reply to post by warrenb
I think its important to realize the strong deflationary pressures on our US dollar as a result of these bank failures. The money charts that people
are frequently shown on ATS and other places do not fully account for debts used as money. And because debt is used as money it makes our financial
system so complicated its so far as I can tell impossible to predict when inflation or deflation will hit.
A lot of people expect inflation to hit hard because the M0 (basic money supply) has doubled or more. But in fact the M0 has been a trailing indicator
meaning the money supply has increased only after debt has increased. Debt being used as money means that someone has written you an IOU, and then you
basically pass along (spend/invest) that IOU as if it were money. The only inflation threat would be if the governments can manage to build up debts
faster than the private sector reduces them firstly through bankruptcies and also by paying down debts.
Of course there is the confidence factor that could just destroy the dollar regardless. But with the threats of deflation through bankruptcies and
other debt reductions, there really isn't so solid of a basis for confidence in the dollar to shrink. Of course if US dollars were not fundamentally
worthless and faith-based, we would likely not have to worry about it in the first place.
[edit on 28-8-2009 by truthquest]



