what will keep the us economy going now?, page-6

This from The-Privateer - very interesting reading:

Unfortunately, for the Bush Administration, the Fed, and the Treasury, the adverse consequences are much too visible on the debt markets. Don't forget, it was this same Administration, not many months ago, which said that deficit spending and the height of interest rates have nothing in common.

US debt markets are in extremis. So far, the US Dollar and the US stock markets have NOT reflected this condition, to the utter amazement of everyone who has noticed what has happened to debt yields. Gold WAS reflecting this condition - LAST WEEK. This week, the ubiquitous funds have been rallied into action and have dragged the US Gold price all the way back to where it was at the beginning of the latest rally.

The reason why this has been done is painfully obvious. Next week's Treasury refunding auctions is probably the most important in the history of that institution. At stake is much more than the continuing profligacy of the Bush Administration. At stake is the entire superstructure of the global financial system based on the fiat US Dollar as the reserve currency. Treasury debt paper is both the ultimate reserve upon which ALL (with the partial exception of the European Union) global financial systems are built. It is the ultimate "safe haven", the financial instrument which, above all others, IS TOO BIG TO FAIL.

Everything that can be done IS being done to prepare for the successful conclusion of these auctions. One very important step was, of course, to debunk Gold, hence the swan dive this week. As already stated, many see the present bond bloodbath as beginning to rival the one in the late 1970s. The late 1970s saw the beginning of the parabolic Gold rise from $US 102 in August 1976 to $US 850 in January 1980. It also saw the near extinction of the US Dollar and an interest rate environment of almost hyperinflationary proportions, where short-term debt exceeded 20%. Back then, the US Government owed about $US 750 Billion.

Today, with official rates at 1.00%, the US government owes $6,751 Billion and the Bush Administration has been and proposes to continue to add to that figure at a rate never before approached. The soaring bond yields point to the fact that this can't go on much longer. A "failure" of the Treasury auctions next week would point to the fact that it must stop - RIGHT NOW! Anything and everything must be done to avoid that.

The longer the Gold supression is maintained in the face of the current situation, the more obvious it becomes. Many have noted the extreme reluctance of Gold stocks to follow Gold down this week. The longer the Gold suppression is maintained in the face of the current situation, the more violent the snap back will be when further mainainance proves impossible.