The Rope

We're not close to done, despite what Larry Summers might be telling us.

The normal early indicators of inflation like gold and oil are reacting to the expanding money supply, but there is still much collapsing debt and deleveraging pulling in the opposite direction, creating the impression of stability in the present time. Overall, deflation is still stronger, because the rising unemployment and stagnant wages are slowing the velocity of money, which these retail numbers show.

Either we are headed for a long, long period of Japan-style decay or the rope that connects this tug of war between inflation and deflation will snap, causing rapid inflation or rapid deflation. I would expect rapid inflation. ( The 'rope' is the dollar+our ability to raise new credit ).