8/31/12

Bernanke

P.M. EDIT: BERNANKE HAS SPOKEN. The markets are up and holding on to hope for more QE. Gold has jumped another $25 into the 1680′s.  Stocks have been rescued at least for a day or three. The market is closed Monday for Labor Day. The CNBC take:  http://soc.li/6lwmHrD.

A brief word. The guy speaks later today at the Fed shin dig (annual) in Jackson Hole, Wyoming. Benny is in a literal hole. He has the insane task of not only being the monetary master, but the fiscal master, since CONgress and the Executive branches of gubbiment can’t competently handle their duties.

Short of announcing a plan to directly buy stocks, the stock market may end up being disappointed if the Fed chairman once again utters the meme that the Fed “stands ready” to act to save the economy. Further, if Bernanke were to announced some sort of enhanced asset buying programme (little Brit spelling for ya this morning), the markets could briefly pop and then pull back. What sort of assets could the Fed buy to make a real difference? Really nothing, but some say perhaps buying mortgage backed securities might be on the Fed menu in order to stimulate housing further by narrowing the spread between MBS and actual 30 year mortgages. But that would have a limited half life of extending good cheer for what would become the fright-nancial markets as the Fed would show that only an empty bullet box is left. 

But let’s be real. If the Fed head were to come out with some dazzling QE plan, which is doubtful, it would signal a panicky Fed. That wouldn’t be a good thing AND with the Dow still hovering right at the 13K mark, one should wonder why the Fed would want to rescue stocks. One should wonder why the Fed would want to rescue the economy if it is showing tepid growth of 1.7% according to the official Ministry of Information (labor dept) numbers.  It appears that QE is already largely priced in to the stock market and that the economy is still creeping along.

At the end of the day, it is the REAL economy that matters. Bernanke cannot wave a magic wand and turn what has become a speculative crazed economic system back to a manufacturing and technology based juggernaut. The bulk of the once upon a time good in the economy (yes with those things called jobs), manufacturing and technology originating within is gone (our own multi national companies work against the country) and Bernanke can’t do a damned thing about it.

In the wonderland of Wall Street, however, reactions can be surprising. I am largely on the sidelines watching. I will say there is the potential for a larger market reaction following a period of moribund trading this month.

Hyper Inflation of a Different Sort That Few Talk About

Earlier this week I discussed the impracticality of returning to the gold standard now not because I am not a believer in the benefits of the gold standard (to say nothing of the store of value that gold has represented for the thousands of years it has been traded), but because our fiat financial system is what it is – a behemoth of liabilities that have built to the size of inconceivable figures that have crossed the Quadrillion dollar line. In my way of thinking, a gold standard is not yet the answer to a return to financial sanity unless the foundational problems of the financial system are restructured — which is not likely to happen voluntarily since it would effectively amount to the financial elite, really the oligarchy and the mysterious Illuminati, handing over their power and losing their fiat based wealth. Using gold to back today’s financial paradigm would be problematic since there is only an estimated 5 bln ounces of gold above ground, or about $8 tln worth of gold.  So gold is a zit on the face of the fiat Ponzi body and as I noted earlier this week, the American trade imbalance and debtor nation status would mean a rapid flight of gold out of the country.

I fully recognize that gold, or a gold standard is not the problem. The problem is within the now mostly speculative Ponzi financial system as it exists today. It’s either going to be a gold standard, or its going to be a Ponzi system. The town isn’t big enough for two sheriffs. From a political standpoint, both parties benefit greatly from the present financial system. The talk of fiscal rectitude amounts to piecemeal non-solutions that pander to keeping whomever in office; and with both parties come the sacred cows that can never be subject to the spending cut axe. And let’s not even explore the corrupt and inequitable taxing nightmare system.   

So what’s the point of these blabberings aside from repeating what I stated earlier in the week? The disturbing thought comes to mind that you can blame the taking away of the gold standard for the massive hyperinflation of the financial system where we no longer talk about millions and billions, but now trillions and even quadrillions as if it’s routine stuff.  In a little more than 40 years, the financial system has expanded, or bubbled by a factor up to 100,000 times with only a relative few barely batting an eye. We live within the greatest of bubbles which gets most of its attention on ratings starved CNBC, or in circulation stunted, but once great newspapers like the New York Times. Yes, there’s WSJ with its few million readers, but this a country with 300 million people, or whatever the size of the population is, making the Journal a niche publication for people who are either really making it, or perhaps faking it. lol.  The vested interests of the financial system are aware of this sneaking hyper inflation, but most average folk are not! That’s because everyone is so busy trying to make ends meet since average wages (not adjusted for inflation) have expanded by 4 times (for the lucky worker bees) over the last 4 decades. The disconnect between the real world and the financial world is massive. Even gold itself and other commodities have only expanded by double digits. The massive expansion of the financial system is unprecedented and exposes everyone to exponentially higher risk though few realize it.

Could this hyper inflation of the financial system have happened if the gold standard was not eliminated? My simple answer is NO. Just like a 3 year old, even grown up men and women, but the primarily the male cabal of bankers and politicians and corporate chieftains need set limits – for those men are far worse than uncorrupted 3 year olds, and the state of the world’s finances prove that without a doubt.   

Given the hyper expansion of the financial system, gold in my mind is a gift horse having grown only roughly 15 fold since the early 70’s. And due to the potential of a disorderly financial systemic event, if not an eventual all out implosion, gold (and silver) are outstanding insurance policies to protect wealth. The $10,000 an ounce price barkers know nothing, having lacking imaginations and have earned my greatest contempt. They fail miserably in their understanding that accumulating a holding of gold is for both financial and actual survival preservation. We are in the midst of very dire times. Buying gold should not be a proposition of speculating on price – that’s what futures contracts and GLD are there for. The point is, is that physical gold and their coin counterparts are the anti speculation in a speculative based system that is going to die from unchecked speculation. How hypocritical to hawk gold as a potential play for the Ponzi like good life!  Read between the lines and you will realize that the present dollar system is on a course to shrivel and collapse. $10k gold figures being bandied about now are essentially useless and actually counter productive to the best interests of the gold industry. Really, what does it matter if gold goes to $10,000 if the dollar itself falls rapidly to a fraction of its former self? As I stated yesterday, the definition of wealth is going to change (provided that society is not destroyed by the vengeful banking cabal when their system collapses).

Remember, you can’t eat worthless paper, but you can trade metals for something to eat and preserve wealth whether you are the average Joe, or a multi millionaire.