Fed in ‘All In’

The Fed said it will ramp up its purchases of Fannie Mae and Freddie Mac Mortgage Backed Securities (MBS) from $500 billion to a whopping $1.25 trillion in the coming months. The Fed is also going to double its purchases of Fannie Mae, Freddie Mac, and Federal Home Loan Bank bonds to $200 billion from $100 billion.

And for the icing on the cake ... the Fed will buy as much as $300 billion in longer-term U.S. Treasury securities. It's going to focus on Treasuries with maturities between two and ten years, and make purchases two or three times a week.

In short, printing money out of thin air at the central bank, only to turn around and buy debt securities issued by your Treasury, is the kind of practice you typically see in emerging market regimes.

Indeed, the Fed's actions sparked the biggest one-day plunge in the U.S. dollar in several years. Gold also surged, a vote of no confidence in central bankers' willingness to preserve our purchasing power. The yield on the 10-year Treasury Note, which had been flirting with the 3 percent level, plunged roughly 50 basis points in the blink of an eye. The last weekly survey from the Mortgage Bankers Association pegged the average 30-year mortgage rate at 4.89%. Consider that the lowest annual average mortgage rate seen in the 20th and 21st centuries was 4.7 percent, set right after World War II. In other words, this is just about the cheapest that mortgage money has ever been.

The Obama administration is going on the offensive in an attempt to rebuild confidence in its ability to lead the country out of its seemingly depending financial morass.

But don’t be too optimistic with the recent runs. The last time the economy was this bad - during the Depression - the Dow sank to 36 and gold rose to $36 - a 1-to-1 ratio. In 1980, after the huge stock downturn of the ' 70s, the Dow and gold met at 850. Today the Dow is rapidly falling, down 50% from its peak of 14,164 set in October 2007. Gold is soaring once again, retesting historic highs. If they meet somewhere in the middle, that point could very well be 5,000, according to legendary bear market analyst and millionaire investor Peter Schiff (the man who accurately called the last 4 major market corrections) . Indeed, he sees the 1-to-1 ratio returning again, and soon.