But let’s extend this insight then: What has been the _response_ from the backers of those sovereign wealth funds to ‘instability in the financial system,’ including presumably their unstated losses? Well, China lowered rates and loosened reserve requirements, actions of far more import than their concurrent rollback of fuel subsidies. Faced with losses, they are sur-flating. No one, but no one, at the sovereign level is going to accept deflation while they have computers to post pixels. If overseas wealth doesn’t flow into the US, we will only balloon our own balance sheets more to cover the slack, in my view.

So Juan, I agree with you that derived figures (such as Rosenberg’s) for the nominal level of the velocity of money are an academic exercise, and cannot be considered firm readings. But velocity IS a real component of financial system process and behavior, whose first order impacts can be broadly represented. Yeah, any actual number is suspect, but if money is hard or easy to get the system acts quite differently in aggregate. So velocity is not a moot concept, to me, only it’s measurement. . . . You’ll notice that I didn’t put any ‘number’ on my own surmises there.

Asset price deflation (delveraging), goods inflation (central bank cash pumping – transmitted through lower US dollar/higher commodity prices) – whilst wages are stagnant..ouch.

Is this possible?

Hold on cowboy!

I think most people would say park it and be friggin thankful you have it!

This market has defied all thinking previous to this point. One used to say “0 coupon bonds”… or utilities.

Maybe someone else can help you out more than I.

Treasuries seem incredibly expensive, I’m not brave enough to take on corporate debt in this environment. So where do I park my money for the next year ir two?

Five trillion over five years — a trillion per year — isn't too shabby, but the Fed has created, including TARP, between one and two trillion in less than two months. There has never been a printing press that couldn't keep up.

A lot of the analysis we see suffers from a perspective deficit. For some reason we in the western world feel that we are exceptional and the normal rules of economic forces do not apply to us. If one presented the vital signs of the American economy — massive debts, consumption-oriented candy-floss economy, massive trade deficits — and showed it to Rosenberg without naming the country, would he predict deflation? I think not.

This is just another case of a false belief in American Exceptionalism.

Inflation is the easiest way out of the debt mess. If the government wants inflation, it will get it. Even if velocity declines, it can only go so far, whereas the ability to print dollars is both unlimited and politically rewarding.