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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Fed, Exter’s Pyramid and Gold – When John Exter Met Paul Volcker

Commodities / Gold and Silver 2015 Aug 14, 2015 - 11:23 AM GMT

By: GoldCore

Commodities

DAILY PRICES
Today’s Gold prices were USD 1,117.35, EUR 1005.54 and GBP 715.56 per ounce.
Yesterday’s Gold prices were USD 1,116.80, EUR 1003.23 and GBP 717.18 per ounce.
[LBMA AM prices]


Gold in USD – 10 Years

Gold and silver rose on the COMEX again yesterday – up 1% to $1,123.80 and silver was up 1.3% to $15.52 per ounce. This morning, gold is 0.7% lower to $1,118 per ounce.

Silver is 1% lower to $15.47 per ounce. Platinum and palladium are 0.8% and 1.4% higher to $997 and $622 per ounce respectively.

Gold, The Fed, Exter’s Pyramid – When John Exter Met Paul Volcker

GoldCore are blessed to have many well connected, informed and enlightened subscribers and clients throughout the world. On a daily basis, we receive interesting tidbits and insights from all corners of the world.  A common thread in the dialogue with our growing 31,824 email subscribers and wider online and social media following is a genuine concern about the economic, financial and indeed monetary outlook for the world.

Some are what Paul Krugman and other currency debasement advocates would deride as ‘goldbugs.’ Most are ordinary people – of both modest means and wealthy – who are worried about their friends, family and fellow man’s financial and indeed general well being. Some are left wing, some are right wing, most are libertarian. Very few are the greedy, irrational ‘goldbugs’ that is a prevailing narrative in sections of the media today.

We have a fascinating dialogue with many readers. One of our readers living in the U.S. has first hand experience of people involved at the highest levels of the Federal Reserve. He is very concerned about the astronomical levels of debt in the U.S. and internationally and the fact that this debt continues to balloon in a completely unsustainable way.

With his permission, we are publishing his recent email to me (mark.obyrne at goldcore.com) in its entirety. It is about a private meeting between ex-New York Fed Vice President John Exter and ex Fed Chairman Paul Volcker.

We have added a few images in order to help understand the gravity of the building financial and monetary risks of today.

Hi Mark,

While reading your piece last week on the US Federal debt having reached $18 trillion, it brought back my memory of a visit John Exter and I had with Fed Chairman Paul Volcker, back in 1981.  It was a instance I’ll never forget!

John and I had a mutual billionaire widow client whose husband had been a Washington DC real estate magnet. He had died suddenly and she decided she wanted to have a part of her assets in physical gold and mining stocks. I recall she set the allocation at $50 million.

John Exter and Paul Volcker - Prudent Central Bankers
John Exter and Paul Volcker – Prudent Central Bankers


The widow had us travel to DC for a morning consultation followed by a luncheon. It was early April 1981 and 91 day US Treasury Bill rates were near 18%.

Our luncheon ended around 1:30 PM and we had a few hours to kill before our flight back to New York.

John Exter and Paul Volcker knew each other having been at the New York Fed as Vice Presidents and John decided he’d phone Volcker to see if he could see us before our return flight. Volcker took the call, said he would cancel his afternoon engagements and to come right over to the Fed. We got to the Fed and there were 36″ high lumber piles of one foot long 2″X4″ pieces all around Volcker’s office and the offices of his staff. Sky high interest rates had turned the construction industry down and the masses of unemployed construction workers were mailing Volcker the 2X4 pieces with nasty messages written on them in protest of the high rates.

John and I were at the Fed in a private conversation with Volcker for nearly three hours and in fact we nearly missed our flight because we stayed so long.


National Debt of $18.2 Trillion – Unfunded Liabilities of $100 Trillion to $200 Trillion


US Federal debt, in 1981 was rising through the $1 trillion level and I remember Volcker lamenting over the situation and asking John what he would recommend to get a handle on Federal spending. John gave Volcker a stern lecture on the Fed’s expansionary policies and told him the Fed would eventually end up destroying the whole American economy and the dollar because the Fed had become a prisoner of it’s own expansionism and it was something it couldn’t stop. John and Volcker discussed all the pitfalls of Keynesian and monetarism and Volcker didn’t rule out an eventual collapse of the dollar and second deflationary depression. I remember Volcker asking John when he would begin dropping short term rates and John commented that rates would have to drop soon or else the economy would fall off a cliff. It’s interesting that it wasn’t long after our session that rates started to come down.

The meeting was an experience of a lifetime for me to be sitting there in Volcker’s office listening to one gold standard economist central banker conversing with a Keynesian economist central banker. John Exter spelled out his scenario for Volcker and warned him of how badly the Keynesian experiment would end if it went on for an extended period of time. Volcker just sat there and listened and showed his concern.

Here we are 33 years later with US Federal Debt of $18 trillion with the country’s GDP at $17 trillion. A pretty disturbing situation, to say the least!


Exter’s Pyramid via Zerohedge.com – h/t ‘Adam’


Volcker has joined my old club The Pilgrims of the United States which is based out of New York. I’ve been a member for nearly 40 years but don’t get back for meetings and events because of the travel distance. I hear Volcker goes to all the events and a fellow Pilgrim friend has approached him at meetings and when the late John Exter’s name is mentioned Volcker stops and has nothing but kind things to say about him.

Thought you’d be interested in learning of my anecdotal experience.

Best regards,

—————-

When reading this, some will say that this was in the past and these are different times and may not understand this warning from our recent history. However, it offers a lesson from the past that has significant relevance for today. The debasement of currency has ended in economic debacles in every single country, in every single instance throughout history.

Today, we see currency debasement internationally on a global scale – this has never happened before and has never been seen throughout history. The uber Keynesians attack those who warn about monetary risks and proclaim that none of the ‘goldbugs’ warnings have come to pass. Except of course, possibly the worst financial crisis that the world has ever seen and meager, unsustainable recovery.

We would caution that ‘yet’ may be the appropriate word here and we should all be vigilant and focus on the long terms risks – not the short term panaceas, tentative recoveries and massive asset bubbles of today.

 Download Essential Guide To Storing Gold Offshore

This update can be found on the GoldCore blog here.

Mark O'Byrne

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Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

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