Larry explains.

1. Why isn't the printing working?
I have asked this a number of times. And attributed the failure of the Bernanke effort (to increase the money supply in order to speed the economy) to having the new money sequestered as "Reserves." In addition, says Larry, the new money is sunk into Treasuries (because it brings a guaranteed return when interest rates are near zero) and this mountain of money goes nowhere, its velocity is zero.

2. Why is inflation low?
A: Because the money velocity is slow.

3. Will this change?
A: Yes and soon.

4. How soon?
A: Between January and June.

5. What will set off the change?
A: The realization will hit investors that the US is broke and the $16T will never be paid back. The Treasuries bubble then will bust and Treasuries will decline. Here is the 30 yr Treasuries graph:

 The graph shows that Treasuries topped out  and are beginning to decrease in value. A monthly close below 146 (and a trendline which is at 144 now)  will start the cracking of the Treasuries.

6. What will the cracking of the Treasuries do?
A: The value of the Treasuries will decrease as Investors rush to the exit and put their money in commodities, real estate, gold and silver and selected stocks.

7. Will Bernanke try to stem this tide?
A: Most likely. The FED will try to buy up the 30y Treasuries sold, but it can't speed the Money Velocity. Larry thinks that between now and when gold takes off, there might be another round of drop in gold prices.

8. Do I believe that gold will drop between now and the end of the correction?
A: Gold has already dropped even as the Treasuries graph is topping. However, there are a lot of people and countries buying, so we may not see the lows Larry is talking about (i.e. 1,400/oz).

9. Will we have hyperinflation?
A: Larry does not think so. His reason? The economy will collapse before we get there.

10. What will the Fiscal Cliff do?
A: Between Obama and the Media they have browbeaten the House to give in and let the Dems in the Senate dictate the outcome. And there will be no real cuts except for the military. One Dem said that agreeing to cuts for a Democrat was like killing your children. So, between an increase in taxes and no real cuts in spending, the result will be a slowdown.