You’ve probably picked up that, having run four options up the Wyoming flagpole, Ben Bernanke has got what he wanted: the media to make the decision for him. It looks like there’ll be more QE in the States.

At least the US has this option. In private, I understand that Mervyn King is making it quite clear that there isn’t any money left for serious stimulation in the UK – and any attempt to do that by fiddling things would terrify the markets and drive up our cost of deficit servicing. I agree with him wholeheartedly.

In the States, they have a similar problem – less pressing but much bigger. Assuming there are some deep reserves still left in Fort Knox, they could helicopter gold over the nation, let alone Dollar bills. But in Beijing, small people with blank expressions are watching events closely. Anything that looks to them seriously inflationary will be met with retaliation – perhaps a major sell-off of debt to follow the ‘diversification’ out of US securities they began recently.

The Chinese won’t cut off noses to spite the face: the US market remains vital to its growth. But equally it doesn’t want to see its US holdings rendered worthless. And so (I hear) discussions are in train among the Obama inner circle about how to do something both effective and invisible….and the favourite right now is blurring the distinction between capital held by the Federal Reserve, and the current account monies managed by the Treasury.

I’m told that this is being referred to as the Iceberg Plan – ie, a small effort will be public, but a much bigger one secret.

Yes I know – it sounds bonkers, but nothing would surprise me any more. And it’s getting harder with every year for the Reserve to deny that it’s been selling gold direct to the Chinese for quite some time past anyway. The idea is for the Fed not to ‘remit’ the Treasury monies, but simply buy up any Government debt issued. The theory is that this would both boost confidence and release cash-flow into the economy – and not have to face the wrath of a largely negative Congress….especially after November. Finally of course, the Chinese may not notice.

There are always problems when the capital is in one place and the income/expenditure thing in another. It raises the possibility of yet another ruse whereby jargon can be employed (and the poor citizen bamboozled) to rationalise emptying the bank – in order to afford a repair to the yacht.

In Spain at the moment, this process has alighted upon the State pension reserves – which are rapidly being run down on the quiet in order to….buy the government’s bonds to keep the market buoyant. The next on their list is the Health budget. Once you start doing this, there’s no end to it: the family silver, the car, grandma…

The desire by Governments to get people consuming again is like a serious drug habit. Once you get hooked on that single, obsessive idea, all bets are off: you’ll steal from your wife, rob a store, get a gun, shoot a cop…and empty the Fed.

The insoluble problem with the growth model of capitalism is that without materialist hysteria and massive personal debt, it doesn’t work. People are more important than any system, and if people think the time has come to hunker down, then I go with the people – not some poxy trickle-down theory being peddled by a member of the super-rich.

There is no staving off Crash 2 – it’s too late now. We should use the time for reflection on what’s wrong and how to fix it. We should’ve done that in 2008; we MUST do it this time.

By the way, the world having woken up and found the financial system still there this morning, the wardslog@aol.com inbox is stuffed to the gunnels with folks going hahaha, the Nikkei went up, phurrrt, yah-boo-sucks after The Slog piece of yesterday.

Well, I hope you enjoyed it guys, but drill into the Slog’s archive and you’ll find repeated statements to the effect that it will be ‘like watching paint dry’ and ‘could be a month or a year’. I asserted only three things yesterday: the gold price will rise, there will be a Crash 2, and all the signs confirming this are now falling into place. I stick with that, and I stick with my conviction that anyone who thinks the US & European fiscal crises, the Japanese flatline, the Russian property scam and the Chinese boom-bang-a-bang can all be deftly avoided needs their head examined. I would apply that same diagnosis, by the way, to anyone still mad enough to be in mainstream equities.

I’m not an incompetent Angel of Death, dear Reader….just an observer of empirical events and what they probably mean.