lewisabroad

Is the U.S. Solvent?

Inflation is all about the velocity of money, not the supply. Sure supply can affect velocity, but selling and buying and lending and repackaging as derivatives needs to be going on for that supply to do anything. You wouldn't get any inflation if everybody was stuffing greenbacks in mattresses, even if you were printing a billion dollars a second. With all the deleveraging that has been done in financial markets the fed actually some time to print at warp speed without worrying about inflation. The hyperinflation of the USD that many people on these boards worry about has been overstated and overlooks the role that i-banks and hedge funds played in hyper-leveraging their dollars. Until those positions have unwound and people get back to buying and selling again there is very little probablilty of inflation.
Of course, that could start happening tomorrow, which is why having gold in one's portfolio isn't a bad idea. Even the remotest possibility of a dollar default happening is enough to make one want to invest in gold. Just think twice about how big a proportion that hedge needs to be, and understand the mechanics of inflation and why we aren't seeing any despite this insane increase in the supply of USD.

World Currencies Play 'Meet Me at the Bottom'

One missing point to this analysis. How much new cash was injected into the market versus how much liquidity was lost when the OTC derivative and commercial paper markets collapsed? CDO securities were traded a lot like cash up until a few months ago, and had a value based on the "underlying asset" and the ability of that asset to provide a return. When exchange in those derivatives slowed dramatically it should have been the equivalent of taking millions in cash off the balance sheets of big investment banks and corporations alike.
The real quesiton should be, how much "value" was destroyed during the risk repricing compared to how much liquidity was injected by the fed.
If the amount lost in value by these assets is less than the fed's injections, then deflation should be expected (as we see). Long term, nothing will change unless the credit markets and OTC derviative markets pick up again, requiring loan default rates to improve among other things.