Other indicators were dire warnings from the IMF and World Bank that the Fed MUST start a circulated note contraction or face currency devaluation via trader non confidence…they stated the contraction would create a small recession if initiated quickly (this was in 2003) and was managed prudently…however they stated that economic and currency system crisis loomed if the contraction was left to the last moment.

Well we see the triple whammy facing the Fed’s mismanagement of credit and currency has put them in a situation where they cannot afford to either contract M3 or increase prime lending rates as doing either would be disastrous to trader/consumer confidence…so what they seem destined for in the US is a prolonged period of “stagflation” where the dollar will rationalize to whatever the confidence level dictates and everyone is too timid to buy on credit even though it is dirt cheap.

As you stated, about the only bright spot in all this fragile/teetering US economy is the fact the weakening dollar may help create some productivity to assuage the US massive trade deficit….IF production sectors do not have to up capacity with credit.

As for us Canucks, all we can hope is our own central bank has not used too much US currency as assets backing our own dollar.

The big gold rush is on people…silver is looking good too…for the foreseeable future.

JPMorgan Chase & Co. announced that it will buy ailing Bear Stearns for $2 a share.