I dumped all my short market positions (which were about 50% of portfolio) this morning with the markets down another 4%.

The other 50% of my portfolio was in GOLD before the markets opened. I’m joining the markets in buying MORE gold.

Let’s consider the future implications of the Fed bailout of Fannie/Freddie, and AIG, and military spending, and the Social Security benefits deficit, and the existing Federal debt. When combined those are a financial burden the US government cannot manage. What happens in the stock market this year will be trivial compared to the long-term effects of that massive debt burden.

It is now inevitable the US government will go bankrupt, unless our government will use the only available tactic to avoid that: devaluing the dollar. This means printing money on massive scale during the next ten, twenty years. This means massive inflation. That way, our government inflates its way out of the money it owes foreign governments.

This is why gold has jumped over 5% today.

The dollar is the world’s de facto reserve currency, but when the nations who hold trillions of dollars realize that the USA must systematically devalue the dollar. Then the world will abandon the dollar. The Million Dollar Question is: what will those decision makers BUY when they selling trillions of dollars, and trillions of dollar-denominated securities?

Some guess they will buy: GOLD, Chinese Yuan, EUROS, Swiss Francs?