When you speak of inflation are talking about the CPI, money supply, or monetary base(are you using mzm, m1, m2)? If you are talking about money supply and monetary base I don't know how you can say that there isn't any inflation.

Where did the private liquidity come from? What caused such an aberration in human action to assume that such large quantities of leverage was a good idea? Surely we can't chalk up such a drastic change in such a short period of time to stupidity. Could it have been that outside forces did have an influence in these actions? I'll let you work out what the outside forces could have been.

I guess your argument boils down to, "If the government says they will protect the dollar the dollar will be fine. The government says they will protect the dollar therefore the dollar will be fine." Very convincing argument sir. . .

One last comment. Many goldbugs don't argue that gold is an investment that will yield large returns. They simply argue that it is the best way to maintain the true value of your wealth.

A dollar that is based on Gold, like it was before is the most smartest thing to do.

the reason that foreigners are still buying US bonds is because that they already bought bonds, if the US crashes, the money they already have will crash too. so its in their self interest to keep buying, until they can afford not to buy those notes.

The arguement is truely absurd..Gold has been the basis of wealth for 5000 years..Countries wealth have always been measured in bullion,at least until 1973 when we decided it was no longer a good idea..Your argueing that a dollar ,a piece of paper has some sort of real value that is backed by nothing is worth something..You sir sound like someone who is secretly hording gold while trying to get the the rest of us to except the worthless paper..

Point by point:

1) Inflation has already started and will run rampant in the next 5 years because of the $5 trillion printed into the money supply. Nothing that the govt or Fed can do will reverse what they have put in motion. Time will show it.

2) All markets can be manipulated like this. Cramer has mentioned that one hedge fund can influence the price of a stock by the amount it can purchase at one time. Also, the market for the US dollar will be "manipulated" when the dollars held outside of the US (which accounts for about 70% of the US dollar money supply) is dumped on a grand scale by those who realize it is worthless. Then what do you think happens to the value of the dollar...

3) The fact that gold is in limited supply is the exact reason that it has value at all. The fact that US dollars can be printed at a whim makes them worth next to nothing. When there is too much supply for the demand in any market, prices fall. This means that the price, or value, of the dollar falls, which means that $1 will buy less in the future than it does now, which is the exact definition of inflation.

4) "The price of gold has done nothing over the last 20 years." In 1975, the price of gold was at $150/ounce. Today, it's at $900/ounce. Keep in mind that we completely left the gold standard in 1971, so since then, the price of gold has climbed 600%. Also, if you look at the price of gold in the late 70's, when massive inflation took hold, gold rose from $150/ounce in 1975 to $750/ounce in 1980. I think the numbers speak for themselves.

5) The people who have been funding our deficits are starting to second guess what they are doing. They know that they can never be repaid what they have lent, and in the case of China, that is probably the reason they keep lending. Gives them a great deal of leverage over us. However, even the Chinese are starting to pull back their buying of US Treasuries, and asking for collateral for it. I can only imagine what the govt might give them as collateral. How about govt owned land, or guns and ammo, which could then be used against us in the inevitable conflict with China.

Funny you should say it but the dollar is no longer the only global currency.

The Euro has taken it's place as a lot of countries (not only the EU block) have switched their reserves to Euros.These include oil heavy weights and that's why the petroeuro is being discussed to replace the petrodollar.

"Your argueing that a dollar ,a piece of paper has some sort of real value that is backed by nothing is worth something..You sir sound like someone who is secretly hording gold while trying to get the the rest of us to except the worthless paper.."

Dude, gold is valuable for the same reason that dollars are -- we all agree that it is. Gold is just a metal, like any other metal on the planet. But, it's shiny, so we all agree with each other that it's somehow more important than the others.

Investing in gold is silly.

What the people of the world want is stable money. Despite the initial U.S. demurrals, China is correctly leading the way to a Single Global Currency, which necessariy will be managed by a Global
Central Bank within a Global Monetary Union. As China requests, this next
global currency will not be the responsibility of just one country. This
proposal is similar to the pending proposal from the U.N. Task Force on
Financial reform, let by Joseph Stiglitz. The U.S. should join that panel
and China in urging the G20 to begin planning for a Single Global
Currency. A Single Global Currency will be stable.
The success of the euro shows that monetary union is the best way to
ensure monetary stability. The primary problem with the euro and currencies of other monetary unions is that they still must co-exist within the international multi-currency system itself where the value of those common currencies must still fluctuate in value against each other.
With a Single Global Currency, there are no such fluctuations, by definition.
If 16 countries can use the same currency, why not 192?
In addition to eliminating currency fluctuations, the use of a Single
Global Currency would eliminate the current foreign exchange trading
expense of $400 billion annually, eliminate currency risk, eliminate
current account imbalances, eliminate the need for foreign exchange reserves (now
totaling more than $3 trillion); and bring other benefits worth trillions, such as reducing the impact of global financial turmoil such as we are now experiencing.
The Single Global Currency Assn. (www.singleglobalcurrency.org)
promotes the implementation of a Single Global Currency by 2024, the 80th anniversary of the 1944 conference. That’s only 15 years away.
The world is moving toward a Single Global Currency through the creation, expansion and merger of regional monetary unions. Anoth route is through international monetary conferences proposals and agreements, such as were seen at Bretton Woods.
The challenge now is to reach that goal deliberately, as soon as possible
with as little cost, and as few crises
as possible.
See the book, "The Single Global Currency - Common Cents for the World."
Morrison Bonpasse
Single Global Currency Assn.
Newcastle, Maine, United States

Ummm...I wouldn't be so sanguine as to the future of the Dollar as the world's reserve currency for quite a number of reasons. A quick intro: http://asrblog.com/2009/04/25/the-dollar-the-yuan-and-global-hegemony/ . The Chinese are using their T-Bills as collateral to fund commodity buying; to quote Chinese central bank advisor Yu Yongding "I wish to tell the U.S. government: ‘Don’t be complacent and think there isn’t any alternative for China to buy your bills and bonds’,” Yu said in an interview yesterday. “The euro is an alternative. And there are lots of raw materials we can still buy."