With the return of inflation, any recovery will be labored and shaky. Without inflation, it can be vigorous and stable. Here are the two possible scenarios that ensue.

The greater-of-the-evils inflation scenario:

Bad debts are shuffled around to larger companies, and larger companies are nationalized by the government. The day of reckoning is forever postponed; debt burdens, forever enlarged; a real recovery of America's strength, always beyond reach.

The lesser-of-the-evils deflation scenario:

Recovery from debt addiction is not an easy process. It takes introspection, courage, and great moral fortitude. It requires personal sacrifice and collective support. But as a nation, we've overcome tougher obstacles before. We can overcome this one as well. The recovery, even if delayed, is sustainable and restores America's greatness.

I am an optimist. So let's begin by talking about the lesser-of-the-evils scenario. If you have avoided debt and built up a nice nest egg of cash, you are among the minority of investors ready to lead the recovery and benefit handsomely in the process. And I am there with you.

But the majority is not that far behind us. One sunny morning, despite the bankruptcies, the unemployment, and the hardships they bring, most Americans wake up to the realization that the nation's cup is half full: The buildings are still standing. The highways are still intact. The phones are working, and the lights are still on. The Internet is running; ...

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