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From Jim Sinclair's jsmineset.com (sans charts):

You will note that we now have established Up-Trends in all the primary aggregates after a nine month hiatus [Note: He is talking about up-trends in the growth rates]. The Federal Reserve has undertaken to provide the system with liquidity in order to offset the forces of deflation. Let's see if the Fed remains firm now or vacillates!

A major establishment international investment banking firm in its private communication with preferred clients, published today a chart of the velocity of money. I have not seen this chart published before in this publication.

It is clear to me that others are now focusing on velocity which we know is the means of transmitting the increase in aggregates into business activity when velocity is positive.

As you can see, this is simply not so at this moment. In order to turn velocity, the most practical means would be for the Fed to advertise a target for inflation. The longer the Fed fails to clearly indicate and communicate firmly what it wishes to do, the lower the velocity of money will go.

For those that adhere to Professor Ludwig von Mises, don't write me any nasty letters. That folder in my mailbox is full. The conditions deflation can deliver to the world are more horrid than you can imagine - no matter how benign it's being portrayed by various economists and on financial TV.

What is being portrayed today as a magnificent economic recovery is nothing of the sort. The U.S. economic drivers have been the refinancing of mortgages for consumer purchases and the extension of credit.

As far as the extension of consumer credit is concerned, it simply does not exist in the important "percentage terms." With interest rates rising, the credit quality and liquidity measure for borrowers will have higher goal posts and therefore lower successful mortgage and refinancing applications.

With the lower amount of successful mortgaging and refinancing, there will be less of a driver for consumerism. This is a game where two strikes and the consumer is out. Yet the world of stock salesman, media writers and spin doctors are already breaking out the fine wine to celebrate the return to boom times based on the breakout in the Dow a few days ago.

What contrived madness lives in these markets?