Which do you think is more likely to bounce back in the second half of 2011 – the value of gold coin investments or economic growth?

June 08, 2011 – Which do you think is more likely to bounce back in the second half of 2011 – the value of gold coin investments or economic growth? Remarkably, Chairman Bernanke still claims the latter, telling a gathering of international bankers that “the U.S. economy should pick up in the second half of 2011 despite recent signs of weakness,” says the Wall Street Journal.

Not surprisingly, Bernanke also told the group that “the central bank’s policy to help stimulate the economy is still necessary, reiterating the expectation that interest rates will remain low for an ‘extended period.’” It is inconceivable to me that anyone present could believe that continuing down that path will somehow miraculously pull us out of the muck.

The average American, it seems, agrees. According to a recent Rasmussen survey a solid half of the population now expects we are heading towards another Great Depression in the very near future – the highest level in two years – while only 31% expect the economy will be stronger one year down the road. Only 9% are confident that a depression is not at all likely.

Mark Mobius, renowned hedge fund mogul and head of Templeton Asset Management’s $50 billion emerging markets team, confirms our fears. “There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” he told Forbes’ Addison Wiggin.

Wiggin points straight at derivatives, which he estimates to be on the order of 10 times the global GDP, as the culprit. And the Fed is no small player, holding more than $1.6 trillion “in mortgage derivatives alone, junk that the banks needed to clear off their own balance sheets,” Wiggin says.

Thanks to Mr. Bernanke the Fed has leveraged $52.5 billion in capital into a $2.7 trillion balance sheet. That means a depreciation of just two percent would completely wipe it out. Compare that to the big investment banks that the Fed rushed to bail out, which were leveraged 30 to 1.

With the government now holding their most toxic assets and leveraged a whopping 50 to 1, there is only one way this can end. The economy is not going to bounce back and all the wishful thinking from on high won’t change that fact.

Staying the course can only dig the hole deeper. And that will give gold coin investments a real shot in the arm.

Kevin Johnson

Senior Staff Writer – GoldCoin.net