There is no idea so absurd that the majority of people won’t come to believe it ...when it suits them.

We saw yesterday that the chattering classes are moving towards inflation. Rising prices are no longer seen as evil; they are good.

Of course, it takes time to overcome well-established taboos, prejudices and good sense. But every day, the talkers are on the TV stations...the writers are in the newspapers and magazines...and the blowhard economists are in parliaments worldwide.

“Inflation is good,” they say.

We’re ready to do “whatever it takes” to get prices rising again, says the new U.S. Treasury Secretary, Tim Geithner.

What will it take? Economists and policymakers debate...but gradually a consensus is taking shape: it takes inflation!

The Dow fell 227 point yesterday. Gold rose $25 – it’s back over $900.

Records were broken. New houses didn’t sell in December – at a record pace. Consumer confidence fell to a record low. And the number of people getting jobless benefits rose to a record high.

Kodak said it was letting 3.5 to 4.5 thousand people go. Sprint cut 8,000. Corning axed 4,900. Unemployment is up in every state, reports the Wall Street Journal .

And the airline industry said it lost $5 billion last year.

There is a report at CNN about a woman who lost her $80,000 a year job and then couldn’t find anything nearly as good. She’s earning less than a quarter that amount, working at some make-do employment. “I never imagined in a million years,” that something like this could happen to me, she said.

Little by little, the gravity of the situation is sinking in. The economy is weakening. But government is strengthening. Money, power...and hopes for the future...are flowing in its direction.

Yesterday was a day of strikes throughout France. Elizabeth reports:

“I got to Paris on the train. The metro wasn’t running...or at least, that’s what it said on the sign. So, I stood in line for about an hour to get a taxi. Then, the taxi got caught up in a traffic jam and it took another hour to get home.

“As usual, the unions were protesting all sorts of things. They each have their own complaint. But they becoming very active... They see that capitalism has been weakened, and its leaders are confused, so they’re moving to the attack. They think they have an opportunity to get more privileges...more benefits... And they’re probably right.”

Yes, dear reader, capitalists have been whacked so hard they are dizzy. They wobble on their pins... slur their words and speak incoherently. The world improvers see their chance. They’re moving in with their rabbit punches and haymakers. They hope to wallop the rich hard... “squeeze them until the pips squeak,” as a British Labor prime minister once put it.

Yesterday, President Obama, seeing Wall Street on the mat, walked over and gave it the boot.

The $18 billion in bonuses, paid out on to Wall Street honchos last year, were “shameful,” said he. It was the “height of irresponsibility” to take so much capital out of the system when it was losing money, he pointed out.

Of course, he’s right. It was certainly irresponsible. And the Wall Street crowd deserves the boot, no doubt about it. But it’s a shame no one mentioned it in 2006 or 2007 – not even Mr. Obama – when the bonuses and the irresponsibility were even higher. In 2006, the bonuses rose to $62 billion...as the street sold trillions worth of CDOs, MBSs, and other unmentionables.

But that’s just the way it works. As we keep saying, the ‘innocent fraud’ of the market is OUT. Armed robbery is IN.

Government – in the hands of the world improvers – doesn’t flimflam investors like Dick Fuld and Hank Paulson did. Instead, it creates a Bernie Madoff fraud – a pyramid scheme that even the Egyptians would envy. And, unlike Wall Street, Washington takes money from people even without asking...like a convenience store stick-up man without the stocking on his head.

And now – in the confusion of the credit crisis – their hour has come round at last...the politicians and world improvers are coming out swinging, grappling, kicking – getting all the power and money they can, while the getting’s good.

*** While the capitalist system is de-leveraging, the public sector is leveraging. First, the government is taking debt away from the private sector banks and investment houses...moving it onto its own books. Second, it is borrowing like there’s no tomorrow. (Leading us to humbly predict that there are relatively fewer tomorrows than yesterdays for the dollar-based international monetary system.)

David Leonhardt, writing in the New York Times , announces:

“Once governments finally decide to use the enormous resources at their disposal, they have typically been able to shock an economy back to life. They can put to work the people, money and equipment sitting idle, until the private sector is willing to begin using them again. The prescription developed almost a century ago by John Maynard Keynes does appear to work.”

Not to us it doesn’t. But that won’t stop Leonhardt, Obama, Frank, Pelosi, Bernanke – or anyone else. Leonhardt goes on to cite economist Mancur Olson, who noticed that things change in a crisis. The bigger the crisis, the more they tend to change.

Leonhardt completely misses Olson’s point. Olson explained how losing WWII actually helped the Germans and Japanese. They were able to restructure their governments and their economies; they became the two most successful economies of the 2nd half of the 20th century. The New York Times columnist thinks this happened because they fixed the system. He thinks that’s what Olson was talking about. Leonhardt even entitles his article, “The Big Fix.” And he uses it to urge the Obama administration to put into place such big ‘fixes’ as a new system of national health care...and a better, national system of education.

But Olson wasn’t talking about fixes at all. The Germans did not fix their system. Neither did the Japanese. Instead, WWII fixed them both. Their industry and their government were destroyed – by bombs, artillery, tanks and aircraft. Olson noticed what comes after destruction: Renaissance.

America is a long way from that. Its politicians and opinion mongers – such as Leonhardt – are still in their bunkers...still directing what is left of their troops. Still raising money. Still taxing. Still spending. Still fixing. They hope to save the system, not rebuild on the ruins.

Here at The Daily Reckoning , we believe their fixes actually make the situation worse...and hasten the day when the whole thing collapses.

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