Bernanke Bludgeons Bullion: Opinion

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Bullion Bulls Canada) -- Gold and silver prices plummet because the U.S. economy is so healthy that the Federal Reserve won't have to print any more money, and so there won't be any more inflation. Laughter, please.

The U.S. economy is healthy? As I have pointed out on previous occasions, 0% interest rates are nothing less than an economic defibrillator -- a temporary desperation measure to attempt to breathe life into a dying economy. Permanent 0% interest rates simply mean that economy is already dead, as we have seen with Japan . All that remains to be done is to put these zombie economies out of their misery, through debt default followed by massive restructuring.

Federal Reserve Chairman Ben Bernanke

As I have stressed in my recent commentaries, it is also beyond absurd for Bernanke to pretend that the Federal Reserve has ceased its money-printing. The gravity-defying U.S. Treasuries market provides conclusive, mathematical proof that such a claim is false.

Maximum bond prices at a time of maximum supply defy every economic principle in the books. Maximum bond prices at a time of maximum supply, when the largest buyer (China) has been selling Treasuries for more than a year, when the "economic surpluses" which financed Treasuries-buying have nearly vanished, when Treasuries auctions have been rigged so that no one knows who the buyers are, and at a time when the U.S. economy is obviously and hopelessly insolvent defies legality.

Someone, somehow is financing the totally opaque purchases of $trillions in U.S. Treasuries, and the list of suspects is rather short: the Federal Reserve. If the Fed is not financing those purchases with its officially/legitimately created funny money, then in must be doing so in some less than legitimate manner .

The only other mathematically possible scenario is debt default: bonds immediately going to zero (or close to it). Otherwise, exponential money-printing takes the underlying currencies to zero, also making the bonds worthless. Either way, we are 100% certain to get to the same result. Paying maximum prices for any of these paper time-bombs goes well past idiocy and all the way to deliberate economic suicide.

As I have explained on a number of previous occasions , in either a debt default or hyperinflation scenario, gold and silver prices will explode in an equally exponential manner -- again as a function of basic arithmetic (along with supply and demand). Thus the long-term upward revaluation of precious metals is as certain as sunrise following sunset.