“The nightmare scenario that is staring us in the face, right here, right now isn’t hyperinflation. It is in fact a collapse of monetary systems driving demand for dollars through the roof in a crescendo of attempted redemptions into collapsed (“no bid”) asset prices – a demand that Ben will not be able to meet, as the collateral backing those dollars will have all been exchanged for toilet paper. Whether Bernanke holds all this trash on his balance sheet or manages to scam Treasury into exchanging it for T-bills, the result is the same – there is no collateral behind Bucky and as employment collapses no production to replace it with either.

The mad scramble will be on, and as it happens trade will be choked off by not a collapsing dollar but other currencies collapsing around the world.

Paradoxically, the DX, or dollar index, will skyrocket – not go through the floor – as this plays out….”

–  Karl Denninger

Comment:

Glad to know there’s one person who worries on the same lines as I do…but on different grounds.

Mine is from purely technical instinct. I still feel GLD is not performing the way it should given the economic  scenario. I still think if hyperinflation is bad here, it will be worse in countries  that will also be compelled by central bank policies to suffer inflation. I still think the Euro is a mighty strange animal. I still think gold prices are manipulated  and economics statistics are massaged. I think the stock market indices are sometimes manipulated to create panic reactions. We’ve proof from l’affaire Madoff that paper can be printed up that is meaningless as far as revealing actual trades, or buy or sell orders.

And if everyone is telling you to sell dollars, hey, someone out there is buying, right? So, diversify by all means, and ditch the dollar if its prospects don’t look sound – and they don’t. But remember we’re living in a world of managed perceptions, rigged markets, phony alerts,  white ops and black ops.  Ours not to figure out each of the details – that’s a pure waste of time.

Ours is to defend ourselves, observe,  keep our money in our shoes, our heads down and our powder dry. And wait.

And on that note, I observe that gold is trading right where it began before the whole AIG bail- out stuff started cluttering up the papers (just above 950) and the dollar index is above 84 (which means it got knocked down 3-4 points)

above 83 (which means it got knocked down 4-5 points).

I’ll leave you to figure out whether that is good, bad, or ugly, in the circumstances.

Supporting my view also here’s another of my favorite analysts, Puru Saxena, recommending that you don’t add to gold right now, at least not quite. And he’s also recommending oil/energy/pm stocks in emerging markets. Well, I’ve just nibbled at a few of those last week. [I don’t give out too many details on this because I’m not a professional financial adviser and don’t want my errors to become yours. My beat here is different. This is a commentary on the media and the markets].