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December 11, 2005


Wendell Brown

The switch in petro currencies is the world's payback to Bush. If anyone thinks he hasn't turned the entire world against us over the past five years, they need to pull their head out of their ass.

Hollis T

Let me quote an article for you:
"This is what I gleaned from the speech last night: Bernanke tells a story, that if an alchemist invented a way to make gold in unlimited quantities, then released this news to the world and said he was going to start making and selling unlimited amounts of gold, the price drop immediately, before the Alchemist made or sold a single ounce. He goes on to compare the Fed to that alchemist. He talks about the printing press, then says, "By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services."

Then it struck me - this elimination of M3 in March is the credible threat.. It's a bluff. First they juice M3 like it is the end of the world (or 1999), and then they turn the lights out on the statistics. Since we're all in the dark, the only thing we can assume is that the Fed is monetizing debt like there is no tomorrow. But they really don't want to do that -- it is not good for their balance sheet -- so instead they engineer this bluff. Everyone believes it, and they (we) act accordingly, bidding up stocks and gold."

This actually makes some sense. What easier way to devalue the dollar than to simply make everyone believe in a hyperinflationary scenario. The dollar does have to fall (to some degree) one way or another because the trade deficit isn't going to fix itself. In the past month or two the Fed has created some massive amounts of money, something on the order of 30% annualized rate. So why else would they bother doing so now instead of after March?

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