More about the Keynesian "endpoint", a.k.a. when bailouts quit working

This was written on 6/9/10 by Bill Bonner, editor in chief of The Daily Reckoning, and it is entitled

A Gold Medal in Economic Incompetence

. Here’s an excerpt from Bill’s piece:

“You can fight a correction. You can delay it. You can distort it. You can make it bigger and nastier. But you can’t beat it. Eventually, mistakes have to be corrected…one way or another.

Usually, the mistakes take the shape of bad investments or bad loans. You can pretend that they’re still worth what you have in them. You can bail out the lenders and/or the investors. You can default and inflate. But somehow, someone, sometime is going to take a loss.

That’s when you need gold. Every other asset could have bad debt behind it…in it…or standing so close beside it that a blow-up would be damaging.

The correction that began in ’07 was needed to address all the bad debt built up in the bubble years. The feds tried to stop it. Since they didn’t have any money they had to fight it by borrowing more money – that is, by increasing the level of debt!

We knew that wasn’t going to work.

And now, there’s bad private debt…and bad public sector debt too. And now we’re approaching a Keynesian “endpoint” when lenders are growing wary. They’ve already cut off Greece. They’ve warned the rest of Europe. And when they stop lending…then, all your props fall down…along with the economy…and the markets too…”

Here’s the link

Don’t get caught holding paper assets when the props fall down. Own physical gold. Like Bill Bonner says, every other asset could have bad debt behind it. Hold gold coins. Develop a plan to diversify and develop a relationship with a precious metals dealer. Watch gold supply and demand closely and act!