My apologies to everyone. I fear I must have made my point poorly because there are two scathing responses about something that isn’t my stance at all.

I do want a fractional reserve banking system, and I do recognize that at the heart of any monetary system, whether backed by gold or fiat, it depends on confidence. My point is that the confidence must be legitimate, that is, it must be backed by strong fundamentals. The prevailing attitude in the markets for as long as I can remember has been that perceptions are more important than reality. Most “experts” pay more attention to “consumer confidence” than savings rate and how broke with credit card debt people are. They also care more about sentiments that the economy is OK than the $700-800 billion trade deficit. They cared more about the misplaced belief that houses would never go down in price rather than objective measures like price to income or price to rent. So my point is that attempts to repair people’s confidence cosmetically repeats the same mistakes and fails to address the real problem. I was just disagreeing that confidence is the biggest problem. The hard, cold, objective numbers that banks are broke because of poor management is the biggest problem. Improved confidence will not make those ugly facts go away.

And incidentally, according to the pre-1980 calculation method of CPI, inflation is closer to 14-15% than the tamer 5-6% being pushed by the government. So, actually, I would be THRILLED with 20% interest rates!! Not always, but in this environment, absolutely! The -10% real rates on treasuries strongly discourages saving, so I think it is a bad thing. Since I’m a saver instead of a borrower, I want as much rent on my money as possible…