Hi Dmastercard, very good article you posted, i believe there is not really a debate, we agree on almost all things in this article.

Two questions remain that nobody can answer with certainty. The first question is: how far will the real estate prices decline and how far does the fed want to go with bail outs?

Then another big question is what foreigners will do with their dollar reserves and when, as mentioned in the article?

I think that the US will be able to keep them from spending it for quite some time to come, they will ask them to wait.

Don't forget who has the military power. Some countries don't want to lose that backing from the US military (especially the Saudi regime, if it wasn't for the US, that regime would've been toppled a long time ago already).

Other countries don't want to lose out on money, if they dump those dollars now, their reserves will be worth less and they will lose additional money because of repercussions from the US.

That being said i do believe that inflationary and deflationary forces will battle for some time to come and that deflation will finally take over. At a moment in time the Fed can't go on reinflating the economy with bail outs. That is when deflation will set in. A good possibilty is that that's the time when the US will allow the foreign dollar reserves to flow back in the country again, to fight deflation. A lot will be owned by foreigners then.

For now they will tell them to wait. They will succeed, with the simple argument they can buy cheaper later. This buys time. And a lot can change in a few years.

All in all it is just a huge shift in power from the west to the east. The US will be forced to sell assets cheaply to the Saudi's, Chinese and Japanese. This process will not happen overnight though, it will take years and has already started. Europe will have to do the same but to a lesser degree.

In the mean time: GO KXL GO!! Run back to the $ 2+ area where you should've stayed this month! GLTA