whats changed??, page-8

All this is very good IF you accept DavoMagic's premises!

Is the US broke? Last time I looked, the US Government was paying its bills and the price of its debt was increasing!

Nor is the EZ broke by the same definition. Greece, Portugal and Ireland may have to go, but I think that loss on default for the German and French banks is provisioned.

That leaves Spain and Italy.

I meet with a German Fund Manager yesterday. He was of the opinion that the ECB would do everything it had to to save Spain and Italy, largly because there was something to save. The industrial zones in both countries (Catalonia and the Po Valley) are going alright.

(The UK is stuffed but who cares!)

It is almost certain that the Fed and the ECB will resort to further QE strategies to sustain financial system. Until there is a significant increase in aggregate demand, this will have no inflationary impact at all. The money isn't being used for consumption.

If the price of gold happens to rise during the further QEs, it will be because gold traders think that the monetary expansion ought to be inflationary, even if it isn't.

At some point the tension between these ideas will be resolved. I think that resolution will come soon.