Gold standard ? Will it ever happen ?

This question has come up a number of times and the answer is surprisingly simple: Get rid of the income tax !
Once there is no income tax and its incomprehensible "rules" everybody would be free to keep his funds in whatever form he wishes.
Even today you can choose to use gold (perhaps in the form of shares of GLD) as your cash position. Instead of using Dollars as cash, you could just use shares of GLD as cash. You can do this in an IRA right now.
Only remaining (unfair) disadvantage: twice the transaction costs, as you always would sell investments - buy GLD. The other disadvantage being in the "daytrading" regulations that would not allow you to purchase another security before the settlement date of your sale.
In other words, the answer is: competition ! If you don't have to keep your books in Ben's paper, you are free to chose whatever commodity or currency you wish to use.
How many people would continue to use paper ? Is it any coincidence that the income tax and the Fed were created in the same year ? (1913)

TIPS : 5 year yield now negative !

The Treasury just auctioned 10 billion of 4 year 6months Treasury Inflation Protected Securities (TIPS) at 105.51% of principal. The coupon on these is 0.5%. It means that you'll get 2.25 total interest for the remaining term, or you are guaranteed to lose 3.26 on your purchase of 105.51 over the next four and a half years.
The "upside" is that the principal is increased annually by the inflation rate as it is reported by the government.

Does the Income Tax tax income ? Or just our patience ?

No matter how often it is falsely stated: the "income tax" does not tax the rich. It should be easy to tax the rich. All that is needed is to look at the ownership interests in major assets and send out tax bills that would correspond to the value of those assets.

The income tax on the other hand is the most destructive element to attack individual liberty ever devised. And - it does not tax income; not the income of the rich anyway. This most interesting case to make my argument was just published this weekend: 

http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html

And yes, what this example shows is NOT the exception but the rule. If you are already wealthy, you can afford to plan your income and hire the accountants and lawyers to show you how to pay little or nothing. 
But remember, it's not about the money, it is about the method: it places the burden of figuring out what is owed on the individual and it is impossible to figure ! 

This system cannot be fixed and needs to be ended.

Sachzwang

After "Angst", "Schadenfreude", "Blitzkrieg" and other wonderful word imports from the German language I believe this one represents a real enrichment to our current conversation: Compulsion to do something because of the way things are, or "Sachzwang".
Henry Paulson blackmailing Congress to give him 700 billion Dollars, no strings attached, would be such a time where he successfully argued "Sachzwaenge". (That's the plural and sounds actually even better :) )
Indeed, it is most often used in a political context, since politicians have this great ability to maneuver us into hopeless situations where they can plausibly argue that there is just one solution left: give them more money and/or more power !

Making Decisions

I am struggling with the challenge of having inferior knowledge and still having to make decisions every day. It would be nice to think that someone like Fed chief Bernanke has perhaps almost perfect knowledge of the relevant economic data and the wisdom to implement the right monetary decisions.
Unfortunately, evidence shows that it is the Fed that has brought on this crisis. It does also appear that the situation is continually made worse by its present actions.
Ben thinks that inflation is too low. Lies, damn lies and statistics; perhaps it's just my advancing age, but never before in my life did I find the data that the government produces as suspect as it appears to me now.
So here are just my current observations:
Commodity prices are close to record highs and the price of the Dollar at record lows. True, credit is still hard to get for small businesses and consumers, but any company with access to the capital markets does not have that problem. At the same time that the commercial real estate sector is still deteriorating, share of many REITs are already trading at higher prices than before the crash !
Even the stock market as a whole has almost made it back up to its high. The federal government is borrowing to the tune of 1.3-1.6 trillion Dollars a year and investment banks are making record profits this year (according to the Wall Street Journal).
Could it be that the Fed that was unable to see the seeds of the crash is now unable to see the beginning of a very serious inflation ?

None of the above

wonder why in this so called democracy (some claim its not only the envy of the world, but something we have to forcibly install in other countries) almost no-one bothers to vote?
What if you really like to participate in the process, but the 2 clowns offering to run your life are simply too offensive a choice?
None of the above ! This simple and effective idea was actually tried in Russia after the collapse of the Soviet empire. It now isn't offered anymore. I'm assuming that it must have been a little too threatening to the new elite (which strangely resembles the old one ! ).
None of the above: a real necessity in a system that is allowing the voters only the choice between 2 candidates that they very likely wholeheartedly disagree with.

