That's what I should've said, thanks.
Something else is that while FRB creates money out of nothing it doesn't create wealth --that's something different. FRB creates gold based bank notes but GourmetDan's still right when he points out that FRB doesn't create the gold bars used as reserve assets.
The fact that the notes are convertible to bars on demand is where we get turned around.
waiting around until the deflationary collapse kicks in
We had that all the time with gold based dollars and we haven't had it since. While I can't say what tomorrow will bring, I can say that nobody's convinced me to bet my money on doom'n'gloom happening tomorrow.
Try taking some fiat to the Fed and 'converting' it into a gold bar.
You'll get turned around all right... and thrown right out the door.
That's because it's happening right now - the Z1 report tells the tale. An FRB system simply cannot withstand deflation of any kind. Like a shark which must continually swim forward, the aggregate credit-money supply system must continually expand or the entire house of cards comes crashing down.
If it wasn't for the combined Fed & Treasury activities, we'd be living Mad Max right now. Still, all they've done is kick the can. Nothing has been solved, so unless 'organic' lending activity somehow miraculously picks up from increased final demand, we still have our date with destiny.
Also, I think it's unwise to correlate our lack of deflation since the US went off the gold standard and embraced full fiat. Something about winning WWII, industrial dominance, abundant domestic oil reserves, a cohesive mono-culture, high incomes rather than debt financing consumer spending, and the $USD acting as the global reserve currency might have had something to do with it.
Demographic change, off-shoring, domestic resource depletion (what, we're up to 2/3 of our oil now coming in from foreign sources, 1/2 of which are hostile to the US?), and staggering unpayable debt loads are all conspiring to bring this little party to an end.