Jon Nadler at Kitco.com ran across an article in The Financial Chronicle (India) which reported that “India and China may press for the sale of the entire gold reserves of the International Monetary Fund (IMF) to raise money for the least developed countries. The IMF holds 103.4 million ounces (3,217 tonnes) of gold that, if sold, can fetch about $100 billion,” so that “the money thus raised must be used in tackling poverty in the poorest nations,” which makes sense if you think that you are “tackling poverty” by bailing out their rich-nation creditors, including the World Bank itself.

Apparently, it is a fait accompli anyway, as “The G20 heads of state meeting in London earlier this month agreed to sell a part of the IMF gold to raise $6 billion for poor countries during 2009-11. This was a component of a $1.1 trillion package worked out by G20.” Whew!

The World Bank – which is a total failure, which is explained by it being a ludicrous clot of communists and socialists – never saw economic tragedy coming, either, and estimates that “over 90 million people may be pushed into poverty in the global economic turmoil.”

The Really Funny Part (RFP) is when “an official” said, “We are working on a more ambitious proposal of selling the entire gold off, as it is an idle asset with the IMF”! Hahaha!

It’s so idle, and yet here they are selling it to bail themselves out because they don’t have anything else to sell that is worth anything! Hahaha! What a moron!

Gold is thus functioning perfectly, as it retains its value when everything else has turned to crap, and yet here is some “official” of the worthless World Bank looking us right in the eye and saying they want to get rid of it all! Wow! What numbskulls!

It makes you wonder, “What will they do next time when there is no gold ‘sitting idle’ that they can sell?” Hahaha!

It was later that we read, “The gold, if sold, would go mostly to central banks,” which makes you wonder what in the hell is going on, since it has been the central banks that have been big sellers of gold for years, and now they are getting the gold of the International Monetary Fund – the “central bank of central bankers” – that was the original gold that we gave them as collateral against their stupid Special Drawing Rights? Hahaha! Now SDRs will be fiat currencies, too! Hahaha!

Mr. Nadler writes that the reason is because, “One thing is clear; we have long warned that the line of poor, and about-to-become-poorer, nations holding their outstretched hands at the IMF’s doorstep, had wrapped around the block. The institution has not been faced with this kind of global panhandling in its entire history.”

To add insult to injury, it is embarrassing to have it explained that “India and China are looking at three ways of using the money so raised. 1) The $100 billion be invested to improve IMF’s liquidity. 2) The money be committed to improving incomes of the poorest countries. 3) A mix of the first two options be considered.” Hahaha!

Before I dismissed this odious piece of ignorant, thieving crap entirely, I thought I would first try this at work as a last-ditch, desperation attempt to save my job!

So the next day I went in to see my boss and told her that my new plan was to sell the company’s only assets to “tackle the poverty” of some guys who owe me money, which is money that I loaned them by borrowing it from their pension fund, so that they can pay me back my money, so that I can pay back the pension fund.

To make sure the plan “sells” I literally used the World Bank format, and I told her, “We are looking at three ways of using the money so raised. 1) All the money be invested to improve my liquidity. 2) The money be committed to improving the incomes of the poorest debtors. 3) A mix of the first two options be considered.”

Alas, it did not work for me, and my job is as tenuous as ever (probably more so!), and so I assume it will not work for the IMF, either, but as weird and bizarre as it is to even suggest doing such a thing, MoneyWeek.com reports, “The gold market is behaving in ways never seen before” and “in recent months the supply of old gold scrap – consisting mainly of jewellery sold by owners to turn their metal into cash – has actually exceeded demand for jewellery manufacturers.”

The other numbers are as peculiar, like, “According to research consultancy GFMS’s Gold Survey 2009, world demand for jewellery fell 10% last year, supply of scrap rose by 27%, official sales halved, and investment demand soared 61%.”

