Hey Robin,

I agree that deflation is happening now. Yes the Fed is printing more money but you've got to follow all this new money through the economy. It's a pretty short trip so far. The banks which make loans to consumers and businesses are so risk averse right now that they are using the money to plug the holes in their balance sheets. The "trickle-down" effect isn't working and IMHO was never intended to trickle down, although they said that's what the purpose was. One aspect of the problem in the danger that the derivatives market implodes. We'll see a complete financial collapse if that happens. Again, IMO, this is why the Govt. and the Fed wouldn't allow AIG and certain investment banks to fail. Their exposure in derivatives was too great.

Right now, the limiting factor for money to reach the little guys is the risk aversion of the banks to lend. The fed can print all the money it wants and give it to the banks and ailing businesses, but this money can't flow freely through the economy, it might as well not exist. So what we have is a flawed system that has so many holes, that the money isn't finding it's way around.

A gold or silver standard is another way that restrains the money supply, yes. We're not tied to one right now and the primary reason was that it was working against the growth imperative that is a result of the compounding interest in the debt based money creation model. I agree that a gold standard isn't the best choice but not because it prohibits perpetual growth, rather it reduces flexibility of the money supply.

TS