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You have hit the key point and my key concern? Is inflation a sure bet or could the massive amount of deflation absorb all of the new money the world can print. That is the $64 Trillion question. I know you are pretty well convinced that we are heading for a new round of inflation, but I am finding no consensus about that, with some very credible people predicting either side of the inflation/deflation debate.

Thanks for the gold lesson. I’m not really a gold bug. I want some for a disaster hedge is all. Maybe $10,000. Not as an invesment, but a storage of money in the VERY unlikely currency collapse scenario.

Thanks. I always appreciate your sound and reasonable advice and enlightening posts.

The world is absorbing the new money to pay off the old loans that were mainly taken out in Yen, less so in dollars and Swiss francs. The world is not printing enough to do that at this very moment and the markets are heading for their afternoon bath. Printing one's way out of deflation is a very inexact science and the central banks have been cautious so far.

I think they are expecting new lending to pick up the slack but the freight train is still heading in the deleveraging direction. Obviously new lending is not the answer because in the long run it will just lead to the next crisis. But it probably seems like the safest alternative between monetary inflation and credit deflation. As it becomes clearer that it isn't working, I expect monetary inflation to be the tool of choice (it's the only other tool they have).

Fiscally speaking, there is another choice which is govt borrowing to prop up markets and push credit. That works pretty well in this deflationary scenario, but it will be at the expense of our national credit rating.