Peter Bernstein’s biggest worry? The dollar

"As as has been argued here previously, Schumpeter was right: creative destruction is necessary for a capitalist economy to thrive. The business cycle can’t be inflated into oblivion. In attempting that during his years at the Fed, Greenspan allowed financials to grow too large. Now they have to fail, but they can’t be allowed to. In Bernstein’s words: there’s too much debt, but reducing it “quickly” will “bring down the whole system.” Presumably the only solution is to bring it down slowly. That may just happen if we’re lucky. Despite the government’s efforts to reflate the debt bubble, it is deflating as banks deleverage. My personal belief is we won’t be lucky. The stupendous growth of U.S. liabilities, via bailouts and the Fed’s growing balance sheet, will lead to a large fall in the value of the dollar. A view I think Bernstein shares..."