The markets: who really cares, right? Gold and silver have storable value, and everything else is worth the paper it is printed on. That being said, there will be fire works, if not a fire storm, starting Friday. Bernanke has his back up against a wall and the walls are closing in. Bernanke's policy is boxed in, but he thinks he is Houdini.
How will he have ZIRP for the next few years without a stimulus/easing program? Is China going to stay in the market, along with all the other indirect bidders? Are the Private Dealers going to be able to afford the debt, without the Fed flipping the bonds for them? I do not think this will happen, I do not think it is possible.
And Bernanke can not achieve the impossible. He is not a magician, despite his wishes. His other alternative is to let rates rise, and then all social programs will get cut due to the interest on the debt outweighing inflows. If that happens then America is debt in the water, and it will be forced to default, and not for political reasons. A default in that scenario will prove Keynesian policy and monetary policy does not work.
Gold sold off like I thought it would, albeit at a higher price than I thought. Gold's bull run moved higher than my target price of $1850, one that I had for 9 months. Once it got going, it was obvious the reason: Bernanke needed its price to appreciate so that he could get the highest return possible when he loans it out. Now he can afford QE 3, because he has his cash from his gold loans.
This is why Bernanke is such a donkey. He acts like he does not know what gold is used for by the Fed, when gold is loaned out to other Central Banks as a performing loan. It is, in fact, the only performing loan on his books. Everytime he has a comment concerning tradition, he lies.