What's at Stake: Deflation, Not Inflation

Let's take these Fed lovers and non-interventionists at face value -- you know, the people who believe that the risks of inflation are just as pernicious right here as the risks of a recession. Let's give them their due.

The question then becomes, what happens, what is good, if Countrywide (CFC - commentary - Cramer's Take) or MBIA (MBI - commentary - Cramer's Take) or Ambak (ABK - commentary - Cramer's Take) goes under? How does that help tame inflation? What does it do? Put lots of people out of work who then have to sell their homes? What does that do? The Fed doesn't even include home prices in its calculations.

Does it lower the price of the beef for Brinker's (EAT - commentary - Cramer's Take) Chili's? Does it make us pay less at the pump? Does it lower the raw costs of diapers or cereal, where there is inflation?

Or how about wiping out the equity of Fannie Mae (FNM - commentary - Cramer's Take), which is surely going to happen at this pace -- stop denying it, we know it will happen.

Let's work that through: how does that help? We do a trillion-dollar bailout of Fannie and then what? We write a lot of checks to the government and we borrow more. Maybe someone even says, Wait, we have to raise taxes -- is that good? Will that help me pay $2.50 at the pump instead of $3.50? Will it lower the cost of hiring people at McDonald's (MCD - commentary - Cramer's Take)? Will a bottle of shampoo or a can of Coke (KO - commentary - Cramer's Take) cost less? How about a Dorito? Who wins that way?

Of course, all we ever hear about is the need to tamp inflation by keeping interest rates steady and how that might be right because the borrowers knew what they were getting into. We have some Hope Now Project thing that the Treasury Secretary's talking about. Do you really think that's going to have any more success than the SIV conduit they were trying to negotiate? And if it doesn't happen, what goes on?

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