[Twilight]

Here is how I see it, I may be wrong but here it goes:

Banks go to the Fed or their friendly local central bank for a loan. The expiry date is very short-term, a matter of days. On the expiry date, they need to be back with the cash, plus interest (this can even be charged at a penal rate), or there are consequences. They can lose collateral or they can be seized. This is a rotating facility, so it repeats (although extension cannot be taken for granted), but at the close of play the money that was created with every loan, is destroyed in the act of repayment. That does not strike me as being particularly inflationary as there is no long term net input of credit into the system for as long as it runs this way.

Where it can get ugly is if the banks default and the Fed breaks its own rules and does not collect. Then the money it created stays in the system. Were the central banks to print electrons in order to fill the hole of unservicable debt, they would devalue the money everyone holds. That sounds like inflation. However, governments have to service debt too; the UK government apparently spends around 5% of its income on this. Holders of this debt will not take kindly to being repaid with devalued currency. When they take capital losses in proportion to inflationary inflows, it gets political very fast. And expensive. The government might as well default on its obligations, destroy its currency and creditworthiness and become a pariah.

I think if you wish to argue inflation vs. deflation, you have to consider whether the government has more to gain watching your credit rating get trashed, or trashing its own. A few precedents aside, I do not think there are many governments out there willing to take that bullet. They would rather watch the consumer go to the wall and start cleaning up with their capabilities largely intact. Anything else runs contrary to their self-preservation instincts.

[mmasters]

$this->bbcode_second_pass_quote('threadbear', '
')If the fed is now printing money and foisting it onto banks to cover bad loans, with the idea it will forgive the loans to the banks-- look out below!

[roccman]

I fully expect the US to default on their (read our) debts.

The NAU and the Amero are real.

Kissinger was not kidding when he said in the 70s that 80% of the global population must be culled.

And because this is my thread ...911 ties all this together nicely.

Banks will be allowed to fail and consolidated under one global bank...my guess is JP Morgan will be that one global bank.

[emersonbiggins]

US$ taking a bath today, down 0.75 to 75.7.

INO quote USD

Guess Uncle Ben's 75bp cut is finally starting to sink in...

[strider3700]

that and the expected 3/4 cut coming up should give us a new all time low. It's funny how everyone is still talking recession but seems to have forgotten the inflation part of what is happening. If those cuts don't advert recession I don't see how we can avoid stagflation.

[Revi]

The price of gold hit over 910, and silver is back up to over $16.35. I think it happened quickly. Everyone decided that the dollar is worth 2 cents less today, and it happened all across the markets. Oil is back up to 89 and change too. We are back into inflation world. Almost everything on this list is up around 2 and 1/2%:

http://markets.usatoday.com/custom/usat ... dities.asp

[J-Rod]

This kind of rate cut was a desperation move, same with the rebate checks all the Americans will get. I am going to take mine and either buy more silver, or stock up on more bulk food, most of our debts are about to be paid off in full soon. The administration thinks everyone will go buy trinkets and widgets, I think that might be a faulty assumption.

Stagflation is a given, if not worse. get your fecal matter in order folks!

[sciencegirl]

So, is the coming crash going to have a inflationary or a deflationary effect ???

[roccman]

$this->bbcode_second_pass_quote('sciencegirl', 'S')o, is the coming crash going to have a inflationary or a deflationary effect ???

[dorlomin]

$this->bbcode_second_pass_quote('Revi', 'T')he price of gold hit over 910,

[jasonraymondson]

$this->bbcode_second_pass_quote('dorlomin', '')$this->bbcode_second_pass_quote('Revi', 'T')he price of gold hit over 910,

[Chuckmak]

rocc it's time we resurrect this thread.

[Revi]

Well the dollar must be going down, because gold is up. It was around 940, but now it's dropped back to 929. Wow.

http://www.kitco.com/charts/livegold.html

[Chuckmak]

Well, it's time to bring back this post:

Last trade 74.896 Change -0.606 (-0.79%)

[emersonbiggins]

74.872

-0.582

[roccman]

$this->bbcode_second_pass_quote('emersonbiggins', '7')4.872

-0.582

[highlander]

Yes, I'm still waiting for silver to drop back to 13. I think I might be waiting a long time.

[Chuckmak]

Now THIS is a solid ass kicking

Last trade 74.789 Change -0.713 (-0.93%)

[roccman]

$this->bbcode_second_pass_quote('highlander', 'Y')es, I'm still waiting for silver to drop back to 13. I think I might be waiting a long time.

[Iaato]

Holy moley. It dropped a dollar in less than 24 hours.

D
o
w
n

W
e

G
o
.
.
.