The Slippery Slope

QE II is now out of the bag, ready to alter the course of history.

There are several assessments that I’ve held over the years that have never wavered:

• Thin-air money printing. U.S. monetary and fiscal authorities (the Fed and Congress, respectively) will make every attempt to print and spend their way out of this financial predicament and will not take the path of austerity until forced to by external circumstances.
• Gold and silver are an excellent way to protect your wealth from the form of confiscation that thin-air money printing represents.
• Over the next 20 years, resource issues, especially in energy, specifically in petroleum, are going to fundamentally reshape the economic landscape. And maybe the political and social landscapes to boot.

More than two years ago now, reacting to an increase in the levels of government and Federal Reserve bailouts (The Day Everything Changed), I opined that a course had been set and that we were in all new territory that would lead to a dollar crisis someday.

This was my conclusion on September 19, 2008:

To summarize, the US government now owns title to half of the mortgages in America, is now in the insurance business, is guaranteeing institutional money market funds, and is now thinking about buying another $500 billion of bad debts. The total bill? Somewhere between $1.3 and $2 trillion for next year.

And this will be on top of the already record-breaking $500 billion deficit that we were set to hit even without this snafu. From whom, it must be asked, will the US government borrow $1.5-$2 trillion dollars over the next year?

As far as I can tell, there is only the Federal Reserve. Which is why this is also the day that the dollar died. These things take time to play out in the markets, but they will.

By not allowing the rotten parts of the financial sphere to eat their own losses, the United States embarked on a massive course correction that had me conclude that the dollar was not where one wanted to be, but that gold and silver were.

With the recent $600 billion in new thin-air money announced this week, the Federal Reserve has, again, chosen the wrong fork in the road.