I agree with the "pushing on a string" analogy silverharp. However, governments can spend money into existance as well as allow private banks to lend it. They'll try everything to push credit into the market via normal channels and if that doesn't work they will starting printing it and giving it away as tax rebates/cuts and spending programmes. If the Asians play ball and keep buying bonds, along with the FED etc, they will be able to keep rates down. I don't think it serves China's interest just yet to kill off the US and European consumer as they need to further develop their domestic markets.

As I see it, we are not ready for the mania in gold that will come with a major international dislocation in currencies etc. We need to muddle through for a few years with a bit of money printing on the quiet (the public don't understand any of this so they can get away with it for a while), while we have wave two where the institutions get involved. Then as things start to spiral out of control, as the energy crunch hits, then we hyperinflate the liabilities away and go to a new monetary system which can cope with perpetual, energy starved depression (the fractional reserve system is no good without growth and we don't get growth without rising quantities of energy). What that will be is anyone's guess.