Are the seeds of deflation apparent now? Does the recession/depression continue until 2014 when the Department of Defense says demand will outstrip oil supplies? How does an industrialized society survive without cheap oil?

Are we getting a clear picture of what is really going on in the economy or is the situation manipulated in order to conceal the magnitude of the problems before us?

The implied velocity of money is still very high and with GDP = MV, the reduction in velocity that will take place as the debt unwinds is in the neighborhood of 30+ % (current V ~ 1.7 vs 1941 low of ~1.2 a difference of around 30%). We have a long way to go still. The fed thinks that by pumping up reserves it will solve this problem (that is increasing M to solve for reduction in V). This is the theory that Friedman (and now Bernanke) advocated. It is now called the great experiment. Can we grow money in use by 35% or so to prevent depression 2.0?

If we are a consumer based economy, and consumers keep losing their jobs, and those that remain employed are working less hours per week, and in any case all consumers as a whole are at a record level of indebtedness, just how do we the consumer spend our way out of this depression? What is the engine of growth going forward? We all can’t run our own repo businesses or is that the next bubble?