Bernanke's "Never Mind", and Gold

``Indeed with the Fed financing forty percent of all debt issuances, it has become the market and thus any exit is fraught with liquidity risks - a typical "owl" market - "too who" does the Fed sell the mountain of debt to? Of concern is that despite trillions of handouts, the global banking system remains heavily undercapitalized, even under Basel III. Higher interest rates and more bailouts will make this sector riskier exacerbating vulnerabilities. Today, banks have limited ability to absorb losses of higher interest rates or even another round of bad loans. When the swamp drains even the ugly frogs are exposed. We also believe the health of the sovereigns will become a concern again and the prospect of higher rates and an eventual end to quantitative easing will cause a flight from the US dollar, the currency of a heavily indebted sovereign and much weaker than Europe. Although possessing the world's reserve currency, the Fed's balance sheet is at a record $3.47 trillion and the country has again exceeded its debt limit, further debasing its currency. Washington must relive the debt limit this fall which raises the risk of a run on the Treasury causing turmoil in the financial markets and damage to the economy. Déjà vu? The largesse and patience of lenders cannot continue forever, and another building block for higher gold prices. ''