...There are a couple of things at work in this bond selloff – the first is that same thing pushing the Dollar higher – the perception that the US economic recovery will necessitate a rise in the short term interest rates by the Fed. The second is that the bond market is becoming more and more focused on the gargantuan supply of US Treasuries that are hitting the market. This factor more than the former is what is bringing selling into the long bond. Traders see falling demand in the face of rising supply and are working to lower prices. In other words, foreign Central Banks are not buying Treasuries in sufficient quantities to soak up the relentless supply that is coming to fund the current Administration’s orgy of spending.

At the risk of beating an already bruised and battered dead horse – one cannot print their way to prosperity for if that was possible, it would have been successfully attempted by previous generations. This insane stupor which has descended upon Washington has led the dipsticks there pushing this spending spree to somehow believe that the endless proliferation of US debt instruments can be conducted without the least bit of negative consequences. Do our illustrious lords and ladies think that the world has enough savings to soak up all these worthless scraps of IOU’s that are spawning like minnows? At some point reality collides with illusion and then the game is over. That is when the Dollar will fall apart at the seams. As far as I am concerned the US has already effectively defaulted on its debt obligations – the market just does not realize that yet. By the thievery of Quantitative Easing it has declared that it has no intention of ever making good on this mountain of indebtedness, at least not in terms of a currency that can maintain its value. I will borrow all the good apples that you are willing to loan me if I know I can pay you back with apples that are rotten to the core. You get your apples back but what good are they at that point.

That brings us back to gold and why it is necessary to look past all this short term noise; noise I might add that we have seen over and over and over again since gold made its first foray above the $300 level and especially when it cleared $400 in what now seems like ages ago. The long term trend higher in gold has been inexorable given the fact that gold is the only currency that cannot be adulterated by monetary officials because it cannot be created at their will. History has shown us that nearly without exception, political leaders and especially monetary leaders, will take the path of short term gain at the expense of long term stability and prosperity. That is what gold guards us against and why it is so hated and despised by much of the ruling class. If they had their way, they would sweep a magic wand and banish it from the face of the earth. I might add here that given the depth of sleaze, corruption and bribery associated with the purchase of Senators’ votes to ram this despised health care reform bill down the throats of an unsupportive citizenry, gold looks even more desirable to me. After all, where is all this money that was used to buy off hesitating Senators supposed to come from considering the fact that the US has none except that which it either prints or borrows from abroad.