Pot calls kettle black

The new Treasury Secretary, Timothy Geithner, wasted no time accusing the Chinese of manipulating their currency. To fully appreciate the irony, we must recall Mr. Geithner's background. Most recently he was the Regional Governor of the New York Federal Reserve Bank (and occasional taxpayer) and we all know the Fed would never intervene in the marketplace. Prior to that, he came from Goldman Sachs, the mastermind of the Gold Cartel. BTW, his replacement at the New York Fed is William Dudley, and can you guess where he came from...(drum roll, please) - Goldman Sachs! No points for that correct answer; the question was too easy. Oddly, Mr. Geithner was silent when asked if the United States manipulates its currency.

To their credit, the Chinese fired back at him, and rightfully so. Sooner or later, our elected (and appointed) officials are going to learn that you had better be nice to your bankers, and that's what the Chinese are. We owe them $2 trillion + and that number continues to grow. For now, China and the US are joined at the hip, because they need us as much as we need them. They save money, which we borrow and spend. Then they lend us more money. The reason they keep playing this sucker's game is that their domestic market cannot support their economy. The Chinese, Indians, and other developing countries can't afford to buy all the stuff they're producing. Actually, neither can we, but keep buying it anyway. So if the Chinese stop lending, not only does the dollar crash, sending their huge dollar holdings downward, but their entire economy goes with it.

It wasn't so long ago that the 2009 budget deficit was supposed to be $1.2 trillion. Now I have seen some conjecture that it could top $3 trillion. That's three (3) trillion dollars. US dollars, not Zimbabwe dollars. Although at this rate, there might not be too much difference before too long. That's more than all of last year's total budget. And to think there was a time when spending $100 million on a bridge-to-nowhere was considered a scandal. These days, that's not even a rounding error when the government is pledging $320 billion to rescue Citigroup.

On the whole, I think gold and silver are the place to be, followed by oil and gas. Gold recently blasted through $900, but that could not be allowed to hold with options expiration coming up, so the yellow metal had to be held below that level to make the $900 calls expire valueless. Otherwise someone besides JP Morgan and HSBC might have made some money in commodities this month.