Kevin Walmsley

A Rotting Market Stinks from the Head

Great analysis, but the long gold/short Treasury trade won't work. As reckless as the government spending and bailouts have been, they haven't been short-term inflationary, but rather the opposite. It's one thing to attempt to recapitalize a bank that has run down its balance sheet by overlending. It's another to get that bank to relend on the new reserves. It isn't happening. And all this federal stimulus only becomes inflationary as money velocity shoots up.

Welcome to deflation, which is a general erosion of prices across all asset classes, including precious metals. If the gold trade worked in this kind of environment, you would have seen it long before now.