Now, I can understand how people can get so far in debt that they sell their gold, and I can understand how heavily-indebted people can cut back on buying expensive baubles and bangles, and I can see how official sales can be halved by interventionist governments in collusion with each other and bullion banks, but none of that can explain why investment demand is “soaring” unless they see profits, which they obviously do!

Whee! This investing stuff is easy!

Until next time,

The Mogambo Guru
for The Daily Reckoning

Source: Worthless “Officials” Sell Off Precious Gold

How do you measure these things? In yields. This, by the way, is how you’ll know the bubble is popping. When that happens (bond yields rise like a rocket ship) it’s going to unleash financial chaos. But for now, the bubble just keeps on getting bigger and yields on short-term U.S. bonds keep approaching-and even reaching-zero.

“The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent,” reports Bloomberg. It’s, “the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.”

How do you think that conversation goes?

“Thirty billion you say? For four weeks? And you’ll pay me how much interest?”

“Nothing.”

“I’ll take it!”

“If you invested $1 million in three-month bills at today’s negative discount rate of 0.01 percent, for a price of 100.002556, at maturity you would receive the par value for a loss of $25.56,” reports Daniel Kruger.

Yes. That’s how much investors currently prefer government backed bonds to equities at the moment. It implies there will be hardly any inflation at all over the next yen years. But that notion should make you spew milk through your nose as you laugh, unless you’re unfamiliar with the growth in the global monetary base. If so, let us remedy that.

Source: Federal Reserve Bank of St. Louis

You can see that in the U.S. alone the adjusted monetary base is…growing. So why isn’t the increase in the monetary base showing up in the kind of inflation that would terrify bond investors and lead to a rebound in commodity prices and equities? That’s another question we got last night.

The answer is that so far, the huge liquidity injections have been quarantined in the financial sector, mostly on bank balance sheets, or on deposits by banks at the Federal Reserve and other central banks. In other words, all the new money is going into bonds and central bank accounts, not into new business or consumer lending.

Put another way, the quantity of money is increasing, but its velocity is not. That’s because the new money isn’t getting into the hands of people who are just itching to spend it. But it will soon enough. And when it does, look for bond yields to rise and the great inflation to begin. Also, televisions and hookers.

“I think this will be the greatest time in my life to buy stocks at these prices. I just wish I had more capital,” said one of the attendees at the Doomer’s Ball last night on Southbank. We heard this sentiment time and again over the course of the evening. And there is no doubt that the valuations are good.

There is doubt, however, about what the Australian resource sector will look like in a world where capital is scarcer. Will it lead to a contraction in the number of viable firms? Is the credit crunch like a meteor strike that kills all the giant reptiles that fail to adapt to the new conditions? If it does, there will be a huge survivor bias favouring the stocks that remain.

But there was also some anxiety about further falls in stocks, especially the longer the bar was open at the Ball. One reader is forecasting another 20% fall on the ASX before the lows are in. In fact, if the All Ords reaches the 2003 lows (2,673) it’s a decline of 24% from today’s levels. If it overshoots that low-as markets tend to do when they correct-you’re looking at a thirty percent fall from current levels.

If you treat it as a thought experiment and ask yourself what would have to happen for the ASX to fall that much, you get some alarming possibilities. The liquidation of Oz Minerals? The dismemberment of Rio Tinto? The fall of a major investment bank or leveraged institution?

Or perhaps it’s something simpler: more falling prices for commodities. That’s what the World Bank seems to think anyway. As reported in the FT, the World Bank’s Global Economic Prospects report says the commodities boom has, “come to an end.” It adds that, “Over the longer run, the price of extracted commodities should fall.” It reckons slower population and income growth will contribute to slower resource demand growth.

Naturally, this is diametrically opposed to the logic of the boom that began in 1999. Then, you had 200 years of falling real prices for tangible goods seemingly reverse itself, mostly because of growth in global population and per capita income. So which thesis is right?

