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You can't have a nice debate on this forum anymore. I think I'll leave. Dr Bubb - please can you delete my i.d. Thankyou.

I have changed it to help you.

I consider liquidity to be infinite not because there exists an infintely large number of notes - but where there is more money (in all its forms) than there is worthwhile investments. This can occur in a variety of ways. Regardless of how it comes about, how does that money (in all its forms) stop becoming worthless, especially if you are getting to the point where it actually costs to hold anything including cash? On the surface this looks to be very similar to a deflationary scenario - except there exists a surfeit of money (in all its forms) as opposed to a shortage. It is a situation where demand is more than met by supply in everything. This may be triggered by very low wage costs, very high profits leading to excess supply and depressed demand eventually.

My point is let's consider a world where liquidity is infinite and that cpi remains low because of low labour costs. Yields tend to zero and rates remain v. low. But no hyperinflation potentially even in this sort of situation which is supposed to provide the conditions for such.

In a hyper inflation of assets as yields tend to zero, where would you put your money? Why would you invest? This was the sort of situation faced by Japan which lead to the carry trade. What happens when carry trade options also tend to zero? So you will have had some sort of hyperinflation - i.e. it's already happened but it's difficult for us to see it because we've lived with it and it's been up so close. Pension crises as costs rise as bond yields fall, Equitable going bust because they can't meet 3% return a year in low inflation environment, endowments failing to pay off mortgages, btl's with negative yields. With even more loose money flooding the system, yields could fall even more - witness stock market rises. Even as cpi remains relatively benign. What you then have is lots of cash around but no worthwhile home. What happens then?

Faber... http://www.ritholtz.com/blog/2009/11/faber...ntly-over-1000/ “We will not see less than the $1,000 level again,” Faber said at a conference today in London. “Central banks are all the same. They are printers. Gold is maybe cheaper today than in 2001, given the interest rates. You have to own physical gold.” China will keep buying resources including gold, he said.

http://ftalphaville.ft.com/blog/2009/11/10...-buying-effect/

From: http://www.youtube.com/watch?v=hCjzpdivl0I

Now, if only we could get rid of those pesky customers....

http://ftalphaville.ft.com/blog/2009/11/03...swap-confirmed/ Gold for sdr swap confirmed.

From a 'stability' point of view he's right. From an excessive liquidity point of view he is also right. But his conclusion re gold is probably wrong - we will see lots of bubbles as liquidity seeks a return, with trend jumping driving bubbles and busts. Gold will be as prone to this as anything else - if not more.

Under a TFH situation I always said: "Gold is for girls; guns are for guys" Well just found this - best of both worlds....

http://ftalphaville.ft.com/blog/2009/09/17...metals-for-you/ China to world: No more shiny metals for you Posted by Tracy Alloway on Sep 17 08:35.

More on China urging its citizens to buy gold. http://seekingalpha.com/article/159962-chi...cle_lb_articles It is also clear that China is literally “putting its money where its mouth is.” China has devoted an enormous amount of resources building up its domestic gold mining industry, soaring to #1 in the world this decade, and it recently stunned the world with the announcement of a huge increase in its official, national holdings (see “China now has 5th largest gold reserves”). China's gold reserves jumped by 76% from its last announcement in 2002 – up to 1,054 tons. Given that official government purchases on the open market are recorded and announced, this means that rather than buying all that gold openly on the market (which would have driven up the price while they were buying) China has been accumulating gold surreptitiously, through buying up its domestic production – strongly suggesting that ramping-up its gold production was part of a long-term strategic plan to become one of the world's largest (if not the largest) holder of gold among governments. As I have written previously, there appear to be two, related goals in this strategy. Most-obviously, the Chinese government is now spending its U.S. dollar-holdings faster than it is accumulating them. This is no surprise, given the increasing rhetoric (and increasing intensity) expressing concern about the reckless fiscal policies of the U.S. government – and its worries over the future value of its vast accumulation of U.S. dollar-based debt. The second goal which the Chinese government appears to be moving toward is having its own currency, the renminbi, replace the U.S. dollar as the global reserve currency. There have simply been too many actions on this front to list them all, however some of the more significant initiatives are bilateral trade agreements (which exclude the use of the U.S. dollar), currency swaps with its trading partner (which substitute the renminbi in bilateral trade), and authorizing its principal, coastal exporting cities to begin conducting most or all of their trade using renminbi. These initiatives are entirely separate from the buying-spree the Chinese government has been engaging in, dumping U.S. dollars for a vast assortment of “hard assets” - primarily commodities and commodity-producers.

http://ftalphaville.ft.com/blog/2009/08/28/69106/gold-war/