Letters by a modern St. Ferdinand III about cults

Negative interest rates.  'Stimulus spending'.  More government.  Real inflation now reworded to be 'deflation'.  Famous billionaire investor and world traveller Jim Rogers sums it up best:

“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance...All he understands is printing money.”

Rogers gave that indictment at a speech at Britain's Oxford U., in which he also told students to forget about Wall Street and the City; and instead turn to agriculture, mining and any activity that is centred around commodity extraction, and production. One could add that individual investors should be stockpiling commodity assets such as gold, silver and ag product.

The reason? We have a guaranteed bubble which will explode. None – none – of the factors instigated by government meddling in housing and banking finance have been resolved. They have only been exaggerated and deepened. The next crisis will be far worse than the 2008-10 recession. Not only are Western governments bankrupt, the politically managed central bank system is engaged in what can only be termed as a project of monetary criminality, divorced from the real world and entirely subservient to short term state and investment objectives. Central bank policy throughout the West and the consequent rise of stock markets since March 2009 have no relationship whatsoever to economic reality.

So now the US central bank is going to waste $900 billion of printed money, unbacked by gold or any hard asset to 'stimulate' nothing other than the stock market. This is the 2^nd time that Big Ben and friends have used US Treasury bonds to buy 'assets'. Almost $ 2 Trillion dollars was used in 2009 to buy toxic mortgages, which still sit on the US Central Banks' balance sheet. At some point these assets have to be sold – but to whom and at what price ? Now a further $600-900 billion will be printed and used to US Treasuries. How does this help the economy?

Alistair Heath in the Financial Times;

“On top of the $600 bn in fresh quantitative easing, the Fed already has a scheme to reinvest maturing assets. The combined action means that the US central bank is set to buy $850 bn to $900 bn of Treasuries by the end of next year. To date the Fed has bought $1.7 Trillion in US government and mortgage securities...One of the side-effects of quantitative easing is that it is fuelling a bubble in the emerging markets....”

When you print money – some $ 3 Trillion – you debase your currency. Not only are 'emerging market funds' in a frothy bubble as Heath says, but the core commodities are arching skywards as well. Gold prices are telling us that future inflation is guaranteed, along with another major financial meltdown. Indeed I wrote in January 2010 that when gold hits $1500 per oz., this will be a clear signal that a serious dislocation has occurred in the monetary and fiscal systems of Europe and North America.

If gold goes through the $1500 barrier it will be telling us quite simply that the US and the industrialized world will have high inflation; low to zero real economic growth; and the specter of state bankruptcy. The US is technically bankrupt already. There is no disputing this fact. This is one reason why gold keeps rising. The US state cannot afford its debts, it future liabilities and its obligations especially as interest rates will need to rise to fend off very strong inflationary pressures. The US dollar is doomed, and gold will take its place rightly or wrongly as the world's reserve and standard currency.

Gold is telling you something. It might pay to listen. It might also pay to ignore the talking circuses in the media which did not predict this latest catastrophe – a regressive process, which by the way is not over, but just starting.

It is not that gold is in a bubble – it isn't. In fact you were to take either the real total US debt level [$100 Trillion] or the amount of US paperbacks in circulation and divide by the 10.000 tonnes of physical gold that the US has in inventory you would come to a price of between $50.000 and $100.000 per oz for gold. Fantastic ? Most certainly. Possible – probably not, but it shows you that gold is not in a bubble.

When you see the US central bank and US politicians engaged in financial and fiscal suicide do yourself a favor. Buy gold, buy arable land, buy commodities. Don't buy real estate, commercial property or equities. In other words, do the opposite of what most 'experts' propose. You might even consider liquidating the fraudulent retirement savings plan you have and buy the above. Equities, along with the fiat currency system are both going to collapse.