially with consumers who will cut back on spending and possibly save more or pay-off debts (and to reward them with higher rates would be a welcomed development).
11. A bear market will force bad management teams out of the corner office.
12. A bear market will force bad companies into bankruptcy.
13. A bear market will point out bad management teams to investors.
14. A bear market will fuel innovation and offer new solution and products.
15. A bear market will create new opportunities for companies and investors.
16. A bear market is as good as a bull market and profit opportunities are created equally.
17. A bear market will fuel the next bull market (just as the next bull market will fuel the next bear market).
18. A bear market will ensure that the next bull market is based on a strong foundation.
19. A bear market will increase takeover activity during the next bull market.
20. A bear market will bring down valuations (equities are extremely over-valued right now).

Yes, some of the above are the same benefits from both, a recession and a bear market, and all are very important for a healthy economy and healthy financial markets.

The Fed is on the wrong path but will someone have mercy and stop Bernanke before he will accomplish his life-time goal of the ‘Second Great Depression’?