Bill Bonner, reporting from Buenos Aires, Argentina...

Twenty years ago...the Berlin Wall came down. This marked the end of the greatest controlled experiment in economics ever conducted. What did economists learn? Nothing...

In 1949, the Soviets and the Allies divided Germany into two parts. One part followed a traditional capitalistic path to reconstruction. The other part took the socialist road. Remarkably, they kept this test going for 40 years.

Of course it was misery for many of the test subjects. People were so eager to get out of the East German control group, they risked their lives jumping over the barbed wire. Then, when the wall was down, the population of East Germany collapsed...more than one out of every ten people moved to the West!

But it was a great experiment for economists. Too bad they didn't learn anything.

What they should have learned is that when it comes to making people materially better off, government spending is a poor way to do it. It's great for the few favored firms who help Washington raise and spend its trillions. It's great for Goldman, in other words.

But what if you don't have an inside track with the government? Well, you're out of luck. You get to stand in line to buy inferior goods and services - produced by government-owned industries and protected monopolies. That was what the East Germans did. And, of course, you get government bureaucrats telling you what to do...and preventing you from improving the quality of your life.

That's what they did in East Germany. And that's what they're doing, now, in the United States of America - in a less obvious, less heavy- handed fashion. Who owns the biggest auto company in the US? Who provides the finance for the finance industry? Who controls the health care and education industries? Who's the biggest employer? Who finances our houses? Who runs our banks?

Well...you know the answer.

But here's another question: who's headed for bankruptcy? Same answer.

What can you do about it? All you can do is to anticipate where this is heading...and position yourself to profit. Or, at least position yourself to protect your assets.

In that regard, you may want to replace the FED with the GLD, if you know what we mean. The Fed is derelict in its duty to protect your paper dollars. GLD - an ETF for gold - is a very simple way of doing your own central banking.

But should you buy GLD now? Ah...they don't make it easy, do they?

So, should you buy gold now?

A quick answer: It depends.

If you're buying gold for quick profits, you will probably be disappointed if you buy it now. The price has been going up for weeks. It's probably ready for a rest.

Also, gold moves up with stock prices - both anticipating an inflationary recovery. We think this will turn out to be a mistake. There is no real recovery underway. And no inflation either.

If and when stocks collapse, gold will go down too. At least for a while.

But if you are buying gold as the Chinese and the Indians are buying it - as a monetary reserve, not a speculation - there is no time like the present. Sometime in the future, we wish we could tell you when, gold at $1,100 will seem like a giveaway.

Until next time,

Bill Bonner
Money Morning

Turning to the market...

The JSE all share index closed up 1.59% yesterday. The gold mining index gained 0.19%. Resources added 2.22%. Banks and financials shot up 3.65% and 1.33% respectively. Industrials lost 0.48% and the platinum mining index bounced 1.17%.

London's FTSE100 advanced 1.8%. The Dow Jones climbed 2.03% and the Nasdaq collected 1.97%.

Tokyo's Nikkei closed up 1.25%. Hong Kong's Hang Seng gained 0.95%.

Brent crude is currently trading at $77.35 per barrel.

Spot gold's trading at $1098.27 and platinum was last quoted at $1349.50.

And here's how the rand is performing against the major currencies:
R/$ 7.46
R/₤ 12.42
R/€ 11.17