Deflation in the US housing market. Inflation in consumer prices. The twin forces are tearing the economy apart, says Bill Bonner. But which will triumph?

There’s heaps of bad economic news coming out of the US. Food and energy bills have skyrocketed, companies are slashing their workforces and consumer confidence has been shattered.

But Eric Roseman says the mainstream view of a return to ’70s-style stagflation is not entirely accurate. This time around, on top of surging commodity prices and sluggish growth, we have a full-blown crisis in banking sector and major asset price deflation — we have “inverse stagflation.”

What to do? Stay defensive in underweighted stocks…

What does the Federal Reserve plan to do about inflation? At the moment they’re just taking, but it could be time for action later in the year, says Mike Burnick.

Editor’s Note: Lew Rockwell is a died-in-the-wool libertarian. He says this recession is a correction to an overly pumped economic boom. It is not an aberration crying out for correction. It is the result of an unsustainable economic bubble that preceded it. Lew says it should be welcomed in the same way we welcome a sober day after a drunken evening, or the detoxification of an addict after a period of addiction.

Editor’s Note: The Mogambo Guru is apoplectic about the Big Media’s denial over the country’s inflation problem. Official data is underestimating prices in a big way, he says, and the Fed has no idea how to manage the situation…

A lot contrarians, and even many in the mainstream media, are concerned that the US economy is taking a trip ’70s-style stagflation — a period of slow-to-negative economic growth coupled with high inflation. But this is missing the point, says The Sovereign Society’s Eric Roseman. What we’re facing this time around is “inverse stagflation,” a stagflation’s evil twin, where inflation, economic stagnation and deflation come together to wreak economic havoc. 

Editor’s Note: The 1930s have nothing on the depression we’re about to enter, says commodities expert Doug Casey. Interest rates are too low and currencies are being kept artificially high. It can only lead to one thing: the decline and fall of the American empire.

Billionaire investor Eli Broad shares Doug’s view, although he puts it a little more mildly. He said yesterday that the US economy is in the worst recession since World War II and a recovery in the housing market is “several years” away.

Editor’s Note: Are we returning to ’70s-style stagflation. Bill Bonner thinks we may be — a return to a lethal combination of high inflation and deflation of asset prices. But Sovereign Society Investment Director Eric Roseman says what we are seeing this time around is “inverse stagflation” — a mix of soaring commodity prices with deflating housing prices and bank credit.

Editor’s Note: Chuck Butler says the US is already in a recession. He sees the recent contraction of the manufacturing sector as a clear indicator that the economy is in decline. Chuck, presumably, wasn’t aware of today’s ISM factory index update, which registered growth for the first time since January.

The benchmark crude oil rose 57 cents to settle at a record-high $140.21 a barrel on the New York Mercantile Exchange Friday, after a sell-off on Wall Street left the Dow Jones Industrial Average in bear territory.

After plummeting 358 points on Thursday, the Dow dropped another 107 points to end the week at 11,346.51. After sliding 4.2% last week, the Dow is now down 20% from its Oct. 9 high of 14,165. And that means the benchmark U.S. index has officially entered into a bear market.