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Several weeks ago, I made a post on this very site warning Nevadans that they had to get out of dollars and into things with intrinsic value, e.g., precious metals. I said silver looked relatively cheap, and when I wrote that, silver was trading in the $13 dollar range. As one who trades commodity futures, I began to notice a few weeks ago that there didn't seem to be any gravity in the commodity futures market. This is a pretty good indicator of what is happening with the dollar.

Even Bernanke couldn't ignore this, and had to go in front of Congress to pretend that he isn't going to finance Congress' promiscuous spending with the printing press. Don't believe it. It is a ruse. Too many people would have to voluntarily relinquish too much power. Thus I don't see the right things being done until the dollar crashes, at which time the government will no longer have a means of payment - i.e., until they can't continue.

Unfortunately, central planners have managed to convince people that deflation is bad and inflation is necessary to keep people employed. What people will soon realize is that the only cushion was the pseudo dollar rally. By trying to inflate to keep people employed, this will only ensure that people will remain unemployed and create even more job losses. Thus, what is being fought with inflation is exactly what inflation is causing. There is no virtue in keeping people employed for the sake of being employed. The sooner we put an end to counter-productive jobs and counter-productive consumption, the sooner we have an economic recovery. Just because there is unused productive capacity doesn't mean that money printing is inconsequential. That is akin to saying that since there are a lot of trees in your backyard, then it is okay for the government to print lots of money and this won't have an effect. The effect is to drive up the cost of capital, so that productive capacity remains unemployed.

Objectively, the government and the Fed have been running "counter-cyclical" policy (i.e., counter-free market policy) for the last decade. Price the Dow in ounces of gold, and it has gone from about 45 to under 9 over the last decade. Real incomes have fallen off a cliff. No nation can succeed at substituting a printing press for income-generating investment.

BTW, silver dipped down to 15.26 earlier today. That looked like a long price to me. The way the dollar is moving, every dip is a long opportunity. (I AM NOT TALKING ABOUT EQUITIES, I.E., STOCKS. INFLATION IS NOT EQUITIES-FRIENDLY.) Understand that we never had real deflation, but a pseudo dollar rally due to liquidations and so forth. The dollar is going to fall as fast as it rallied. This is the coming storm that will catch many, who were preaching deflation trades, off guard. As I am writing this, silver is back up at 15.40. I went with the dip on wheat instead of silver.