Dr. Copper Is a Quack, Gold $10,000

By Dominique de Kevelioc de Bailleul

The rehashed 2009 Fed advertising campaign of the coming doomsday deflationary spiral released for immediate deployment on all CNBC segments and Bloomberg News now includes an additional “that’s not all” offer to get your US Treasuries while they’re still hot.

Two-out-of-3 doctors recommend Treasury bonds as a way to “kill the pain-and fast!” from an imploding gold portfolio. And our trusted Wall Street’s very own Dr. Copper agrees with the Fed’s personalized treatment plan for those prudent investors who would never dare take on “risky” investments.

And, if you noticed, today’s pitch is “new and improved,” with the added testimonial that China’s impending economic collapse has been thrown in “absolutely free” to viewers of the CNBC daily trash talk.

“I wouldn’t advise anybody to buy bonds, I would advise you to sell bonds,” famed commodities trader Jim Rogers told CNBC on Oct. 14. “If I were a bond portfolio manager, I would get another job.”

Rogers, who knows a thing or two about quacks, doesn’t buy the Dr. Copper story any more than he buys the two-decade long Japanese-style deflation scenario playing out in the US during an all out blowout of the Fed’s balance sheet. The US needs a free military to protect Japan’s, well . . . no military. But Rogers most likely suspects that the voodoo economics the Fed tries to hawk on a gullible American public is too good to be true.

“A difference is when Japan did that [began to experience asset-price ‘deflation’] they were the largest creditor nation in the world,” Rogers explained. “America is the largest debtor nation – not just in the world – but in the history of the world and the U.S. dollar has been – and is the world’s reserve currency. So there are some factors that might not keep the interest rate down in the U.S.”

Just as anyone familiar with the Fed’s con job, as Rogers certainly is, having traded these markets for decades, the idea behind the Fed scaremongering (not just for hard money advocates anymore) is to lay the ground work for more inflation—money printing, that is, to buy what foreigners are unwilling or unable to buy at the Treasury’s over-size trough.

After all, the Fed’s suckers watching CNBC need to be prepared to rationalize staying out of a volatile gold market—and to better yet, show their friends how prudent and panache they are that they’ve been watching the Fed’s no. 1 sycophant Steve Liesman—Yahoo’s Ben Stein of CNBC. Maybe a little group-think could really get going over a $5 Starbucks cup of coffee between the deflationists and the hyper-deflationists.

“As the inflation numbers get worse and as governments print more money and as governments have to issue many, many more bonds,” Rogers explained, “Somewhere along the line we get to the point when (bond prices) go down.”

Pretty simple thesis, really. Two-percent 10-year bonds cannot be the conclusion drawn from a scenario which includes a world commerce implosion. US obligation remain, tax revenue drops, and the additional cost of stimulating a hopelessly broken consumer-based economy just adds to the (at least) $1.6 trillion deficit projected for fiscal 2012, with the latest updated projection revealing that the US will reach a 100 percent debt level to GDP by Halloween. But, maybe that Starbucks coffee will drop to $4 by then, too.

And just out to add to the Rogers’ warning: Paul Brodsky, co-founder of QB Asset Management Company, spoke to Eric King’s KWN on Thursday. He agrees with Rogers and the flip-flopper Bill Gross of PIMCO that there’s no value left in US Treasuries. But unlike the slippery Gross, the lesser-known Brodsky—a twenty-year veteran of the bond market in his own right—has decided to affixed his tin-foil hat and head out to join the fun of owning real money he can buy at his local coin shop.

“We spent twenty odd years as bond traders before deciding there was no value anywhere in the interest rate arena at all,” Brodsky said. “As that background would imply, we like to know what fair value is for things. So we went back and knowing that gold was fundamentally cheap we wanted to find where purchasing power parity would be based on all past monetary inflation.”

It’s safe to say that Brodsky isn’t the only sharp knife in the global draw. He believes central banks will be forced to revalue the gold price to balance the intrinsic value of its marked-to-imaginary paper reserves against commodities in a massive global financial reset.

“We figured you should take the monetary base and divide it by official gold holdings. That would give you the price in terms of monetary inflation that it would be worth today,” Brodsky explained.

He added, “Coincidentally, after we came up with that theory we went back and looked at what they used to use, the formula for arriving at the Bretton Woods dollar exchange value with gold at $35 and it was the same formula. So if you were to divide base money by official gold holdings today, after QE2, you would come up with a price just north of $10,000 an ounce.”

Look out, what Brodsky implies is, that Starbucks coffee is going to $10, not $4. Anything can happen to the gold price from now until Brodsky’s endgame scenario. FX Concepts’ John Taylor could be right; gold could fall to a grand an ounce, a la 1974. But if you’re tired of playing CNBC’s Fast Money and prefer to take the advice of the world’s most legendary trader of all time, Jesse Livermore (1877-1940), you’ll “sit tight” during what Jim Sinclair has said is the makings of the most protracted wealth-shifting gold bull market in the history of finance.

That cool conversation at Starbucks about Steve Leisman and his latest analysis of “The Fed Chairman’s” brilliant money printing strategy will go the way of Ben Stein’s Yahoo Finance career–flushed down the toilet. Let’s certainly hope so for sake of everyone’s sanity it happens real soon.