Let me start this commentary with the final paragraph from Grant's latest article on WSJ (WSJ - Is the Medicine Worse Than the Illness? - James Grant - 20 Dec 2008 ):
After Mr. Bernanke gets a good night's sleep, he should be called to account for once again cutting interest rates at the expense of the long-suffering (and possibly hungry) savers. He should be asked to explain how the central-banking methods of the paper-dollar era represent any improvement, either in practice or theory, over the rigor, elegance, simplicity and predictability of the gold standard. He should be directed to read aloud the text of critique by Elihu Root and explain where, if at all, the old gentleman went wrong. Finally, he should be directed to put himself into the shoes of a foreign holder of U.S. dollars. "Tell us, Mr. Bernanke," a congressman might consider asking him, "if you had the choice, would you hold dollars? And may I remind you, Mr. Chairman, that you are under oath?"
James Grant wrote an excellent article. It is a must read for all our readers. It summarizes all our thoughts and worries about the coming failure of US Dollar and other fiat currencies. Although our timing may not be perfect but we still believe short US Dollar, short Treasury, Long Gold and commodity will be the best investment for the medium and long term (see Gold Boom Doom - Gold Outperformance to Continue into 2009 - 26 Dec 2008). At the moment, it is hard to imagine how FED and other CBs may soak up the excess liquidity after the "hopeful" economic recovery. We believe that Gold is the best defense and offense. (you may also be interested in: Gold Boom Doom - Marc Faber Reiterated Buying Gold and Gold Stocks - 21 Dec 2008)
Here are few posts of interest:
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