In this video (towards end), Ron Paul asks that colossus of economic brilliance, Chairman Ben Bernanke, if gold is money and he answer with a flat “no”.  Even though it has been money for “6000 years” according to Ron Paul, Bernanke says that the only reason central banks hold this asset is “tradition”.

I have to thank Ben Bernanke for his ignorance about gold.  He is the main reason that it is now selling at $1600 per ounce and this is a great boon to my portfolio.  He is the one who is responsible for adding nearly 2 trillion dollars to the adjusted money supply in less than three years; he has also ripped off retirees and other creditors by keeping interest rates at near zero.  I don’t suppose Chairman Bernanke could possibly admit that the following two charts have any relationship.

Adjusted money base 18 July 2011: source St. Louis Federal Reserve

10 year gold chart: source Kitco.com

It is important to add that although QE2 officially ended at the end of June, there is good reason to think that QE continues.  I.e., there is no need for an announcement, QE3 started where QE2 left off, as the adjusted money supply has not leveled off but continues to expand.  And it must do so, as the United States government must roll over nearly 1/2 trillion dollars of expiring treasury debt by the end of August.  Monty Pelerin, in a must read article, writes:

From Zerohedge is this table of Treasury securities that mature in August:

The US government must fund both its deficits plus the maturing debt. In August that amounts to  $600 billion. Can this be done month after month? Not indefinitely! Annualized, the US government must sell new and rollover debt of about $7 trillion this year. Next year the amount will be larger.

The death debt spiral is coming to a head.  The next couple of months are going to be interesting.

My investment summary:

Long:  Canadian intermediate and junior oil and gas sector, gold mining, physical gold and silver (via Sprott Physical Gold and Silver Trusts).

Short:  US dollar

Also in this series:

April 20, 2011 Stuck on stupid: celebrating $1500 gold and the East Coast geniuses that made it possible

September 24, 2010 The education bubble IV: In celebration of $1300 gold