Why this rally might head into fall

Fed can print money, but not metals

Having said that, I also have no interest in owning stocks on the long side, either, due to my concerns about the economy longer term.

Nearly all of my investments are related to precious metals or the other potential beneficiaries of money printing. That default response to all problems will ultimately lead to a weaker currency and plenty of inflation. (Read last week's column, "There's no will to fight inflation.")

This is the scenario the central bankers of the world are secretly rooting for, in my opinion. As James Bullard, president of the St. Louis Federal Reserve Bank, last week told Reuters' Mark Felsenthal (in comments mostly paraphrased by Felsenthal):

"Financial markets have not fully understood that the U.S. Federal Reserve's pledge to keep interest rates exceptionally low for an extended period means they will stay low beyond when officials normally would raise them. 'I don't think markets have really digested what that means,' St. Louis Fed President James Bullard said. . . . The Fed's strategy is aimed at promoting a future rise in inflation, which should provide an immediate boost in activity in anticipation of a future boom, but that hasn't happened, Bullard said."

(The entire Reuters story, headlined "Fed Official: Rates to Be Kept Low Past Upturn," ran Aug. 22.)

Hawkish like Tweety Bird

Let me point out that the St. Louis Fed is deemed to be a tough-minded monetarist district, staffed with monetary "hawks." Thus, there should be no doubt about the Fed being willing to be irresponsible enough to debase the paper scrip we know as dollars until such time as it creates inflation.

The mind-set of all these central-planning types is the same, and what they're intent on doing has been clear for some time. As Federal Reserve Chairman Ben Bernanke said quite a while ago, they have a printing press. And to doubt the ability of the printing press to generate inflation is to ignore history.

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Perhaps what the Fed ought to do is take out an ad in The Wall Street Journal so that there can be no confusion about what it's up to.

At the time of publication, Bill Fleckenstein did not own shares of any company mentioned in this column. He does own gold bullion and gold futures.

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