“The Charge of the Central Banks,” begins a Bloomberg story. Seems the Fed, the European Central Bank, the Bank of England and the Swiss National Bank got together to announce a program of coordinated inflation. Well, they didn’t call it that. They said they were merely making sure that the markets had credit, by increasing the supply of liquidity.

You see, they’re all caught in a tight spot – between the unstoppable force of inflation and the immoveable object of falling prices. So, into the Valley of Death go the central bankers.

Do you remember the Charge of the Light Brigade, dear reader? The British called Lord Cardigan from his private yacht in the Black Sea. His lordship, being new to the battlefield in the Crimean War, got mixed up...and sent his 600 cavalrymen in the wrong direction – right into the Russian’s guns. “Cannon to the right of them,/ cannon to the left of them,/ cannon in front of them,/ volleyed and thunder’d,” says Tennyson, until they were almost all dead. Except for Lord Cardigan himself, who miraculously survived without a scratch and went back to England to be declared a national hero.

Well, here come the central bankers – fresh from their caviar and foie gras – ready to ride into battle. But against what? Inflation? Or deflation? Against the unstoppable force, or the immoveable object?

There’s the problem, isn’t it? They’ve got cannons to the left and cannons to the right.

For the moment, they regard the artillery of deflation as the greater worry. So Bernanke fired a weak volley in that direction on Tuesday. The markets fired back, saying the Fed wasn’t using enough firepower.

Yesterday, the Dow shot off a few rounds, inconclusively and half-heartedly. And the cannons on the other side opened up again. The CRB, measuring the price of commodities, hit a new high. Oil rose to nearly $95. And gold hit $818.

Still our guess is that the Fed is right. The cannons on the left – the side of deflation – will do the most damage in the near term. The threat of recession is growing. Or maybe we’re already in a recession. How bad will it be? Nouriel Roubini says it will be worse than 2001. We should hope so! That recession was so wimpy it did nothing at all. Consumer spending continued to grow. Nothing was corrected – except the price of tech shares.

This next recession will be worse. Because tech shares affected relatively few people. Now it is the housing market that is going down – and stocks too. A lot more people have houses than had dotcom stock.

It still looks to us as though we were headed for that “Japan-like slump” we were expecting seven years ago. Interest rates will continue to go down – if we’re right. And the U.S. economy will go into an on-again, off-again recession that will last for many years.

And what about the unstoppable force of inflation? We doubt it will stop, not with the central banks all over the world charging in such hell-for-leather fashion. But we will see.

The news trails behind us.

From India comes word that the Sensex index has topped 20,000.

We recall the words of our local analyst:

“India is a long-term buy, but maybe not a short-term buy. There is plenty of room for growth. The inflation rate is about 6%. And the economy is growing at 9%. So, you could get 15% growth just by keeping up with everyone else. We tell our investors to expect 20%...because we think we can add another 5% by choosing shares carefully.”

American readers might be interested to know that the rupee (INR) is actually stronger than the dollar. So dollar-based investors might pick up a point or two there, too.

15%...20%...25% per year? Not bad. Unlike China, India does not depend on U.S. consumers nor on a banking sector controlled by communists. Both circumstances are bound to cause trouble for China, we believe. And whatever trouble comes to the world economy, India could get through it relatively easily .

We have no news from Australia, which we just left yesterday but the news from the commodities sector is bullish. And when commodities go up, so do Australia’s profits.

Too bad about the gold price. A nice correction – down to, say, $750 – would have given us a welcome opportunity to buy. You know the drill, now, dear reader: sell stocks on rallies, buy gold on dips. Trouble is, we haven’t had much of a dip. Should we wait? Or buy now? We wish we knew. Personally, we’re buying . Not because we think this is the best price we can get, but simply because we have a little money and can’t think of anything better to do with it.

A little advice to the Fed:

Stop trying to fight deflation. It’s a losing battle. You’re ‘pushing on a string .’ Instead, fight a battle you can win. Fight inflation!

The Fed could bring a correction on easily simply by raising rates. Higher lending costs would stifle growth, reduce spending, lower prices and knock tottering humpty dumpties off the wall. But don’t expect it: there are a lot of humpties; and every one of them has the right to vote in next year’s elections. Not only that, the economics profession has insisted that it can AVOID recessions by adroitly manipulating interest rates and lending standards. If the economy sinks now, Bernanke’s peers are going down to blame him – not only for the recession, but for undermining his colleagues’ pretensions.

But what America – and the world – needs is not a boom, but a correction. So, Feds – wherever you are – listen up: While a central bank clearly has the ability to trigger a recession, it may not have the ability to stop one. Like a hitman, a central banker can always kill a boom; but he can’t necessarily bring his victim back from the dead.

You’re better off pulling the trigger on a boom that needs to die rather than pretending to heal the poor thing with your voodoo medicine. At least, you’ll look as though you know what you are doing.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.