Paulson meant that he was waiting for the US-lead depression to catch up with the rest of the world and bring down rates in Pounds, Euros, Yen and Australian dollars. He’s a genius after all. It’s working:

Source: http://quotes.ino.com/chart/?s=NYBOT_DX

Even gold, that running vote of confidence in paper money, has backed well off the disconcerting 4-digit level:

Source: Kitco.com

How could people suddenly have such a preference for the dollar again? Don’t they know that it, like the Constitution, is just a goddamned piece of paper? Well, Paulson won’t admit this part of the policy, but you may have heard lately about people and companies going broke. Broke means no money (such as dollars). Since dollars accounted for a huge share of the bad loans made in the bubble, the implosion of that debt is akin to a shortage of dollars.

The dollars were never really there, just debt, but when you get a loan, it sure feels and works like money. And when it comes time to pay it back, money is what you need. Right now, nobody seems to have much of it, so those who do are getting the sense that they should hang onto it. That means a slower velocity of money (the pace with which it changes hands), which is deflationary by even by mainstream economists’ definition (M V = P Q).

So, who wants to guess how much longer Peter Schiff can hold out with his inflation case?