The Bailout Ocean

See the above link to a Bloomberg article:

“To everyone’s dismay, we believe some of Grandpa Ben’s predictions are playing out,” Greenlight said in the letter, a copy of which was obtained by Bloomberg News. “The size of the Fed’s balance sheet is exploding, and the currency is being debased.”

How very true. When hedge funds start buying bullion....that's got to be the biggest buy signal for gold I think I have seen. It is an astute article and another reference point to explain why the pundits forecasting long term low interest rates are dead wrong. For future reference

• the US bond market will implode


• the US dollar will fall precipitously


• US interest rates will rise dramatically in a very short period of time


• global interest rates, to various extents, will follow
  

This is an inexorable consequence of current actions, as the United States, already running unsustainable deficits, pushes its currency over the brink.

The Stability of China

Talk of a 2010 recovery is absolute rubbish.

Follow the above link to an article from today's Australian that correctly identifies the real risks facing the global economy and geo-political order. As we have stated here several times before; the current Chinese political compact between the government and its people is unsustainable and will unravel quickly in the face of economic recession. The resulting political discord is likely to lead to one of two outcomes both of which are equally unpalatable. Either China breaks as a coherent political entity or the Chinese Communist party will be required to conduct vicious and broadspread totalitarian suppression of its populace. The only way this could be successfully achieved in my opinion is with the unwaivering support of the People's Liberation Army.

The sort of support that you only get in a time of war.