THE FED, THE MARKETS AND GOLD

Gold-stater comment: The Fed, The markets and Gold:

Anyone following the markets knows that the June 30th end date for the Fed's stated campaign of market manipulation (Called QE2) is drawing near. Ben Bernanke has stated openly that the measure of success of this campaign is the percentage rise in the S and P 500 stock index. His stated idea is that as long as the stock market rises the economy should be okay.

As everybody knows the campaign works as follows: The Fed purchases Treasuries from the banks at inflated prices. The banks plow the money into the markets. Market analysts who work for the bank relentlessly tout the fact that as long as the Fed is plowing money into the market (Which they call "Expanding their balance sheet") the markets rise 86 percent of the time.

Bank analysts and brokers tout this program relentlessly to their clients. The machine has worked well to prop up the markets during this operation.

However, come June 30th the operation is set to expire. This is a little like saying that as long as we keep 200,000 troops on the streets of Baghdad, violence decreases so everybody should invest in Iraq. But then the 200,000 troops will by removed on June 30. What do you think would happen to your investment in Iraq?

Either one of three things will happen as we approach June 30th:

A) The economy is healed and the markets will continue to climb without any more help from the Fed. If this happens sell all your gold.

B) The markets will fall steadily - or collapse - until the Fed announces QE 3. If this happens, all assets (including gold) should fall. Then - (With QE 3 - and/or a collapse of confidence) gold will explode upward for a prolonged period.

C) The Fed will announce they are honoring the June 30th End date, but they will keep purchasing treasuries at the same rate through Caribbean shell banks and other proxy organizations. Analysts who track this activity will demand accountability, the Fed will refuse. A new level of mistrust will be created between the government and the citizens. The markets will fall slowly (without the Fed's explicitly stated support) , and gold will move up as levels of mistrust intensify.