I'm missing something here. Investing in treasuries is still giving the money back to the government, isn't it? Changing it from one hand to the other?

I'm not an economist, but since even they don't agree on what is happening... I'll have a shot at the inflation/deflation thing.

What I'm not sure I understand is this: We were living on imaginary money, already. Maybe less so in other countries than in the U.S., but when your banks are leveraged 40:1, that is a lot of money that only exists on paper. In fact, it's an inflation of credit from safer and saner limits. This is what is deflating. All of that imaginary money that existed on IOU's. It's really no better than the government inventing money.

At the same time, the U.S., and other countries including Canada and China are planning to print a whole bunch of money.

I assume that for a long time forward, we won't be returning to such high leverage ratios. If we don't return to the same leverage ratios, then the effect of throwing so much money at the problem will be muted. It will simply replace the effect of all that imaginary money we were already living on.

I have yet to see an economist who wasn't passionate either in the deflation camp or the inflation camp, and who can adequately explain the inter-relationship of interest inflation and dollar inflation.

If any of you understand the issue better, please help!