gold breaks out, page-113

Hi Timber or anyone else that fancies a shot at this.

For a minute let’s assume the fed does not print money out of fresh air but instead merely creates an electronic figure and sends it to one of the fortunate banks. For arguments sake let’s use a small number of $1 M. The purpose of the exercise is of course is to grow the economy create jobs etc.

This won’t start to happen whilst the money remains as a computer entry at the bank, however, say the bank was inundated with loan applications from good quality business prospects wishing to expand their business (more jobs) etc.

The bank shall we say with a modest fractional reserve banking ratio of 10: 1 could lend $10 M. and maybe we could start to see the economy grow. Of course some banks may even go back to some of their old habits with higher ratios. (I believe I once read of $0.56 covering each $100.00 at the peak of madness.)

I think it would be fair to say if these business loans where to be used for tangible things such as machine tools, materials and labour then at this point the computer entries will indeed be converted in to printed dollars.

Now as we are not talking about $1 M but $40 B (QEI) and $45 B (Twist again) each month and a minimum of a fractional reserve of 10:1 I believe we are talking about a substantial amount of freshly printed US dollars.

Now I agree we probably have deflation in the things most people already own: houses, commercial building flat screen TV’s etc.

Also possibly with all that new money going into real business we may indeed start to see a recovery; however, what concerns me is how much serious inflation in the things we need to buy and use every day are we likely to see.

Q 1: Will the computer entries convert to hard printed out of fresh air dollar bills?

Q 2: Will this lead to serious inflation at least until the recovery takes hold?

Q 3: How will they reduce this inflation and suck these dollars out of the system or are they with us to stay?

I would be most interested in thoughts here; however, for now until things are clearer I will continue to insure myself from the many possible outcomes with physical Gold and Silver held outside of the traditional banking system.

I admit I am beginning to wonder about the value of time spent in here, I am willing to listen to solid reasons why Gold is wrong it’s just that in the last several years I have not seen one solid argument that convinces me against holding Gold and Silver.

Cheers all and very best regards: Andy