Quaker

Bernanke Just Lost A Lot Of My Respect

Think it was a coincidence that Bernanke was telling us Subprime was contained and housing was bottoming right at the time GS was shorting the *&^% out of real estate? Isn't our current Treasury Secretary the former CEO of GS?

Look Here For An Inflation Proof Currency

If you look at the markets it's not that complex. In the last two weeks, the fed added 200bn in overnight repo's. We haven't had that kind of printing since Weimar Germany but the dynamic is simple.

Bank's have $200bn withdrawl of short term credit. Fed clicks a few keys. Numbers pop up on a screen. Banks have new $200bn loan. $200bn of money fed made created out of thin air. $200bn in money taken out of banks has to find new home. What to do?

$200bn is all the equity of the top three banks in the world. The transaction took gold up $50 an ounce. There are roughly 70,000 tons of gold in the world with a market value $1.5 trilllion. If Gold trades at the same % stocks trades, 1% or so a day, 200bn represents a HUGE percentage of the float.

IMO, Gold could easily go up to $1,000. That's not even the market cap of the worlds 10 biggest worldwide corporations. It's a trivial amount. It's less then half the foreign holdings of US treasury bonds.

Why The Fed Must Allow Gold to Rise

Hey Greg, whenever I read something like your post, which is very logical and straightforward, I ask myself "what am I missing here?. John Hussman (quoted on SA a lot) agrees with you wholeheartedly. His BOND FUND carries a 20%!!!!! gold holding. Hussman is the best bear market fund manager in the country.

So what, if anything are we missing? One thing is certain. Like those oil guys who stare relentlessly at WTI, many US managers think America's inflation rate matters. In case nobody notices, gold doubled while inflation stayed at 2%. As you state, the relationship between Gold and the Dollar seems pretty strong. Gold stocks are lagging cold considerably, which tells me, like oil, money managers still simply don't get it. Late to get in with the first move and having lost HEAVILY they're now going to be even later getting in, but when they do, it's going to the mother of all parabolas.

I think one thing we're missing is that we're going to have the mother of all bear markets in bonds.

The week after 9-11, Bush told America to show their patriotism by spending money like it's going out of style. Greenspan obliged. It's payback time.