Lear Capital on Bernanke's Pro-Gold Strategy

Don't you hate it when you stress over the right answer to some dilemma, and then with a smack to the forehead, when you see the answer has been staring you in the face the whole time, you go . . . dah!Of course!I knew that!

Yesterday, per a recent NewsMax report, Ben Bernanke encouraged Congress to extend the Bush tax cuts rather than let them expire less than six months from now.

Bernanke said, “In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy . . . There are many ways to do that. This is one way.”

It never made sense to me that you print money out of thin air, give it away and then vow to take it back by raising taxes.Seems to me one cancels out the other.Kind of like blowing up a balloon by blowing in then sucking air out of the balloon to blow in again.

Justifying the intent by saying only the rich will get taxed isn't really adding up either.Cap and trade, for example, is a bigger tax on the poor than it is the rich.A National Sales Tax or Value Added Tax would affect the poor more than the rich as taxes paid are a greater percentage of earned income.And here's a good one for you, as of now, beginning in 2013 the Health Care Reform Act includes a sales tax on real estate of 3.8%.

Pile all this on top of proposals that eliminate the home mortgage interest deduction and you get another tax that has a greater effect on the poor than it does the rich.

As I have said in previous writings, debt and deflation are a more volatile combination than nitro-glycerin.Higher taxes on anyone is deflationary.It was only a matter of time before we got the smack on the forehead from Ben Bernanke as the Fed's fear of deflation is real.

If Bernanke is successful in swimming upstream, against the wave of democratic resistance, then stimulus will once again become the order of the day with inflation waiting just around the corner.

All this is good for gold and perhaps one reason global gold demand remains strong.With central banks still adding to gold reserves, gold supplies still constrained and gold production on the decline, it may be a good time to pick up a few gold coins in anticipation of Ben's Pro-Gold strategy.