gold breaks out, page-115

Hi Andy, I'll take a shot

That $1m given to the bank is being used to buy a bond that the govt spends (wastes?) just once. There's little or no fractional reserve lending of this $1m while the economy is in the dumps and the private sector is deleveraging

In the meantime we see deflation in things like housing and commercial buildings as you say. This is great news if you're young and have a job. US housing is much cheaper than Australia. Heck, you probably have enough cash flow left over to take risks and start a business one day... these are future entrepreneurs AND demographics is on America's side unlike most other Western countries.

So low prices will cure low prices and the economy will rebound (US energy independence?). In the meantime their Govt only pays 1.6% interest over 10 years, less than the inflation rate. Eventually USA sees real GDP growth instead of just nominal growth. Asset values will rise and Bernanke won't need to recapitalise the banks. In 10 years time the govt will have to roll over its debt at higher interest rates, but so what? It will be borrowing far less and taking in much higher tax receipts

All this will mean the death of the gold bull market, imo. However, we're still in the currency debasement/negative rates phase that is still playing out.