Russell McDougal at Investor’s Daily Edge says there is too much dollar-based debt that can’t be paid back for the buck to survive in its present form. Another Nixonian dollar default is coming, this time via hyperinflation. And the same people who have sentenced the greenback to death will be launching its replacement, the Amero.

Daily Reckoning editor Bill Bonner is amazed that investors continue to buy Treasury bonds, when official inflation is running way above the yield of on 10-year Treasury notes. Americans have grown so accustomed to stable inflation and low interest rates that they have forgotten the lessons of the ’70s and early ’80s. Bill says every generation of investors in the last century has faced a major crash, and now it looks like it could be our turn…

Financial charts can generally look good or bad. But sometimes, one comes along that is downright ugly. The Rude Awakening’s Joel Bowman says the earnings chart for the Dow Jones Industrial Average index (.DJI) is particularly sore on the eyes. Earnings were negative in Q208, for the first time ever, giving the index a price-to-earnings ratio of nil. Such losses will heighten deflationary fears, encouraging the government to crank up its inflationary policy. More from Joel…

The Daily Reckoning’s Bill Bonner says Americans are going to have to get used to a lower standard of living. After living beyond their means for so long, they will have to leave beneath their means to survive the correction.

Ken Rogoff, former Chief Economist at the IMF, warned that ‘the financial crisis is at the halfway stage. I would go further to state that the worst is yet to come’. His prediction that a large financial institution would collapse led to a fall in global markets.

What should investors worry about more, inflation or deflation?

Wholesale prices (PPI) are rising at the fastest pace for almost three decades. But some analysts warn that the decline in asset and stock prices could signal the start of a severe bout of global deflation.

Dan Denning in The Daily Reckoning Australia says both inflation and deflation destroy value, albeit in different ways. But as long as central banks can print more money, worldwide deflation is unlikely.

Citing the risk of high inflation, the U.S. Federal Reserve voted to hold the Federal Funds rate steady at 2.0% yesterday (Wednesday).

“Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,” the accompanying Federal Open Market Committee (FOMC) statement read.

Economists and investors wait with bated breath for the U.S. Federal Reserve to release the statement from the Federal Open Market Committee this afternoon (Wednesday) at 2:15 p.m. EDT.

While it is almost universally expected that the FOMC will vote to hold the Federal Funds rate steady at its current 2.0%, the language in the accompanying statement will be scrutinized for clues about the upcoming August and September meetings.

The U.S. Federal Reserve will be in the spotlight again this week – and not because of those speaking engagements that seem to help whipsaw investor emotions. Tomorrow (Tuesday) and Wednesday, central bank Chairman Ben S. Bernanke will meet with his fellow policymakers on the interest-rate setting Federal Open Market Committee (FOMC).

After one of the most aggressive rate-cutting campaigns in its history – a stretch that’s seen the Fed pare its benchmark Federal Funds rate from 5.25% in mid-September all the way down to 2.0% today – most experts believe the central bank’s next move will be to take interest rates higher to blunt inflation…

Apparently, there’s just no stopping stocks. They just keep on trucking higher as investors forget about the recent troubles in the financial sector and focus on Merrill Lynch’s note that ‘credit markets may be “past their worst”’.