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.

With the supposed reasons for gold and silver prices going lower being exposed as ridiculously fraudulent propaganda, once again we are left no explanation other than market manipulation to explain the abrupt plunges in the prices of gold and silver -- just as they had achieved technical breakouts indicating that prices should move substantially higher.

With both the fundamental factors and the technical factors absolutely and unequivocally bullish, there is no conceivable, legitimate explanation for the price moves seen on Wednesday. While it may frustrate the readers who send me their mail seeking guidance, I have essentially ceased any/all short-term predictions for the precious metals sector. My reasoning is elementary.

Market manipulation is both an exogenous and arbitrary event. As such, the timing of manipulation events can never be predicted -- except as a response to any/every potential breakout with gold, silver or the mining stocks. The catch-22 here, however, is that while we know the banking cabal will attempt to manipulate the market lower any time there is a breakout, sometimes they succeed and sometimes they fail. And when they fail, the train has left the station, and it's never coming back.

Equally, whenever any "manipulation operation" is underway, both the duration and intensity of the event are also arbitrary, and thus these factors (as a matter of logic) can also never be predicted. Given these parameters, investors have two strategies open to them.

They can continue to attempt to play the swings in the markets (knowing those swings are absolutely unpredictable).

The other alternative is to recognize we cannot predict the unpredictable, and are thus relegated to playing "pure defense" In this context, this would seem to dictate a strategy as simple and conservative as dollar-cost averaging (or some close proxy). Remember that as long as we are able to exchange (worthless) paper for (valuable) metal at all that ipso facto this means the metal is "cheap." Ignore the wild gyrations in prices -- and just keep buying real, physical bullion.

The Achilles heel of the banksters is that they require significant amounts of real bullion to leverage in their illegitimate paper manipulations, and you cannot leverage zero. When the banksters run out of bullion, their paper-fraud schemes come to an end.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.