Domestic price level rises (inflation), however the currency collapses, causing a flight from domestic money both internally and abroad, and thus a huge collapse in the velocity of money. It is the capital flight from devaluing worthless paper currency that causes (real) asset price collapse. Thus an inflationary policy causes a total collapse in real values. This is contrary to Bernanke and Keynes's view that reflating is the "cure" for deflation/depressions. This has happened in every single hyperinflation I am aware of - Weimar, post WWII Hungary, former Yugoslavia, Albania, Zimbabwe etc. Assets such as real estate, bonds, stocks etc soared in nominal terms, but got *absolutely massacred* in real terms until the prospect of price stability and an end to hyperinflation. The Fed will never go that extreme but all that means is the effects will be less - they will still be the same effects in *type*, just not in magnitude. This is why a reflation trade will not work even once Bernanke blinks and fears true depression. It could provide a huge sucker rally in risk assets which should then be shorted. This also means central banks are basically powerless to stop post-bust depressions - if the bubble was big enough, they will happen regardless. All the central bank can do is choose whether it will be a deflationary depression (screws debtors), a neutral price level (fairly equal consequences), or an inflationary depression (screws everyone, even debtors, since real values collapse to almost nothing). Beware betting against a depression for anything more than a short-term trade when, not if, Bernanke starts direct money-printing at the Fed.