insideoil

The Banker's Dilemma

Looking to the possible consequences of this thinking, to increase velocity we will see commodities trend slowly higher to ensure deflation is kept at bay, and slowly - so as not to further damage overall demand.
The two kinds of USD need to remain boxed where they are until the "main" street system can afford to meet the "wall " street USD. The first kind of USD is trapped off balance sheet in toxic assets/liabilities and the second kind are those USD used for daily trade. At this time the overall system cannot afford to let them meet, hence the freeze up of the system. The trick - as we see as being played out now - is how governments can push enough money into the main street, without it being siphoned off to pay off the wall street problem.
My bet is on the slow but steady recovery of those commodities that have seen the worst of the recent price drops, while those that have seemed less affected will remain at remain flat at least.
As for anything financial - be it bonds, banks or whatever - its going to be toast for a long time to come as governments are forced to keep the financial service industry in the fridge to keep those two kinds of USD apart till they can afford - through controlled inflation and hopefully resurrected main street growth - to let them get together again.
Lets hope the patient work out approach will work, as the other approach of starting wars - either of the physical or the trade variety - to fight over the scraps of what remains, will certainly lead to a great deal more suffering by the world at large.