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The Blow-Off Rally?


With the dollar declining, gold poised for a major breakout, and bonds rolling over, full faith may not be enough.

Editor's Note: The following is a free edition of Jeff Cooper's Daily Market Report. For a FREE 2-week trial, click here.

That clinking clanking sound that makes the world go round
-Money Money

Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces.

-Sigmund Freud

Faith is a fine invention
When gentlemen can see,
But microscopes are prudent
In an emergency
-Emily Dickinson, Faith Is a Fine Intervention

Cloquet hated reality but realized it was still the only place to get a good steak.
-Woody Allen

What is debt? It's imaginary money whose value can only be realized in the future.

Money today is worth what the people agree to use it agree it is worth. From where I sit, the only likeness the greenback has to being truly "green" is in its resemblance to the proverbial frog - you know, the frog that, when thrown into a pot of boiling water, jumps out and saves itself - but, when placed in a pot of water under which the heat is slowly turned up, stays put until it's fully cooked.

It seems to me that the only thing the dollar is backed up by is green ink; we as dollar users are frogs in water whose temperature is rapidly rising. And, since the dollar is the world reserve currency, we're all users, global dollar junkies.

Methodical methadone is not the antidote for what's wrong with our economy. The solution to what is wrong with our economy is not stabilization or 'adjusting'. The solution to what is wrong with our economy and our loss of sovereignty is to regain control of our money.

The nature of the symbiotic relationship between those foreigners whose survival depends upon export and are paid in dollars and the ability of the US to import from overseas with Federal Reserve Notes may reach critical mass sooner rather than later.

The following is from US Representative Ron Paul, Monday, May 18, 2009:

"I have been very pleased with the progress of my legislation, HR 1207, which calls for a complete audit of the Federal Reserve and removes many significant barriers towards transparency of our monetary system. This bill now has nearly 170 co-sponsors, with support from both Republicans and Democrats. Senator Bernie Sanders has introduced a companion bill in the Senate S 604, which will hopefully begin to gain momentum as well. I am very encouraged to see so many of my colleagues in Congress stand with me for greater transparency in government.

"Some have begun to push back against this bill, and I am very happy to address their concerns.

"The main argument seems to be that Congressional oversight over the Fed is government interference in the free market. This argument shows a misunderstanding of what a free market really is.

"Fundamentally, you cannot defend the Federal Reserve and the free market at the same time. The Fed negates the very foundation of a free market by artificially manipulating the price and supply of money - the lifeblood of the economy. In a free market, interest rates, like the price of any other consumer good, are decentralized and set by the market. The only legitimate, constitutional role of government in monetary policy is to protect the integrity of the monetary unit and defend against counterfeiters.

"Instead, Congress has abdicated this responsibility to a cabal of elite, quasi-governmental banks which, instead of stabilizing the economy, have destabilized it. It took less than 2 decades for the Federal Reserve to bring on the Great Depression of the 1930s. It's also inflated away the value of our currency by over 96% since its inception. It has invisibly stolen from the poor and given to the rich through this controlled inflation, and now openly steals via bank bailouts. It has predictably exacerbated the very problems it was meant to solve. Detractors have also argued that the Fed must remain immune from the political process, and that more Congressional oversight would distort their very important decisions.

"On the contrary, the Federal Reserve is already heavily entrenched in the political process, as the Federal Reserve chairman is a political appointee. High level officials routinely make the rounds between positions at the Fed, member banks, the Treasury, and back again, taking care of cronies and each other along the way.

"As far as the foolishness of placing complex monetary decisions in the hands of politicians - I couldn't agree more. No politician or central banker, no matter how brilliant, is smart enough to know more than the market itself.

"The failure of central economic planning has been witnessed over and over. It is frankly beyond me why we ever agreed to try it again. To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have. They have been given the power to create money by the trillions and to give it to their friends under any terms they wish, with little or no meaningful oversight or accountability.

"Thus the loudest arguments against greater transparency are likely to come from those friends - and understandably so.
No positions in stocks mentioned.

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