Well you know what we think. We think the Money Migration is the long-term transfer of the world’s wealth from the debt-based consumption economies of the West to the world’s savers and producers, roughly in the “East.” This certainly favours Aussie resources for at least a generation.

But the migration has been massively disrupted by the credit crisis, which is really just an epic attempt by the U.S. and other English-speaking economies to avoid their Day of Reckoning. But don’t you worry. That day is coming. It’s just taking longer than we originally thought. Ben Bernanke is a creative man. And he’s desperate too.

But why don’t we ask China what it thinks? After all, it’s a pretty important party to this discussion. China? What do you think? Hello China. Are you there?

Hmm. China is not taking our calls. Maybe that’s because some Chinese firms are too busy looking for ways to take advantage of the current situation by securing long-term supplies to resources at lower market prices. And maybe actions speak a lot louder than words about Chinese desire for Aussie resources.

“Shenzhen Zhongjin Lingnan Nonfemet Co., China’s fourth-biggest zinc producer by output, said it agreed to acquire a 50.1 percent stake in Australian miner Perilya Ltd. through a private placement,” reports Bloomberg. And Forbes reports that Chinese steel-makers are set to push for a major reduction in iron ore prices to reflect the fall in global steel prices.

The average price in October for a metric ton of iron ore fines, according to Forbes, was $US90.60. But Chinese steel makers reckon that with steel prices back at 1994 levels, iron ore prices should roll back to. In 1994, a metric ton of fines was US$20.40.

A lot has changed since 1994. Supply of ore is up. Demand is up too. But costs for resource producers are way up too. It’s unlikely the steel-makers are going to get a price cut that large. And if they do, it will put some smaller ore producers under enormous pressure (even harder to with stand if you don’t have access to credit).

Where are we then? A year ago BHP held the whip hand and chased Rio in a dream of grand ambition. Now BHP is reconsidering its strategy. Rio is reeling. And pricing power has switched back to resource consumers in China, who are eager to use the whip as well, it appears. There’s been a lot of whipping going on, hasn’t there? More on what it means tomorrow.

Finally, yes. We too saw the reports circulating that the International Monetary Fund is getting ready to dump a bunch of gold on the market. So far, we haven’t found anything to substantiate them. We’re looking around, and will report back on what Diggers and Drillers editor Al Robinson digs up as well. Until then…

Source: The World Bank Goes Nuclear on Commodities

That said, China’s economy is still on track to post impressive growth during a global financial crisis. Unfortunately, this growth won’t meet initial forecasts.

In its latest quarterly report, the World Bank revised China’s growth downward to 7.5% from an earlier projection of 9.2%. The change reflects the World Bank’s view that Beijing isn’t doing enough to shift the country’s reliance away from waning exports to more robust domestic growth.

The Chinese economy grew by 11.9% 2007, in what appears to be the peak in double-digit expansion since 2002. Now facing single-digit prospects in 2009, China’s slower-than-expected advance call into question the global economy overall.

While most pundits see diminished U.S. consumer spending impacting China’s exports, emerging markets worldwide contributed significantly to the export boom of the past few years.

Latin America, Eastern Europe, Russia, Southeast Asia and other regions able to cash in on skyrocketing prices of fossil fuels, metals and grains are themselves suffering from the market turmoil. As commodity prices plummet, the expanding middle classes of these emerging nations begin to contract – reducing spending on consumer goods coming into their countries from China.

Reading between the lines, the World Bank also seems to be saying that the worldwide recession will be here for years to come – further hampering China’s ability to stimulate its economy.

The World Bank’s report also challenges the effectiveness of China’s new $586 billion stimulus package announced earlier this month. The package called for a massive national infrastructure build-out. Given the World Bank’s view of China’s over-reliance on exports, the new stimulus plan could ultimately prove to be a “bridge to nowhere” with no substantial growth for the long-term returns that emerging markets count on for these massive projects.

