Bernanke Vs. Gold - Getting Hostile

Zero Hedge | 11/23/09

[FromLori]

I was struck with Bernanke’s comment last week at the Economics Club regarding bubbles. He said:

”It is not obvious to me that there are any misalignments in the US financial system”.

This comment has already gotten the attention of the media. Two years from now the blogs will be quoting it along with other notable words from the Chairman. Remember the following? Mr. Bernanke regrets having said this.

“We (the Fed) do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

When Mr. Bernanke made those comments back in May of 2007 he was either misrepresenting the facts or he simply could not see the implications of the facts that were in front of him. I don’t think he was fibbing to us then. He called it as he saw it. He simply had no clue what the pieces meant. I am concerned that he is equally out of touch today.

How could Mr. Bernanke not see that zero interest rates are a misalignment?

Mr. Bernanke is a student of economic history. He knows that during the 30’s T Bill rates went negative. I am sure that he remembers the panic of 2008 when again Bill yields fell below zero. But those were panic situations. There is no panic today. But bill rates are at zero.

I am sure that Mr. Bernanke is smiling ear to ear as he sees the evidence that his plans are working. Zero interest rates were his objective. He has succeeded and even exceeded his goals.

What Mr. Bernanke has accomplished is making fiat money useless. It now costs you to own the stuff unless you want to gamble with it. Our whole system is based on the notion that money has value. The Fed has established that it has none.

I assume that Mr. Bernanke is acutely aware of day-to-day market movements. He knows that the comments by St. Louis Fed Governor James Bullard that “Maybe we should extend the Agency POMO buys” quickly resulted in a $20 pop in the gold price. You can’t ask for a better example of the market’s attitude towards America’s monetary stance. It is starting to get downright hostile.

It would be a kick in the pants to the entire financial system if the price of gold started to have a meaningful impact on monetary policy. I think that is exactly what is going to happen. It is just going to take a while. Bernanke continues to believe that nothing is misaligned. We are going to wake up and find out that things are horribly misaligned.

[demsux]

I’ve increased my gold holdings due in large part to the similarities between the Carter years and now.

[FromLori]

How well I remember those years the high inflation, high home interest rates a complete disaster somehow I think obamageddon will be still worse.

[FromLori]

ping

Schiff goes toe to toe with Bullard

http://networkedblogs.com/p18740636

[dennisw]

The central bankers love their fiat currencies and despise gold. Gold makes their fiat currencies look bad and this is especially true these days.

Since Ben Bernanke is the big man behind the planet's most powerful fiat currency he despises gold the most. For years I didn't understand what GATA was complaining about. Its main complaint is the gold leasing racket which has been suppressing the au price for years. This artificial suppression is coming undone and au is rising to its natural price 

Gold leasing works this way--
Central banks such as the German, the UK one, the USA lease (lend actually) their gold at very low interest rates to bullion banks which are sophisticated banks that are big in the au business. It could also be a giant like Goldman Sachs. There is a covert understanding that the Central Bank will never ask for the gold back. It is out on permanent loan according to a freeper. So that the likes of GS or a bullion bank don't get caught in a jam. The bullion bank then sells gold short at critical moments when it knows it can jam the longs and bankrupt them or drive them out of the *all of a sudden very risky gold business*

Another explanation
The Gold Carry Trade

A carry trade where you borrow and pay interest in order to buy something else that has higher interest. The gold carry trade works as follows. A central bank loans a bank (sometimes called a bullion bank) some gold. The gold lease rate is usually very low. The bullion bank immediately sells the gold and invests in securities with a higher rate of return, such as government long-term bonds. The carry return is the return on the bonds minus the gold lease rate. However, this trade is risky on two dimensions. First, if the bullion bank invested in long-term bonds and the interest rate goes up, the trade could be unprofitable. More seriously, the bullion bank has effectively sold the gold short. If the loan is called by the Central bank and if gold has risen in value, the bullion bank will have to go into the market and purchase higher priced gold. Indeed, if many banks are short, the unwinding of the gold carry trade could drive the gold price even higher.

