http://www.247wallst.com/2008/07/merrill-lynch-4.html#more DEFLATION It was just a few months ago when Paulson and Bernanke said subprime was contained, and would not be systemic. It was just May, that Thain of Merrill said everything was ok, and that no more capital would be needed. ............................................................................................... What is very telling is when even some of the supposed best financial minds cannot grasp the current situation, who are unfortunately controlling the money spiggots for a lot of people.. This is a simple example of DEFLATION.... Actually how can deflation not be most likely? Think of it this way..... Tom has no savings......any money that he buys things with, he simply borrows. There is only one item that Tom can buy....it is called a house. There are 100 Toms. The most that a Tom can borrow is $100,000. Thus the highest price for a house is $100,000. ...................................................................................................... But things change..... The banks will now only loan to 50 Toms. The most that a bank will loan a Tom is $50,000. .................................................................................................... Thus all houses are now worth no more than $50,000. ................................................................................................. The prospective valuation loss is 50 X $50,000 plus 50 x $50,000..... The total previous valuation was 100 x $$100,000.... Now the total valuation is $50,000 x 100....... ..................................................................................................... Half the total previous valuation has evaporated. This is DEFLATION....... ............................................................................ Coming to the theatre near you......... MER is one of the movies..... ................................................................................................. Printing money and diluting the value of the dollar is not a solution, yet but it is according to Bernanke. Trying to create new bond types for mortgages to replace the lost values is not a solution, yet but it is according to Paulson. Raising another $8.5 billion, does not equal many times the $8.5 number, but yet it is sufficient according to Thain..... Dream on.......