"to achieve a soft landing requires that a huge number of people around the world watch the real value of their dollar-denominated assets melt away slowly for half a decade without ever being impelled to sell off the dollar-denominated positions in their portfolios. It could happen. It happened in the late 1980s, thanks to the Japanese central bank and the collected investors of Japan. It will probably happen again. It requires mammoth irrationality on the part of investors, and an extraordinary eagerness on the part of central banks to eat enormous losses on their dollar reserves. It is not a rational-expectations equilibrium. But it will probably happen.
But if it doesn't happen again--if there comes a day when the world's central banks and investors all decide that it is time to sell their dollar-denominated assets, then... Well, then we get to see how good a central banker Ben Bernanke really is. There is a really bad global equilibrium out there, which the world economy might jump to at any moment."
Brad fails to note that Japan paid for the privilege of giving Bush I and Clinton's America a soft landing with more than a decade of stagnation. But, hey, someone, somewhere wants to suffer for America's economic sins. Really, they do.