Jessee saw the implications of Setzer’s post and followed up with some comments worth reading, ammo for inflationistas:

‘My explanation is pretty straightforward.

Central banks were the main source of financing for the US deficit all along. Setting Japan aside, the big current account surplus countries were all building up their official reserves and sovereign funds — and they were the key vector providing financing to the deficit countries.”

The implications of this are rather profound. The much touted notion that the US is the preferred destination for private wealth, thus sustaining an out of balance trade deficit through a financial services economy, is rubbish at best, and propaganda at worst. It is rooted in the Dick Cheney nostrum that “Reagan proved that deficits don’t matter.”

What we have today is a very lopsided vendor financing arrangement, wherein the US is largely supported by China and Japan whose industrial policy currently recommends their support of a US debt that is increasingly unpayable.

If and when China and Japan are no longer able to support the continued growth of US deficit financing, the dollar and the bonds will contract (decrease) in value, and perhaps precipitously, like a house of cards. It is much worse than we had imagined, and more concentrated on these two countries, along with Saudi Arabia, than we had thought.’

and the money lines…

‘Japan and Saudi Arabia are understandable as virtual client states under US military protection, but we struggle with how China was taken into this arrangement which is so potentially destabilizing of their internal political and economic stability.

This is why the world has not developed a sound replacement for the dollar hegemony. It is because if they do, they must navigate around the probability, not possibility, of a collapse of their dollar reserves, and a dislocation of their own export driven economies, much worse than we might have imagined. It is not a matter of economic inventiveness; it has become a matter of will.

Who will be the first to flinch? History shows it is rarely a conscious decision, but rather some incident, an accident, some trigger event, even one so small, that it creates astonishment at the size of the avalanche it unleashes.

To make it clear and simple, this is the first evidence we have seen to suggest that hyperinflation is in fact possible in the US. As you know, we have been strongly adverse to the extremes in outcomes, both in terms of a sustained deflation and a significant hyperinflation.

That has now changed. The dollar is a Ponzi scheme, the waters of debt are overflowing the dam of artificial support, and only a few countries, two of them somewhat unstable, are holding back the deluge.’

http://jessescrossroadscafe.blogspot.com/

http://blogs.cfr.org/setser/

PS Having server problems at 130. Goes well with enticements to view Jesica Alba naked. Way to go Google!

See:

http://www.ft.com/cms/s/0/def4b5f8-d50f-11dd-b967-000077b07658.html

Also from the bat article.

“The full impact of these bat-killing pressure zones extends far beyond the wind farm, however. Such migrating bats travel from Canada as far as Mexico, eating thousands of insects en route, including crop pests such as moths and beetles. “They are one of the only things that fly around at night and eat bugs,” Baerwald notes. “Bats killed in Canada could have a detrimental impact in America or Mexico. It’s not local. It’s an ecosystem-wide issue.”

“….The Summerview wind farm, which Baerwald studied, kills hundreds of bats every year, particularly during the fall migration period that has just begun. But bats that find their way via sonar should have no trouble detecting fast-moving objects like the 200-foot- (60-meter-) long blades on the 300-foot- (90-meter-) tall turbines that spin as quickly as 160 miles (255 kilometers) per hour. And before the installation of these new, taller turbines bat kills had been practically nonexistent.

Pressure drops of as low as 4.4 kilopascals kill common lab rats and all the bats autopsied showed internal damage and bleeding consistent with this type of death, known as barotrauma. “If bats have a lungful of air as they fly through the air-pressure change, there’s nowhere for the air to go,” Baerwald explains. “The small blood vessels around the lungs burst and fill the lungs with fluid and blood.”

Treasury to Buy $5 Billion GMAC Stake, Expand GM Loan

Dec. 29 (Bloomberg) — The U.S. Treasury said it will purchase a $5 billion stake in GMAC LLC, the financing arm of General Motors Corp.

Treasury will also lend an additional $1 billion to GM so the automaker can participate in a rights offering at GMAC to support the lender’s reorganization as a bank holding company, the Treasury announced today. The loan is in addition to $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC.

http://www.bloomberg.com/apps/news?pid=20601087&sid=anb6MiPINGT8&refer=home

Krugman is fighting the last war.

The Huffington Post piece takes it even further, and into an economic Orwellian nightmare – but one that may be prescient. Print new money, and let Obama/Reid/Pelosi give it ALL to the usual Democratic base – Unions, both public- and private-employee, “community groups” (Obama – “I am giving $1 billion to ACORN to keep us from falling into a Depression!”) This is a Democratic wet dream, and I suspect this is exactly how it will play out. Take from everyone (print new money) and give to your supporters.

Who is reacting to who again.

Skippy