Wrong as usual Mr. Johanus.1. US CPI is only spiking because of...

Wrong as usual Mr. Johanus.

1. US CPI is only spiking because of oil, if it were not for that it would be closer to 1-1.5%.

Answer: Oil is part of the price of everything we do and buy. Not including oil (and food) prices in inflation is like a doctor saying to a patient 'you are healthy except for that brain tumor and the hole in your heart.' And anyway Deflation and Inflation are both monetary phenomenons.

2. US housing is double dipping, what is this indicative of?

Answer: Failed policy by the feds and the popping of a bubble. I agree that this is likely to force bank share prices down but that is not deflation. Deflation and Inflation are both monetary phenomenons.

3. US consumers refuse to take on more debt. They are deleveraging, ie. repaying their liabilities when the corresponding asset prices have crashed. This results in the exact opposite of inflation.

Answer: This may or may not be true but it doesn't matter. The feds are taking on more debt at explosive levels and it is the feds that can print money not consumers. Don't quote to me about the velocity of money. That really happens at the fed level initially to.

4. Despite the massive rises in commodities companies have simply not been able to pass along the cost because of the deleveraging economy (cost-push inflation not happening).

Answer: Many consumers may be de-leveraging but the US government certainly is not. They will have to pay their bills one of these days. They can only do that via inflation or default at this stage. Also health costs, fuel costs, food costs, education costs are all going up so not to sure what you mean here anyway.

5. Wages are stagnant.
Answer: Not in all fields they arn't.

6. QE technically causes about 5 basis points of inflation, it is purely inflation expectations driving a lot of asset prices.

Answer: Where did this tidbit come from? Certainly it takes time for new money to make it's way through the system (ie go from M0 to M2 to M3 and so on) but 5 basis points? How much QE do you mean anyway?

7. 10 Year treasuries ARE AT 3 PERCENT. I guess the market has it completely wrong, massive inflation right around the corner?

Answer: The market gets things wrong plenty of times and this is another of those times.

The only possible way the feds can stop inflation coming now (with an abrupt default) is to raise interest rates significantly. Probably to around 7-10% in short order.

Let me see...that would make the interest on the US Debt around 7% of GDP or around one third of the budget. Making the deficit even larger. Crashing house prices even more. Further destroying bank balance sheets.

Can you see that happening...especially in an election cycle?