Obviously, the much ballyhooed stimulus plan isn’t enough to carry the day in China.

The latest rate cut, to 5.58% for loans and 2.52% for deposits, was the fourth cut since September.

Now, potentially like the U.S., China’s lower growth rate next year would rely heavily on higher public spending, according to the World Bank report. This could be a harbinger of how the incoming Obama administration would attempt to fix the U.S. economy based on recent news stories.

Taking into account China’s stimulus plan and other domestic projects, Beijing’s spending would add 4 percentage points in 2009 to the economy compared with 1.5 percentage points in 2007.

Another drain on China’s coffers could be subsidies for the increasing ranks of unemployed factory workers. Shrinking exports mean lower demand for products.

The government has announced new measures to support the economy, out of fear that the crisis and growing unemployment could cause increased public protests, according to AsiaNews.

Facing an epidemic of protests, Public Safety minister Meng Jianzhu warned that local regulators could face “social problems affecting stability.” In particular, there is the danger that the slowdown in exports will cause widespread unemployment.

Gunagzhou province provides a snapshot of where unemployment is heading.

A recent Chinese media report cited data from the Guangzhou Train Station, which showed in early October that the number of departing passengers compared to the same period last year had increased by 128,000.

Guangzhou is one of China’s largest manufacturing export centers.

The amount the World Bank lends to developing countries such as China, India and Brazil could reach $35 billion for the 12 months ending June 30. That’s almost triple the $13.6 billion doled out to developing countries over the last fiscal year. The bank said it is prepared to commit up to $100 billion over the next three years, with the majority of the funds to be made available through its International Bank for Reconstruction and Development (IBRD).

“The global financial crisis, coming so soon after the food and fuel crises, is likely to hurt the poor most in developing countries,” World Bank President Robert Zoellick said in a statement.

Emerging markets, which were flooded with speculative cash prior to the financial crisis, have seen a rapid withdrawal of private investment. Investment in infrastructure, education, and healthcare projects have been scaled back as a result, undoing much of the progress achieved over the past decade.

“The response to this crisis must be global, coordinated, flexible and fast,” Zoellick said. “It is more critical than ever that the international community acts in a coordinated and supportive way.”

The World Bank has lowered its 2009 growth estimate for developing countries to 4.5%.  The bank projected 6.4% growth for emerging markets as recently as June.

The bank estimates that a 1% decline in emerging market growth pushes an additional 20 million people into poverty.

World Bank estimates for global growth were also revised downward. The bank lowered its global economic growth estimate for 2009 to 1% from the 3% it projected in June. That is significantly lower than the International Monetary Fund (IMF) November 6 estimate of 2.2%.

Growth in developed countries will shrink by 0.1% next year, and global trade may suffer its first decline since 1982, the World Bank said.

World Bank Triples Lending to Developing Countries

Food-price inflation has gathered pace of late, with wheat, corn, soybeans and rice all hitting records this year; rice prices have soared by 141% since January, with US futures gaining 17% last week alone. Between February 2005 and February 2008, food prices rose by an average of 83%, says the World Bank.

With food comprising around half of household consumption in some countries, civil strife is growing. Riots have broken out in at least a dozen countries – including Senegal, Mexico and Egypt, where the president has ordered the army to start baking bread; the Philippines has made rice hoarding punishable by life imprisonment; in Haiti, protests over rice prices have forced the resignation of the prime minister.

According to Rob Zoellick, president of the World Bank, food inflation could push at least 100 million people back into poverty (defined as earnings of $1 a day) and set back global progress against poverty by up to seven years.

Mounting wealth in developing countries has stimulated demand for food in general, and particularly meat and dairy products, which increases demand for grains to feed livestock. Soaring energy prices have increased demand for biofuels, which means more grains are devoted to ethanol. Almost all the expansion in global corn production from 2004 to 2007 was put towards American biofuels production, reckons the World Bank. Urbanisation has reduced agricultural land and agricultural productivity has made only modest progress over the past two decades. Stockpiles are at their lowest in 30 years.

