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4 Comments
The U.S. Economy: Remembering the Past Could Help Fix the Future
The Dow Hates Bush?
Inflationists vs. Deflationists: Who's Right?
Defaults don't cause the evaporation of money, just debt. That money was paid to someone, most likely the previous home owner. The effect is banks becoming insolvent with depositors being paid from FDIC insurance. So deposited money won't disappear and neither will the borrowed money. The end result is that borrowed money being monetized into the private sector just like our government is doing publicly. I don't believe deflation is possible under these circumstances, hyper-inflation is my bet.
The only way I see deflation happening would be for borrowers to pay off loans, that's the only way money will disappear. And we all know the US Government won't be participating in that.
Western Central Banks Dump Gold: What's Their Long Term Plan?
If banks become insolvent then the people lose all faith in them. Perhaps the sale of gold is a move to avoid insolvency. In the coming debt collapse billions in loans will not be repaid, devastating the balance sheets of the banks. If, however, they have converted a significant portion of gold assets into cash to cover the defaulted loans, they could avoid a run on the banks. People will continue to have faith and the banks will maintain their strangle hold on the people of the world only to buy back the gold when the price collapses and continue the cycle all over again. It's just a theory, and personally I'm not sure that it would work.