THE GOLD RALLY COULD BE STOPPED BY THE FED RAISING INTEREST RATES...BUT THAT IS NOT GOING TO HAPPEN ANYTIME SOON...
BUT...THE BOND MARKET COULD RAISE RATES WITHOUT THE FED...AND THAT SEEMS TO BE THE MORE LIKELY COURSE...
THE BOND BUBBLE WILL NOT SURVIVE 2011...THAT MEANS RATES WILL RISE EVEN AS THE FED KEEPS PRINTING MONEY...
THIS PUTS THE GOLD MARKET IN TURMOIL...AS BONDS COLLAPSE...RATES RISE AND MONEY SEEKING A RATE OF RETURN AS A PLACE TO GO...
BUT AS BOND RATES RISE...THE ZOMBIE ECONOMY WILL SLOW...CAUSING THE FED TO PRINT EVEN MORE MONEY... OF COURSE THE FED COULD BUY BONDS TO PREVENT THE COLLAPSE OF THE BUBBLE...AND THAT MAY WORK FOR A WHILE...
MY BASE ASSUMPTION FOR 2011 IS THAT THE US ECONOMY IS NOT SALVAGEABLE IN ITS CURRENT CONFIGURATION... AMERICAN UNEMPLOYMENT WILL NOT GO DOWN...AND THE ABILITY OF THE US ECONOMY TO "MAKE THINGS" WILL CONTINUE TO DECLINE...
THUS...WHILE GOLD MAY BE FORCED DOWN IN THE SHORT RUN...THE LONG RUN VIEW HAS TO BE BULLISH FOR GOLD...AS THE FED HAS NO CHOICE BUT TO KEEP PRINTING MONEY TO SUPPORT THE HOPED FOR ASSET BUBBLES ON WALL STREET...
COULD THE FED EVENTUALLY ABANDON THE WALL STREET BUBBLES FOREVER MODEL...AND SIMPLY RISE RATES TO STOP THE DECLINE IN THE DOLLAR...AND THE RISE IN GOLD AND OIL ($4GAS)...YES...THAT COULD HAPPEN... BUT IT WOULD BE A SEA CHANGE IN FED THINKING ABOUT WHAT THE AMERICAN ECONOMY IS ALL ABOUT...
AT SOME POINT THE FED MAY NEED TO INTERVENE IN THE MARKETS...TO STOP $180 OIL...!!
AND WALL STREET BE DAMNED...
LOOK FOR SOMETHING LIKE THAT IN THE LAST HALF OF 2011...
THE ONE THING HELICOPTER BEN FEARS MORE THAN DECLINING WALL STREET AVERAGES...IS THE PRICE OF OIL...!!
PLEASE REMEMBER .... OIL DID THE US ECONOMY IN IN THE 70'S...AND HISTORY COULD REPEAT IN 2011...!