Nor does it help matters that no fewer than 48 countries have imposed price controls, export restrictions or consumer subsidies, as The Economist notes. Such measures have distorted the price signals “that would otherwise have encouraged farmers to grow more food”. Meanwhile, investors heading for commodities as a hedge against inflation and dollar weakness have also underpinned prices; according to Christoph Eibl of Tiberius Asset management, $40bn flowed into raw materials markets in the first quarter of 2008 alone. The world now faces a “downward spiral of trade restrictions, higher prices for staples and starvation”, says the managing director of the IMF, Dominique Strauss-Kahn.

With China and other emerging countries now worried about food-induced inflation, they are raising interest rates, which is a “dangerous development” for a world economy relying on domestic demand in the emerging world, says Anatole Kaletsky in The Times. And as the Asian Development Bank points out, Asian government subsidies to cushion the impact of food-price rises is posing a threat to national budgets.

The ultimate answer to high food prices is to boost production, but that won’t happen if governments continue to prevent producers from receiving the right price, lowering incentives to boost production and keeping prices high, says Stephen King in The Independent. “For the emerging world, this has the potential to turn into an economic shock on a par with the oil price increases which hit the Western world in the 1970s.”

http://www.moneyweek.com/file/46017/the-silent-tsunami-threatening-the-world-economy.html

The world’s banks may have lost billions and UK mortgage deals have evaporated, but unemployment fell by 39,000 in the quarter to the end of February to 1.61m. The numbers claiming jobseekers allowance is at its lowest level for 33 years. Most of the job losses in the quarter had nothing to do with the financial world, says the BBC report. The bulk of them were lost from manufacturing, which shed 27,000. In spite of these losses, overall there were the fewest redundancies since 1995. Okay, so the numbers may be massaged and analysts will find technical factors that influenced the result, but unlike the US, the jobless rate is yet to increase.

Continues below …

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Analysts greeted the unemployment news “cautiously”, it was reported. Vicky Redwood, an economist at Capital Economics, said: “Overall, the labour market remains in fairly good health – but the unambiguous robustness seen just a few months ago is starting to fade.”

Okay, so we’re in a slippery-slidey slowdown, but for all the wailing and gnashing of teeth from the financial sector, trouble is yet to show up in the unemployment numbers. Maybe it’s further down the track. Unemployment is rising in the US and there are those that say our economy lags the US by several months, so a similar trend may yet materialise. It’s yet to show up, but economy watchers are “cautious”. The prevailing mood is downbeat, but could it be that the government is right and the UK economy will actually prove to be more robust than the analysts give it credit for?

Of course, jobs will be and are going in the City. It’s goodbye to those structured finance departments now being closed down by the banks, plus related areas also in recession. The axe is swinging. It could be 10,000…it could be 20,000. JP Morgan thinks it’ll be as many as 40,000 jobs cut. But even if it is that large, do ex-bankers show up in the unemployment numbers anyway? Or perhaps they lay low on ‘gardening leave’ at the continental villa until things pick up.

Less flippantly, the resilience of UK employment levels makes me think things aren’t quite as bad with UK plc as they are sometimes painted. That may yet change going forward if the economy continues to deteriorate, but while employment remains resilient, the worst case scenarios look just that. UK stocks have been encouraged and are up 40 points at midday.

A ray of hope in the withered UK mortgage market… Barclays is “wide open for new business” according to a report in the FT,and Abbey has reduced its variable rate by 0.25%, reports Headline Money. Plus, recently HSBC made an offer to the country’s 1.4m people coming off fixed rate mortgages this year…though with strings attached.

