The reason our rates can even approach 0% without a vanishing supply of credit is because the government, via the FED, creates loanable money out of thin air. In other words, even if no one saved a penny and spent 100% of every paycheck on consumer goods, there could still be credit available at 0% interest.

But let's explore the implications of this. First off, credit would no longer be real credit. Real credit would mean someone produced something and did not consume it. IE – they saved. If no one is actually saving, credit is not access to saved goods; it is nothing more than new funds that must compete against existing funds to secure goods. This will reflect itself in price inflation, which will result in the market demanding higher nominal interest rates. Otherwise the real rates would be negative. To maintain low interest rates, the government must create ever-greater amounts of new loanable funds.

As price inflation gets ridiculously high and real interest rates remain negative, individuals are forced to find new ways of saving, an essential means of economy. Without saving, everything you produce must be immediately traded or consumed. They can't save in money, because inflation taxes the purchasing power of money too quickly.

Thus, they look to various assets. Real estate and corporate stocks are frequent choices, and not coincidently known for their frequent speculative bubbles.

But we can even go further than the asset bubbles. Eventually, too much money-creation leads to hyperinflation, where individuals seek to exchange money for any real goods as quickly as possible. This basically leads to a barter economy, barely above primacy.

Of course, liberals don't think these things through.

Look, us “goldbugs” tend to be so beause we recognize the DANGERS of inflation. That the price of gold goes up is NOT something we cheer over. Certainly, we don’t like anti-market moves that artificially hold the price of gold down in order to obfuscate the dollar’s demise. But we remember that it isn’t that the PRICE of gold is going up. It isn’t becoming more valuable, just like houses weren’t becoming more valuable. When it takes more dollars to get gold that is because the value of the dollar is going DOWN.

We are “goldbugs” in order to PROTECT ourselves from what Greenspan and Bernanke have done. Nobody would be more happy than myself if gold were to drop back down to $20 an ounce (i.e., around what it was when the Federal Reserve was first established.)