Deflation is coming
Deflation is coming. Obama is running around telling the banks to lend. But bank credit is still deflating. It is hard to turn the boat around because:
1. FED makes credit available. [Yes they do]
2. Banks must lend. [No they don't, because they don't think they will get their money back]
3. Borrowers must borrow. [No they don't, because they don't think they can pay it back]
4. For inflation, consumers must spend extravagantly and chase too few products with too much money. [Consumer is a saver now]
An entire nation cannot borrow for decades, inflate the money supply and the prices with borrowed money, and then hope that all will be fine when the pay back time arrives! Banks create money when we borrow:
http://www.tradingstocks.net/html/banks_create_money.html
This debt becomes our money supply. It has principal + interest to pay. Principal exists because we borrowed it. But interest is only created with further borrowing! When borrowing stops, there is not enough money to pay outstanding total debt! This is why banks are in trouble. This is why FED triples the base money supply and inflation is nowhere to be seen. This is why home prices are down, unemployment is up. The money to pay old salary levels does not exist.
State and local governments are broke and are cutting jobs, services. Banks are in trouble and are kept alive by government stimulus via Fannie, Freddie losses to keep a zombie mortgage market running. Consumer credit is deflating. Business lending is down. In general credit is deflating. Austerity measures are being taken across the world. Financial regulation is coming to curb unregulated trade. Here is what is deflationary today:
http://www.tradingstocks.net/html/signs_of_deflation.html
This is a single dip depression. March 2009 lows will not hold. We are on the top of right shoulder of head and shoulders pattern in stocks. 2000 is left shoulder, 2007 is the head, 2010 is the right shoulder. The coming crash will be one of the biggest ever. Prepare for another Great Depression.