**The Fed is going to Crash the System" -- An Open Letter**

An open letter to the members of LeMetropoleCafe.com:

"We have heard on several occasions that "the credit crunch was over, the worst was behind us, everything has been written off so the decks are now cleared." Apparently the Fed and US Treasury don't believe their own spin. If the credit crunch has really been overcome, then why would the Fed and Treasury be looking for ways to expand the Fed's balance sheet? For those of you who don't understand "expand the balance sheet," it means they are looking for ways to extend more credit than they are currently capable of supplying. Why would they need to do this? Simple - they know that they've already lowered rates to 2.25%, AND they have already expended more than 50% of their lending ability.

This recession/depression is just getting started. They know this to be true. They've already blown through half their balance sheet and lowered rates more than 50%. This is like Custer's last stand! Half or more of the Fed's ammo has already been spent, and nothing but an ocean of more indians/bad debts keep coming over the horizon. Better call in more reserves with more ammo because the surface of writedowns has only been scratched.

For the last two days former Fed chairman Paul Volcker has more or less "scolded" Ben Bernanke for overstepping the Fed's bounds. He also insinuated that the "bubbles" were created by Fed policy. In other words, Alan Greenspan and Co. are responsible for the current destruction of the capital markets because of past "drunken driving" at the helm of the Fed. Greenie was on CNBC yesterday to try to soften the blows to his legacy. I thought he came across very poorly, but he was smart enough to jump out of the car early enough to avoid a formal DWI.

The bottom line is this - they know this credit crunch is not going away. All of the past remedies that have been tried have not worked. They have upped the bet several times now to no avail. Now they have decided to "double down" in the hopes that a balance sheet larger than $1 Trillion will do the trick. This is a problem of HUNDRED'S of TRILLIONS of DOLLARS. All the Central banks worldwide can join together and try this same exercise. There is no way this can work. The end result will be a more rapid decline in the purchasing power of paper monies. The more desperate they become and the more credit and currency they try to create, the faster the decline in purchasing power occurs.

This is financial quicksand! Move, don't move, squirm, or don't squirm. It doesn't matter. The end result is the same. As I wrote last July, the cake was already in the oven, the outcome already predetermined. As I see it, the only way to repair the system is to let the defaults happen. Cleanse the system. With what little Gold the Central banks have left, they will need to add AT LEAST one "0" to its current price to resume with the next currencies and financial system. Gold will have to become so expensive that the average man would never consider it as an alternative to the next paper currencies. This way the central banks will retain at least some power. They can make it illegal to own, but that only makes it worth more. Heck, add two or three "0's" and no one will be able to convert paper to Gold. BUY IT NOW WHILE IT IS CHEAP AND AVAILABLE! This may not be an option later."