Whats next. 2008 is an election year. 

The US fed rides to the rescue with large liquidity injections and lower interest rates. This time the inflation rather than going into mostly assets like housing and the stock market will be seen as rising prices in goods and services. Poof stagflation is born. As people see their purchasing power eroded they look to gold as an inflation hedge to protect themselves. 

The only alternative is the fed does not ride to the rescue and a deflationary depression is the result.

The fed given a choice between the 1920's and 1970's will choose the 1970's.

There is no limit to the amount of money the central banks can print and most are creating money in the 10% to 15% rate.

This is what misses says.

CRACK UP BOOM

This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

But then finally the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against "real" goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.