http://www.321gold.com/editorials/willie/willie061308.html
Some very confusing factors are at work relating to the USTreasury Bond market and the gold market. To assume that gold will rise in kneejerk fashion in response to the gargantuan grotesque growth in monetary inflation (aka US$ money supply) is simply naïve for the public and amateurish for professionals. Never in the US history has more confusion reigned within the body financial. This is to be expected, since the US banking system is insolvent, in parallel to the US housing landscape being increasingly insolvent. The nation must soon make difficult decisions on rebuilding the United States, its infrastructure, its energy supply industry, and put down its military weapons used abroad. Some strange effects are detectable regarding the USTreasury yield curve changes in recent weeks. They coincide with the broader usage of the US Federal Reserve Lending Facilities. In my view, the USFed is slowly killing the USEconomy in order to grant a reprieve to a criminal collusion of corrupt Wall Street bankers. They lied, they cheated, they stole, and now they are being given money as that same funds are being drained from the private sector. The evidence lies in the USTreasury yield curve and gold price. Helicopter Ben Bernanke is more like a Mad Scientist draining the blood out of a victim on a surgeon's table. His helicopters only travel over Wall Street. He has become a tool for the Manhattan Ruling Elite.
USTREASURY YIELD CURVE CHANGES
The USTreasury yield spread is of crucial importance. The ratio of the 10-year USTreasury yield to the 2-year yield is telling the story of the USFed betrayal to the economic participants on Main Street USA. The gold price tends to rise in brisk fashion when the yield ratio rises. The gold price consolidates when the yield ratio tends to consolidate. Here is some reasoning as to why. Generally, a flat yield curve has the short-term yields roughly equal to the long-term yield. That signals a period of economic stagnation expected. The cost of short-term money would not be very high, since no significant demand would come for that money intended for business investment. Economic prospects would be somewhat dampened. Generally, a steep yield curve has long-term yields much higher than short-term. The cost of long-term money would be set higher in order to reflect the erosion from price inflation on assets. The entire system would gear toward the systemic price inflation. Volumes can be written on the yield curve topic. The short and long ends of the USTreasury yield curve do not stand still. In recent weeks, both ends are rising. The short end is rising much faster, in almost a scary fashion, like a panic.
Today's climate is very confusing. Silly questions prevail as to whether we have inflation or deflation. We have both, and will continue to have both. The key question is which is winning. Asset prices are falling as costs are rising, all without the benefit of wage gains. That is the formula for system implosion. As the USEconomy is heading deeper into recession, but a tremendous amount of money is being created. The system is broken, and desperate repairs are attempted. Old theory must be adapted to total financial chaos. When inflation is WINNING the battle, the monetary spigot flows fast. Inflation floods the financial system, as much of the money flow comes OUT of the long end in response to price inflation deep concerns. At the same time, the USFed monetizes the short end so as to keep it close to the current Fed Funds rate. They purchase short-term USTBills with printed money, plainly told. When deflation is WINNING the battle, the destruction of asset values occurs faster than newly created money can replace it. Inflation still floods the system, but its directed locations are not where needed, rather where power controls it. Inflation has occurred more so on the cost side, as economic distress becomes a huge issue. Profit margins are squeezed or vanish. Money flow comes into the long end from recession concerns as the inflation effects hit the cost side, which destroys businesses.
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