 

[FromLori]

Yes did you see the recently declassified documents?

http://bluelori.blogspot.com/2009/11/gold-price-suppression-is-public-policy.html

[dennisw]

http://finance.yahoo.com/techticker/article/378046/Fed-Face-Off:-Peter-Schiff-Goes-Toe-to-Toe-With-Alan-Blinder,-Jim-Bullard

Thanks To Princeton University’s Business Today, Schiff went head to head in New York City with St. Louis Federal Reserve President James Bullard and former Federal Reserve Vice Chairman Alan Blinder in a panel titled, “Challenges of the Global Slowdown: Redefining Government Regulation.”

dennisw says—— These guys Bullard and Blinder have (had) responsible positions, are real players and decision makers, and are fools to be filmed having an exchange with Peter Schiff. This gives a big boost to Schiff who I like. This will be hailed as Schiff schooling these plodders

[dennisw]

I’ll check it out... thanks. Sure wish I bought a bunch when I first heard those GATA “bellyachers” years ago. I thought they were kooks, out to lunch

[EyeGuy]

“The central bankers love their fiat currencies and despise gold. Gold makes their fiat currencies look bad and this is ESPECIALLY true these days.”

######

Exactly. (Caps added).

While the unmitigated disaster that is the Obama Administration has certainly irresponsibly poured lighter fluid onto the fire, the compelling reasons for owning PM today, go back many years.

We are approaching the financial brink due to YEARS (decades) of fiscal mismanagement, and instead of pulling us back, Zero's crew has us rushing to the precipice.

[Cicero]

Well, Bernanke is also famous for saying that the Fed has a “printing press.” Also, that if necessary, he could drop money out of helicopters.

He is still well known by his nickname, Helicopter Ben.

[djf]

Problem is the global economy has turned into something like this:

You buy some "paper" from somebody.
They kinda, sorta promise (but not quite) that at some time in the future they will give you back MORE paper!

And at the time (read that if) you get back the "more paper", you are unsure what it will be worth, or even what might be available to buy with it.

So I think a big part of the appeal of gold is due to the uncertainty factor. It's something real. It's not a promise. It's not some kind of future event like winning the lottery. And add to that that it is more and more in demand.

No matter what the financial whirlygigs say, gold will now buy more than Enron stocks. It might end up being the same for GM stocks. Or government Tbills. Or bank Certificates of Deposit. Who knows? There's the uncertainty factor again.

[dennisw]

If you want to hear a fresh voice w/ a fresh take on this mess go to youtube and listen to parts 1-6 of -—>>

Damon Vickers on Alex Jones Tv 1/6:A New Financial Order!
http://www.youtube.com/results?search_query=%22Damon+Vickers%22+alex+jones&search_type=&aq=f

Keep yr eye on Damon Vickers

[FromLori]

[djf]

From the sounds of the first five minutes or so, he’s part of the same old moneyed crowd, which means more of the same...

but I’ll keep listening...

[FromLori]

They are creating another bubble

http://www.truthsavvy.com/content/free-money-federal-reserve-fuels-dangerous-new-wall-street-bubble

Eventually bubbles burst

[dennisw]

You buy some "paper" from somebody.
They kinda, sorta promise (but not quite) that at some time in the future they will give you back MORE paper!

The amount of paper compared to productive assets has skyrocketed in 30 years
Today we have graduated to plastic as in credit cards
They hardly existed 30 years ago

The amount of paper in the form of loans and bonds in relation to underlying tangible assets is much greater than 30 years ago
But we weren't content with that and allowed Wall Street to run wild churning out the most dangerous paper yet...the explosion in derivatives most especially mortgage backed securities and credit default swaps

All this paper because everyone wants something for nothing and Wall Street and the Fed found out they way to become rich is not through honest labor but to issue paper promises which are our main export these days. China sells us an LCD TV and we sell China FedGov paper (promises). The FedGov has 60+ trillions in obligations to meet and the only way it can fund them is via issuing a storm of paper. Taxes too

[dennisw]

it gets better...I know...he’s bragging about summers at Seal Island w the Rockefellers for neighbors. This island is off Maine and near Mt Desert island

He comes from an interesting place. Alex Jones calls him out on his NWO connection but thanks him many times for a great interview and invites him back

[djf]

OK.. finished the first part and he’s starting to sound like me... talking about commodities and a global unit of measure for trade (not paper based)... so I’ll keep listening!

[macglencoe]

Maybe you haven’t noticed, but the nations of the world are preparing to change their currencies to Gold backed currency. As in 1939, the US will outlaw the private possession of gold and take it from you at far lower value than what you paid for it. The dollar is presently worth 2 cents compared to the 1939 dollar.

[demsux]

At this point, I’m quite comfortable with my gold holdings.