Fed Chairman Bernanke roils markets -- again!

Fed Chairman Bernanke sent gold prices to a new all-time high, with prices rebounding $20/oz. on the heels of his speech promising aggressive interest rate cuts. Grains prices rallied also, after being depressed for a few days. Other commodities prices will probably go much higher over the next few weeks and months.

"Helicopter Ben" is in denial of the reality of inflation and the influence of the Fed's "cheap money" policy on the creation of bubbles and the ensuing deflationary effects of its boom-and-bust, irresponsible monetary policy. This seems downright disingenuous considering that it was he that made the statement that the government could inflate its way out of deflationary pressures by simply printing more money and throwing it out of helicopters. By his own words, he knows better. And that suggests he is being intentionally deceitful, and that his denial is strategy, not merely denial! More inflation... on the way! Thanks, Ben and Co.!

Oddly enough, 10-year treasuries sold off, increasing interest rates and the yield spread between 2-year and 10-year notes. Investors must be beginning to get worried, and are now starting to demand higher returns. When the interest rate spread increases, its because long-term investors are increasingly worried, so they are demanding more interest for taking the risks of long term investments in U.S. government bonds. It's about time!

The stock market loved his speech. It will rebound for a few days, and then, as with previous promises of easy money from the Fed, reality will set in, and stocks will plummet again. That will be a good time to fade the market and sell!

The laws of true prosperity economics can not be denied, despite the Fed's being in denial!

I have always been intrigued that, contrary to popular urban myths, the Fed causes more market turmoil by its interventions, not less! If the Fed had stayed out of the subprime credit mess 6 months ago, we would probably have had a recession that would have passed by now, since the average recession lasts only 4-5 months. Instead, constant and repeated Feddling has delayed the inevitable, and created more and more turmoil, not less. The Fed's interventions do not bring stability to the financial markets; rather, they amplify the instability!