"As I’ve said on numerous occasions in the past six months, the bond markets are still undecided whether the next large move will be inflationary or deflationary. This has been a singularly difficult question to answer because the tea leaves keep rearranging themselves. We’ve seen several multi-week cycles this year in which the prevailing view shifts from one side to the other.
In my opinion, the signs are now pointing more strongly toward deflation. Or in other words, to the next leg downward in the collapse of the housing bubble. The heroic efforts of government policymakers to deny reality and act as if they can forestall a necessary readjustment appear to be fizzling out. "
