It is sad that this has to happen but it has been obvious for a long time - that the structural break of the US economy is now firmly evidenced by the inability of monetary expansion to paper over. We should now expect deflation in the US as it has been in Japan since the early 1990s.
We cannot be thinking about marginal adjustments in the global economy. It is not as if the US economy is still structurally sound and that a sharp depreciation of the US dollar will correct its external imbalance which it doesn't have much relatively. With the rise of China (and India), the US (and Japan) collapses. Germany may hold, but the Euro may break.
The rise of China not only took away manufacturing jobs from the world, but competes with the rest of the world for food and resources. That a billion of Chinese now chooses not to go hungry means food production must rise by 1/6th or a billion people outside China must starve.
Central banks must reduce monetary expansion and direct the new expansion towards food production and away from real estate, stock purchases and credit cards.
Deflation is a needed adjustment after the sustained monetary expansion. This could put more people into productive work to increase output (especially food). This alternative has been viewed negatively as a rise in unemployment which is true in technically unprepared societies.