Looking more internationally we see the dominant trends still in place. Oil is still going up. It’s topped $114 for the first time and there’s talk of $120 next quarter. Petrol at £5 a gallon is looming for car drivers, warns The Times, as a consequence. It’s not a great time to be running an airline either as wafer-thin margins get overwhelmed. US airlines Delta and NorthWest clearly saw the writing on the wall when they announced a merger of their businesses earlier in the week. Brazil won’t mind higher prices though. Its latest big offshore find has got tongues wagging that this country’s image is about to change from carnival to oil super-power. The Carioca discovery, if confirmed as containing the estimated 33bn barrels of oil, could be the largest find in 30 years, reports The Times.

Gold’s positive today too, now $938. You know the drill by now, dear reader: commodities going up, means the currency in which they’re traded, the dollar, is going down. It’s fallen to a record low against the euro at $1.5967 after the latest Euroland inflation number came in higher at 3.6%. This its highest level in almost 16 years and further confirmation to currency traders that there’s no easing on the horizon for EU interest rates (currently 4%). The pound traded hit a record low too against the euro yesterday at 80.64p.

As the economies of the industrialised nations are skewered on the treacherous prongs of the credit crisis, China continues unscathed on its double digit growth march to world economic leadership. It may overtake Germany this year as the world’s third largest economy, reports Bloomberg. It grew 10.6% in the first quarter of the year, slightly down on over 11% last quarter but still in defiance of the authorities’ attempts to cool the economy.

Growth is not without its problems. Inflation, for one. It’s out of control says one commentator. Higher interest rates and currency appreciation are needed to cool things down. Yet the latest inflation figure for March is 8.3%. Still high, but less than the 8.7% recorded last time around suggesting some of the heat is starting to be taken out of the system.

Another problem is the combination of destroyed crops from the worst storms in half a century, soaring food prices and 300m (about the population of the US) people estimated by the World Bank to be living in poverty. Buying the yuan seems a good idea for investors – one suggested by Jim Rogers some time back – but how to do it? That’s the question…

Back in the West, JP Morgan reports another $5.1bn in writedowns related to subprime and home loans gone bad. RGE Monitor says to date we’ve now accounted for about $230bn of the estimated total subprime losses of around $1trn. Some way to go.

Regards,

Rob Mackrill
The Daily Reckoning

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The Mogambo Guru recently weighed in on the situation:

“The big problem with inflation is that people get low blood sugar when they are hungry, and soon their moods turn sour. I know this for a fact because if breakfast or brunch or lunch or coffee break or dinner or any snack is five minutes late, I involuntarily turn into a screaming monster from hell demanding to know who stole my food and vowing bloody revenge. I can only imagine the anger when hunger is caused because someone can’t afford to buy food!

This “inability to buy food” is one of the problems with inflation, and that ugliness is now here, as we read from Bloomberg.com that “The World Bank in Washington says 33 nations from Mexico to Yemen may face ’social unrest’ after food and energy costs increased for six straight years.” Hahaha! No kidding?”.

The big problem with inflation is that people get low blood sugar when they are hungry, and soon their moods turn sour. I know this for a fact because if breakfast or brunch or lunch or coffee break or dinner or any snack is five minutes late, I involuntarily turn into a screaming monster from hell demanding to know who stole my food and vowing bloody revenge. I can only imagine the anger when hunger is caused because someone can’t afford to buy food!

This “inability to buy food” is one of the problems with inflation, and that ugliness is now here, as we read from Bloomberg.com that “The World Bank in Washington says 33 nations from Mexico to Yemen may face ’social unrest’ after food and energy costs increased for six straight years.” Hahaha! No kidding?

World Bank chief Robert Zoellick says, “Thirty-three countries around the world face potential social unrest because of the acute hike in food and energy prices”, and that since 2005, “the prices of staples have jumped 80%”.

Like what? Like corn and wheat, which are making the news by rising like crazy, and the latest food emergency is that “Rice, the staple food for half the world,” is now double the price of a year ago, and a fivefold increase from 2001. Yikes!

