Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Bernanke Falls Flat

Politics / Central Banks Apr 29, 2011 - 02:44 PM GMT

By: John_Browne

Politics

Despite loud huzzahs from a variety of boosters who proclaimed that Chairman Bernanke spoke with gravitas and wisdom at the first ever Federal Reserve press conference, the wider investing public clearly saw the performance as unconvincing. During and immediately after the proceedings the prices of gold and silver rose strongly to new highs as the U.S. dollar plummeted. The affair seemed to solidify the understanding that Bernanke and his cohorts have no intention whatsoever to reverse the current trend of inflation and a weakening dollar.


With all the preliminaries swept away, it appears that the great dollar slide that we have long feared will not be interrupted. In the last year alone, the dollar has fallen 25 per cent against the Swiss Franc, (the gold standard of fiat currencies) - with one quarter of that decline coming since the beginning of April alone. Against gold itself (the gold standard of all forms of money), the decline has been even worse, 31 per cent so far this year, and 8 per cent this month.

Ominously, the dollar index (the broadest measure of dollar strength) is just a percentage point or two above the all time lows that it set before the financial panic of 2008 sent spooked investors into the apparent safety of America's deep and liquid Treasury market. It appears that spell has now been fully broken.

Bernanke's press conference was heralded as a chance for the press to ask penetrating and unscripted questions to the Chairman. However, only a handful of reporters were selected and they were limited to single questions. As any lawyer will tell you, usually it is not a single question, but a line of questioning that tends to tease out the truth.

In addition, it is no accident that Bernanke called upon reporters who were likely to tread lightly upon him, including the reliably supportive Steve Liesman of CNBC. One intrepid Financial Times reporter even asked the Chairman how the investing public can be persuaded to give up their irrational fear of inflation! Given the supportive environment it was easy for Bernanke to appear commanding and reassuring while skirting the key issue of latent inflation.

Clearly however, Chairman Bernanke still was worried about the slow pace of the U.S. recovery. Claiming substantial success for his QE1 and 2, he left the door at least partially open for a QE3. Perhaps this, more than anything, tipped his hand to the anti-inflation hawks. Most probably, they continue to believe that the Fed will assist the Administration in its bid to inflate out of recession by means of political life support rather than genuine consumer demand. Many investors now accept that the government's plan involved debasing the U.S. dollar to erode the massive and profligate debts of the U.S. Treasury.

Key to the reasoning of Bernanke and his FOMC are balancing the rates of inflation and unemployment in pursuit of the Fed's dual mandate of securing sound money and employment. Somewhere along the way, although never proclaimed officially, the Fed decided that its "mandate" compels them to maintain inflation at a minimum of 2 per cent annually. With Bernanke citing the official inflation rate at 1.3 percent, the conclusion is easily made that the Fed sees no reasons to step on the brakes.

At the same time he expressed sympathy for those American householders who are experiencing inflation at least in double digits for oil and food. This means that, in terms of real money, all investors in bank deposits are being robbed of some 8 per cent each year. This hidden transfer of wealth from the private to the public sector and their banks is just part of the massive general and stealthy transfer of wealth from the private sector.

In 1994, in response to political pressure the formula used to calculate unemployment figures was changed. It is my belief that the current methodology understates the true number of unemployed. Most notably this was achieved by excluding those unemployed over the long-term. Although knowing this better than anyone, Bernanke expressed concern about the level of long-term unemployment. However, in claiming to show the efficacy of his recent policies he continued to quote the 8.8 per cent unemployment figures that exclude such workers. If he had included them the real level would be some 16.2 percent.

While the stock markets welcomed the fact that Bernanke intends to continue his covert inflationary policies, the currency, gold and silver markets were not fooled and gave Bernanke a resounding thumbs down.

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, Michael Pento, and John Browne delivered to your inbox every Monday.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in