interesting stuff on us economy, page-2

I don't know what Mr. Bernanke has been smoking.

Following an illustrious academic career (by whose standards?) he joined the Fed in a senior position - senior enough that when he opens his mouth, his comments make their way onto the front page of the Wall St. Journal.

If you refer to the recent comments by Stephen Roach of Morgan Stanley, the Fed remains terrified of deflation a la Japan. To the most naive student of economic theory, a simple way to counter deflation is to inflate, ie turn up the electronic printing press? Wrong! That is the worst way! That will lead to a relative dimunition in the value of the currency, super high interest rates, a real rate of interest ie interest rates minus inflation rate, at the interest rate differential between that country and its trading partners. Furthermore, it will create an invironment of sky high inflation, coupled by falling prices - the scariest scenario called stagflation.

What is the result? Collapse of financial markets, and a currency that goes down the toilet. Welcome to the USA 2003. Who is not only the biggest, but the only winner? Hint - it's a four letter word; and it's spelt
g-o-l-d.

Prepare for the reinstatement of the traditional mathematical ratio between the Dow and Gold.

The smart guys are buying bullion and decent gold producer shares. The suckers are diving head first into the latest bear trap.

Protect yourselves.