100% inflation in the price of rice in one year! And 500% in seven years! Yikes again! No wonder that Jody Clarke at MoneyWeek.com reports that “Since January 2005 the average price of a loaf of bread in the US has risen 32%. Overall, US retail food prices rose 4 % last year, the biggest jump in 17 years, says the US Department of Agriculture. Meanwhile restaurant owners have been even harder hit, with wholesale price increases of 7.4%. That’s the biggest jump in nearly three decades, according to the National Restaurant Association.”

And worse yet for us alcohol-besotted worthless lushes out here, heroically keeping bartenders and comely barmaids gainfully employed year around, the price of hops, an integral ingredient in beer making, has soared from $4 a pound to $40.

The Marketbasket Survey, conducted by the American Farm Bureau Federation, says a basket of things like bread, milk, eggs and pork chops will cost you $3.50, or 8.9%, more this year than last. Both a five-pound bag of flour and a dozen eggs are up over 40% since January 2007.”

And speaking of pork and yummy pork products, there is a pig crisis in Britain because the government mandated that pig farmers institute some reforms to make the rearing process more humane, and that means that “Costs rose and farmers fled the sector. The U.K.’s breeding herd has fallen to about 425,000 – half the size it was in 1990. Now, soaring feed prices have tipped the industry into crisis.”

And food prices, and the resultant anger, are rising around the world, as we glean from a reader of George Ure’s Urbansurvival.com who has been using the Google search engine for references to “food riots.” He has submitted these returns:

“278 on the 22 Mar 08
289 23 Mar
330 24 Mar
380 26 Mar
970 02 Apr
1330 05 Apr
1698 07 Apr 08″

Mr. Ure has some data of his own; “Meantime, the word ’shortage’ is hanging around 33,000 hits a day, up from the 11,500 a day” back when he first started tracking it back March 15th, 2006.

Larry Edelson at MoneyandMarkets.com says, “Over the past eight years, the price of food worldwide has increased 75%; the price of wheat has gone up a dramatic 200%.”

And regardless of what idiots at the Federal Reserve or their toadying hangers-on say, inflation in prices follows inflation in the money supply, which brings up the terrifying fact that it is all going to get worse and worse, as from Bloomberg.com we read that “Federal Reserve officials signaled the central bank will keep lowering interest rates because financial markets remain distressed even after the fastest reduction of borrowing costs in two decades”, which goes along with another Bloomberg article that reported, “New York Federal Reserve Bank President Timothy Geithner said capital markets are still ’substantially impaired’ and policy makers and financial industry leaders must ‘act forcefully’ to stem the crisis.” Translation: You ain’t seen nothin’ yet.

Too bad it will be all for naught, as Jason Hommel of the silverstockreport.com is exactly right that “the Fed is doomed. Printing more will not work. Printing less will not work. Printing nothing will not work. All the inflation of all the years from 1913 until now is beginning to crash down on our heads, and it will keep crashing until it stops.”

I am not even from this planet, and I understand that something has to keep going “until it stops”, but when will that be? The answer, says Mr. Hommel, is simplicity itself: “Until bonds start paying more each year than gold is going up each year.”

So what does one do about the collapsing economy? Nothing! You can’t do anything! Your only freaking hope is to not get into this kind of mess in the first place! Ergo, the Constitutional requirement that only silver and gold can be money, which brings up chartoftheday.com, from whom we get the Quote of the Day, which reveals how we can prevent the damned Federal Reserve and the Congress from destroying us with inflation. It is Ludwig von Mises himself who states, “The gold standard makes the money’s purchasing power independent of the changing ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence.”

And as a guy who is not excellent in anything, I can still recognize it in something that keeps us from being destroyed by inflation. And so when it comes to gold, if you ain’t buyin’, prepare for dyin’.

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

Editor’s Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter – an avocational exercise to heap disrespect on those who desperately deserve it.