Josh, thanks for your post. Really well-written and right on the money in my humble opinion. The big question is what next? Here’s my sense, for what it’s worth.

I’m in the deflation camp for now. Nothing left in the tank to inflate wages, so no price pressure in the short term. However, I think we are at great risk right now of currency failure followed by hyperinflation. Denominating oil in something other that the dollar could trigger a chain of events that causes confidence in the dollar to fail.

What’s propping us up right now? I think the size/strength of our economy/currency as compared with other regions, and also systemic inertia and psychology. That could change. It’s hubris to think otherwise. The imbalances created during the bubble — the numbers are just staggering, utterly mind-blowing. We’re walking the edge of a razor in terms of economic collapse.

Also, I believe pragmatic and multilateral foreign policy is absolutely critical to our interests right now. Economic collapse was ALWAYS the closing strategy behind AQ’s war against US. There is a great deal of wealth in the world controlled by interests opposed to American hegemony. These are strange times and we ought to take care.