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The Year the Game Changed

|Includes: GDX, GLD, IEF, iShares 20+ Year Treasury Bond ETF (TLT)

In 1999, the price of gold bottomed after having ridden the post-Volcker era down along with treasury yields. This was due to the sound policies the former Fed chief rammed home and the confidence that ensued.

Enter the Maestro, Greenspan, who inherited the benefits of this sound policy and used it for years as a lever to bail out the system whenever needed. Many people thought Greenspan was a great and powerful Fed chief, but in actuality he was simply playing off the confidence that had been restored in the monetary and financial systems.

I think this macro chart has profound implications and clearly shows that sometime in the 1999-2001 period, we went off the charts as increasing debt burden became not only acceptable, but necessary to support the lifestyles we had grown accustomed to. Denninger's letter in the previous post illustrates China's role in the macro Ponzi scheme in the harshest of terms.

There is talk of a gold bubble and in my opinion, the most unsavory of the gold bug 'community' are out in full force, hoping for nothing less. But gold is not in a bubble. That is because gold represents an anchor to sensible systems and simpler times. It is going nowhere. The other stuff, the remnants of a rotting system is what is going somewhere and that somewhere is down. In short, confidence is being lost. It is no coincidence that gold is the only asset in new high (blue sky) territory.

Back to the chart, look at what happened as Greenspan finally ran out of Volcker's ammo and the market realized that this was simply a shell game promoted mainly by the macro vendor financing relationship between the US and China. There have been various means of keeping treasuries aloft, not least of which is the need for China and other creditors to keep buying them or at the least, not talk them down. Gold's honest monetary value has simply picked up on the rigged game beneath the surface and sought the value that treasury yields have thus far refused to seek.

At the very least, this is a picture of honesty beneath the surface and sadly it is a picture that most people will either never see or come to see when the media are shoving it down their throats and they panic into gold at god knows what higher price than it is currently at.

I'll kill it here, but when I see and ponder pictures like this, I hear thousands of word.