Dave Eriqat

Deflation, Monetary Velocity, and Why Gold's a Buy

I love your “goofy” analogy with the rabbits! But I’ve never seen rabbits run around a tree trunk; squirrels, yes, but not rabbits.

Anyway, as you point out, what’s lost in all this “liquidity” pumping that’s going on is the other side of the equation: borrowing. If people don’t want to borrow – or can’t borrow because they’re in debt up to their eyeballs already – increasing the funds available for lending is utterly useless.

And if I understand your explanation correctly, once all that injected money ceases to be “comatose” and starts velocitating we’re going to see massive inflation.

Like socrateazz, I have grave fears about what Obama might do to "fix" the economy. He's already promised 2.5 million jobs in two years. The only way that can happen in this economy is through public labor, putting people to work in public works projects. I could also see him resorting to rationing and price controls, especially if global shipping doesn't get restarted soon. In case anyone hasn't noticed, the U.S. is highly dependent on a steady flow of energy, merchandise and even food arriving by ship.

Dave
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