No inflation ! (and no COLA)

here is a list of the major traded commodity contracts that are close to their all- time highs:
corn, wheat, soybeans, cattle, crude oil, gold, silver, copper, sugar, coffee, cocoa, cotton.
Are there any contracts trading close to their lows ? No.
I found only three items that trade about in the middle of the range of the last 10 years: hogs, natural gas and orange juice.
Oh, I almost forgot: yes, there is one contract that is trading close to all-time-lows. It's the Dollar index.
In short, the Dollar is at its low and the overwhelming majority of commodities is trading close to all-time highs.
Hey, wake up Ben ! You seriously want to tell us that we need to fear deflation ? You are so fearful that you feel it necessary to print up another 2 trillion Dollars ? Can you imagine what will happen to prices if you do ?

The Ultimate Pain !

After harvest estimates were reduced Friday morning by the USDA, futures for corn, wheat and soybeans immediately went limit up bid. Anyone who had sold the contracts not only lost his margin, but is now also unable to close his position and will be forced to buy at the open on Monday. 
Most traders will protect their positions with stop orders that are triggered when the trade moves against them. In this case, the stop would have been triggered, but even market orders would not have been filled and traders would now be forced to carry their losses over the weekend, not knowing how much it will cost them in the end.

What's the difference between a financial bubble and a Ponzi scheme ?

None, really. They both rely on greater fools to inject ever greater amounts of money into the scheme for it to work and make EVERYBODY rich.
Here's the major difference and problem: Ponzi schemes are of course illegal. Financial bubbles on the other hand ?
They were tolerated by the Fed (remember chairman Greenspan stating that he is not in the business of pricking bubbles ?) and now that the biggest one of them all has burst, the Fed is frantically promoting bubbles so that the game can go on !
In a sane economy that uses money of real value, rising prices cause demand to decrease and production to increase. In our bubble economy, when prices rise, everybody tries to buy before prices go up even higher.

Japan has a new "printing" program too..

Japanese central bank just announced last night that they want to create another 60 billion Dollar worth of currency. Since the Japanese economy is roughly 1/3 the size of ours, it would translate to about 180 billion if done here.
It doesn't quite compare to 2 trillion, but the interesting part is that they are planning to buy just about ANY asset that's traded in Japan, including stocks (through ETF's) and Real Estate Investment Trusts. That's something that many people, including myself, have speculated that the Fed is already doing.

Some more unwieldy numbers...

Total mine output of gold this year in the world (as well as average for about last 10 years) is about 2500 tons. At the current price (which some say is too high) that amount is worth about 100 billion Dollars.
Now here I again have to repeat myself: the Fed is proposing to "print" another 2 trillion Dollars in the near future after having "created" 1.7 trillion last year.
It's not just the magnitude of the difference, but also the nature of the two assets that must be taken into account. Paper Dollars can and will be further multiplied by the wonder of the reserve banking system. In normal economic times this multiplier is about a factor of ten. Now the Fed claims that it has to create these huge amounts because credit is not being created in its usual fashion. That may be true, but will the Fed be able or even willing to withdraw this potent drug from circulation when things return to normal ?
Remember that this is the Fed that was utterly unable to foresee what the housing bubble would do. The same Fed that saw no problems when trillions of Dollars were lent to borrowers who would not get a loan of even twenty bucks from a responsible lender.
When the Fed announced its first printing job in December of 2008, copper prices were at about $1.25 per pound. Today copper trades at almost record highs again: $3.70 a pound. Even though crude oil trades at "only" $82 per barrel (after having dropped to a low of $35 from a high in 2008 of $150 ), major commodity price indexes are making new record highs. The Dollar index (a basket of the currencies of the major trading partners of the USA) would be trading at a record low, it not for the temporary weakness of the Euro.

Here are two worthwhile links:

http://online.wsj.com/article/SB10001424052748704847104575532442706099582.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html

US is not Japan

Many investors expect to see rates on US government debt fall to levels like they are common in Japan for the last 15 years: 1 to 1.5 % on 10 year obligations.
That is highly unlikely IMHO and indeed I see a much greater danger in inflation hitting double digits.
The key difference is that Japan was a net creditor to the world when its real estate bubble burst in 1989. I guess that because debtors in Japan were now pressured to repay debts in Japan itself and also were unable to incur new debt because of falling asset prices, they in turn called in loans and sold assets in foreign countries. The receipts of those transactions were converted to Yen, thereby pushing it from around $0.60 per hundred Yen in 1989 to about $1.20 per hundred Yen 6 years later. Japan, in other words, experienced vicious asset price deflation and at the same time had to deal with a doubling of the value of its currency, making its exports much less competitive.
The position of the USA is exactly opposite: It is a net debtor and the Dollar has been making new lows since the bubble burst here in 2008. Since the US trade balance is still negative and amounts to about 3-4% of GDP per year, it requires foreign entities to accept that quantity of new Dollar assets every year. It would seem a daunting proposition, considering that investment returns here do not cover the present inflation rate.
It appears ludicrous to me, to fear deflation as commodity price indexes are reaching new historic highs almost every day.