Financial Post:

We believe that the objective of the Fed was two-fold; firstly, to put downward pressure on the long-term interest rates and stimulate the economy by squashing their recent gains, and secondly, to fill in the gap between a very sizeable increase in government spending and the demand for Treasuries at a time when traditional foreign investors are reducing their exposure to the dollar. They no longer have the same export surpluses they need to invest domestically and support their own economies, and are truly starting to question whether the U.S. government will ever be able to pay them back without significantly devaluating the dollar.

My comment: I have been saying for a while now that the US will not be able to float all of this debt and would resort to monetization. Obama and the Democrats just keep spending money and announcing new spending programs everyday. I heard yesterday they were giving $5 billion to auto parts suppliers. I saw it mentioned that we could see $1 trillion dollar deficit every year for the next ten years. Obviously the bond market of the dollar will break well before that happens. My view has and will continue to be that the dollar will be heading down and gold, oil, and commodities will be heading up. I expect inflation to be back on the radar screen by the end of this year.

What kind of worries me is the tone and actions of the administration and Congress. They have adopted this populist mentality and are attacking anyone that they can to take the focus off the real perpetrators of the crisis which is the FED and the Federal government which constantly interfere in the markets. The AIG business is a perfect example. If the government would not have stepped in and taken over a private business then we would not be having this grandstanding about retention payments. Dodd, Frank, and Geithner all apparently knew about these payments and now are crawfishing away from their votes or knowledge of these payments. The whole thing is a diversion from the anti market policies of central planning of interest rates by the FED that created the environment where these firms could operate in the Wild West fashion that got them in trouble. The thing that scares me is that I did not spend more then I make, I did not buy a home I could not afford. I invested in gold and hard assets to protect myself from the inflationary policies of the US government and FED. When gold goes to $5000 per ounce and oil is $400 per barrel and I cash out am I going to be dubbed a "profiteer" a "hoarder" an "enemy of the people" and have my "windfall profits" taxed at 90% because some corrupt sociopath politician wants to show how he is a man of the people. That is why I advise international diversification if you have the means. Do not forget FDR made it illegal to own gold in the last depression. Do not think it cant happen here. Human nature is the same throughout history only the circumstances and actors are changed.

John Polomny
The Real Deal