Before we get to the cart and the horse, let's answer a reader...

Before we get to the cart and the horse, let's answer a reader question that just came in: 'What prevents the Fed from sending every household $100k?'Just Five Things1) Lack of authority2) People would use it to pay off debt3) Banks do not want to be paid back with money that is worthless4) The Fed will act to bailout banks, not consumers5) Hyperinflation ends the game. The Fed is simply not in the business of destroying itself. Rest assured the Fed is going to do almost everything under the sun to encourage more borrowing. That includes slashing the discount rate, the Fed Fund's Rate, loosening rules on collateral, etc. Some of those we have already seen. This is likely the first inning. But the one thing the Fed is not going to do is send everyone $100,000 or $10,000 or even $5,000. If for some reason I am mistaken and the Fed starts sending out checks or depositing money into people checking accounts to a significant degree, then I am willing to eat my deflation hat. Just so we are clear on this, another piddly $300 from Congress is not enough. The Cart and the HorseThere was an interesting editorial article on Gold Eagle last week by Peter Schiff. Prices Are The Cart, Money Supply Is The Horse