In 2009, we witnessed central bankers around the globe injecting massive amounts of Fiat liquidity into their economies to avoid a Financial Meltdown and Global Depression (except for China whose stimulus package was four times larger in percentage terms than that of the USA, with most of it going into Real Estate). In the US, most of the stimulus went into bailing out their Frat Buddies, Unions and the too big to fail Banks and Car Companies with barely a dribble going to where it would have done the most good.

The immediate problem now becomes the natural INFLATION that always follows ultra low interest rates and massive injections of NEWLY PRINTED money; that must somehow be drained from the economy in order to avoid HYPER INFLATION and herein lays the problem – Bernanke, Geitner and the Government do NOT have any exit strategy, certainly not before the November Elections. Simply put: Government funding cannot remain the primary source of growth for much longer; especially since it’s not working except fro pushing even the manipulated inflation numbers higher. The cost of the support packages have stretched worldwide finances to unsustainable levels in most countries with little if any benefits to show for it. Europe is in even worse shape than the USA. We are about to come face to face with THE reality that $ocialism does NOT work.

NB: It is evident that the more certain people are that they have the correct view, the more they distort new evidence to suit their existing expectations.   Being human, I too succumbed to this phenomenon for awhile. But my constant re-evaluation and re-assessment of my mistakes opened my eyes early enough so that it only cost us opportunity and not any real HARD money. Fortunately I picked every short term HIGH and it was our use of tight stops that kept us out of harms way, while our over concentration (75%) in precious metals kept us all in positive gains with the balance sitting in cash, waiting for these latest bubbles to blow up.

CHINA

The risk of inflation and asset bubbles is intensifying in China since the Chinese are expected to pull the world out of recession. However their economy, being only ¼ the size of the USA, is not capable of doing this (please don’t confuse me with the facts). Any slippage in China’s growth or a BURSTING Bubble (beginning with Real Estate) will seriously damage confidence and be felt across the globe.
Everyone is betting that Chinese growth will save us all. And China is under pressure to live up to that reputation. So it’s very possible the Chinese Government will not take the necessary steps to control capital misallocation any more than we have. The country’s unprecedented liquidity and credit expansion already points to huge inflationary, asset bubbles and banking sector risk in the very near future. They will have to find the perfect balance between avoiding a major domestic crisis and keeping the Real economic expansion going. This is something that has never been done before. Is a Fascist Government any more capable and smarter than the Socialist-Capitalist governments of the West? We shall soon find out.

The BIGGEST Financial Weapon of Mass Destruction.

America and the World are now sitting on the world’s biggest ticking financial time bomb, largely because we’ve pursued some of the most reckless financial policies in history. This toxic asset is U.S. Treasury Bonds… specifically Treasury Bonds with maturities of 10 years or more. They’re the world’s most popular investment by far… and now they’re about to turn out to be the world’s most dangerous!

INTEREST RATES HAVE ONLY ONE WAY TO GO, WHICH MEANS THAT LONG TERM BONDS ALSO HAVE ONLY ONE WAY TO GO AND THAT IS DOWN
Buffett recently said that the coming inflation “has the potential” to be worse than the double-digit rates of the 1970s. And Jim Rogers, of the infamous Soros, Quantum Fund, warned that we are facing an “Inflation Holocaust.”