Consider_this

Gold: The Only Remaining Bubble?

The extreme bi-polar nature of the market; where you get massive deleveraging and deflation of the equities market and fear of a deflationary depression on one hand; and then a simultaneous fear for a hyperinflation tomorrow on the other hand due to massive govt issuance of debt. Can be explained without insulting either deflationists or inflationists.

I think they're both right.

Both deflationist and inflationist believe that some kind of collapse is imminent.

Deflationist believe that everything will collapse in price (and rightly cite all the drop in industrial, oil, retail, jobs, etc) and money in the streets become ever scarcer. This makes anyone who carry debt harder to service that debt; and who is the biggest debtholder in the world? US Govt. So govt will eventually default and we'll have an economic collapse.

Contrast this to an inflationist view:

Inflationist believe that the govt will not stop in it's bailout efforts, and will go so far as to flood the money supply by monetizing debt if need be. Thus, there'll be no technical default, but thru the hyperinflation that ensues, a inflationary default of the US debt.

A deflationist dream is to buy US Treasuries, collect what meager yields it has, and time the final cash out to just before the US Govt defaults, or the market recovers. His favorite flight to safety vehicle is Treasuries.

An inflationist dream is to buy Gold, and wait the imminent inflation of everything due to exploding money supply. Ideal cash out time is when the inflationary pressure is at the greatest. By then Treasuries, in contrast, will be paying pathetically low amount compared to what Gold would run up to.

Gold is an indicator of total global collapse. The ultimate short, if you will.

Similar to Treasuries, it is a flight to safety vehicle; but dissimilar to Treasuries it places no faith in the US Govt. Therefore, a flight to safety person has two choice: you can take the extreme step of parking your money in the treasuries today, as a safe haven (given today's pathetic interest rate); or an even more extreme step to park your money into gold, which is a further bet (compare to ultra liquid treasuries) on some kind of govt default and collapse.

Thus, I agree with the author that the dual climb of Treasuries and Gold need to be observed TOGETHER. As they both indicate the overall level of discomfort and fear in the market. If the dual assets continue to climb without easing, then it will be doomsday for the world, because money will dry up for any other business purpose.

However, if the fear should peak... And things start stabilizing to some extent, so that imminent doom doesn't seem a certainty anymore . That's the interesting angle of how these two will unwind.

What I know for sure is this, if we don't get doomsday, a lot of people who're betting on one one way or another, is going to get hurt.

Such a dysfunctional market.

An Open Letter to the Plunge Protection Team

Going back to the gold standard is a gold-bug's wet dream. It ain't going to happen.

There's a simple way that the current crisis of confidence with USA will resolve to USA's benefit.

It's a question of Relative Reputation and Image.

USA looks bad now because it has screwed up and is losing a lot of money -- relative to other countries who appear to not be screwing up as badly.

Is it really?

Or is it that the whole world is on a roller coaster, tipping over a "peak" and USA the first train? In that case, the first train appears to be crashing, and the rest seems to be moving up.

If this is so, and the decoupling theory is a bunch of crap, then this the crisis of confidence will quickly be resolved when USA finds a bottom and the other economies are still crashing.

An Open Letter to the Plunge Protection Team

Careful, We're looking at a potential Depression here... If it's really true, a Depression is a re-pricing of *ALL ASSETS*...

Price of every asset gets repriced down. A destructive cycle of lower demand driving lower prices driving lower jobs driving lower demand will start.

In that scenario, Gold is *NOT* the store of wealth you think it is. Nothing is immune, as whatever "money" someone will pay for a "thing" is going to be less, as the system simply has less money in it.

Good news is everything will be cheap at the end of this process -- bad news is everyone will be poor.