Keith Fitz-gerald (Whiskey & Gunpowder):
Everything we know about classic economic theory suggests the U.S. economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the U.S. Federal Reserve has pumped into the system.

I confess… I got it wrong with gold.

“Gold continues to climb…stoked by inflation worries,” says a headline in the International Herald Tribune.

Retirement is part of the American dream. Unfortunately, the nation’s financial meltdown is making the act tougher than ever. Social Security alone won’t pay the bills.

Personal spending soared 1.3% in August, the biggest monthly leap since 2001, the Commerce Department announced today. Of course, this $129 billion jump in consumption “shows strength in August, indicating some economic improvement,” as CNN writes. A quick look at the chart reveals that the once sober American consumer is starting to fall off the wagon yet again.

On one hand, the deflationists are claiming that given the extremely high debt levels in the West, further inflation is impossible. On the other side of the argument, many proponents of inflation are calling for Zimbabwe style hyperinflation. In this business, everyone is entitled to their opinion; however it is my contention that we will get neither deflation nor hyperinflation. If my assessment is correct, once business activity picks up, our world will have to deal with high inflation.

In my father’s house are many mansions. Surely one of them has a room with no elephants in it….

Not to crunch too many metaphors right here at the top, but a consensus seems to be firming up in the animate jello of the Internet that we have entered the Season of the Witch. An odor of ripeness fills the virtual air — something between dead carp and apples baking.

The rally may end any day, but it didn’t end yesterday. Stocks rose 127 points, as measured by the Dow. Oil closed at $66. Gold rose $2.50.

In their official statement Wednesday, U.S. Federal Reserve policymakers said they “continue to anticipate that economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for an extended period.”

The inflation/deflation debate is hot… It crackles and pops like a pine fire. But it gives off little helpful light. Abe Lincoln may have read by the light of an open fire. But when we tried it, we singed our eyebrows. It made us suspicious of Old Abe; maybe he wasn’t quite as truthful as he pretended to be. Later, we realized he was a mountebank. But that’s another story…