Today, for the first time in over 13 months, the bellwether 10-year Treasury note traded with a yield below 3%. At a minuscule 0.60%, the government's two-year paper changed hands today at its lowest yield ever.

Housing prices refuge to budge; and, in my view, are nowhere near done in giving back their gains of the last decade. Commodities are tumbling anew; indeed, the broad Reuters/Jeffries CRB (Commodity Research Bureau) Index remains some 45% below its manic mid-2008 peak. The U.S. stock market traded this afternoon at yet another new low point for 2010.

Yet, as is the case almost every day, my e-mail in box is peppered with a myriad of half-hysterical warnings about imminent hyperinflation. Perhaps you've seen some of these messages; dire warnings with headlines such as "Obama and Bernanke have declared war on the dollar" and such drivel. (By the way, about the only thing that hasn't been weak of late is the foreign exchange value of the greenback!)

Some of these warnings and/or fears over hyperinflation can be forgiven up to a point. After all, America's fiscal deficits are soaring. In nominal terms, they dwarf those just about every place else, even if our own debt-to-GDP ratios are not quite as ugly as those in Japan and Greece (yet.) And -- unlike in European countries, where some belated attempts are being made to rein in out-of-control spending -- here in the good old U.S. of A. the federal government and the Federal Reserve both are pulling in the other direction. It won't be long before we see even more frantic but doomed attempts on the part of both to inflate and spend our way back to health.

Yet looking only at the Federal Reserve and shrieking "HYPERINFLATION!" is a big mistake. That's like claiming to understand how to bake a cake by looking only at a couple of the ingredients, or like claiming to understand a baseball team's chances in the upcoming pennant race by focusing on just a couple of the nine positions.

You, see, there is a far bigger force than even the Federal Reserve at work here. For years, this recent creation was itself a powerful source of hyperinflation; causing stocks to soar in the 1980's and 1990's and housing to surge higher during much of the "oughts." But even all that was small potatoes.

The so-called shadow banking system -- the creation largely of former Fed Chairman Alan Greenspan, the single-most destructive policymaker in American history -- brought about a hyperinflation that would have made Weimar Germany blush. Enabled both by that modern-day financial Dr. Frankenstein and by a complicit Congress all too happy to go along with the fun until it blew up in everyone's face, an assortment of investment banks, hedge funds and other players for years took on what resembled central banking functions themselves. Through all kinds of modern-day financial alchemy, they created "wealth" out of nothing, and did so beyond anything ever done by the Fed itself. At one point, for instance, the notional value worldwide of all the various forms of derivative contracts created almost entirely by the "shadow banks" exceeded one quadrillion dollars.

THIS is the hyperinflation --one that is now over and is reversing itself -- that some of the "experts" seem to have overlooked.

Sure, the Fed has bolstered its balance sheet to over $2 trillion. But this is like urinating into the ocean on the part of the official central bank. Far more than that has been lost in equities and, especially, real estate. Securitized "assets" and their derivatives have plunged in value worldwide now by many tens of trillions. And we're just getting warmed up, folks.

When the shadow banking system is destroying $100 or more of so-called wealth for every $1 the Fed and Barack Obama are throwing at the economy, that doesn't lead to hyperinflation. Just like the circus lackey following the animals with his shovel and garbage can, Ben Bernanke has one of the most unenviable jobs of all time in dealing with the aftermath of Alan Greenspan: trying to keep a full-fledged DEFLATION from sucking just about everything down into a years-long tailspin.

Until all the debts that need to be reckoned with after a generation of hyperinflation are properly dealt with, just about anything the Fed does will be inadequate, if not at times morbidly humorous. Those calling for hyperinflation now are late to the game, to say the least (and to say the most, clearly don't have even the most basic understanding of fractional reserve banking, together with its Greenspan-created mutations of recent years.)

We've already had an obscene hyperinflation. Years from now, we might have another one. But the last hyperinflation needs to be "worked off" first. The debacle of late 2008-early 2009 was a dramatic harbinger of what will be a years-long process of unwinding debts, a scarcity of credit, and a generational change of attitudes among consumers who are learning quickly to distinguish between needs and wants. In short, it was a harbinger of an on-again, off-again DEFLATION; and one that will bedevil economies, markets and policymakers for a long time to come.