i think we must face it ..........., page-7

As always, gold is the inverse of the US dollar. At present, the US is hosting one, final almighty bubble: US government bonds. When this last bubble bursts, so will the US dollar and gold will pass its previous all time highs.



While that is a totally awesome uptrend, the US has continually upped the ante, playing chicken with the world:-



However, just because you have a very long-term trend, doesn't mean it can't and won't reverse.



At present, we have rampant destruction of debt and asset inflation around the world. The US authorities are hell-bent on trying to buy up (by one means, or another) all of the private sector debt and replace it with US Treasury debt.

At present, the private sector debt is such a pile of over-valued crap that people are clamouring over one another to exchange their crappy private paper for yield-less, but somewhat higher quality US government paper.

The US treasury bubble will end when either: (a) enough private crap has been exchanged for US Treasuries to take away the fear factor in holding private paper; or (b) the sheer rate of issuance of US Treasuries exceeds the demand. Perhaps a combination of the two.

It's been a couple of months since we had a really serious crisis, however I note that Paulson has requested the second $350bn of TARP before he leaves office (which is next week), so I presume there is something nasty brewing at present.

While people keep on piling into treasuries, I can't really see gold rocketing, because I can't see the US dollar tanking. However, the rate of issuance is just so enormously humungous that something has to give. I can't see it lasting the 2009 year out.