Gold Voicemail
“Hi, this is Gold. Sorry, I’m being massively manipulated by the feds right now and am going back to sleep bec of all these sleeping pills I’ve been given. The govt wants to fool people that the economy will be better soon. So Im heading back down to $700/oz. Goodnight.”
“Hello Gold’ “This is the front desk. “Yes, the Fed has approved the $700B bailout and dropped interest rates to near zero and they are going to print $10,000,000,000,000,000.00 of funny money for 2009,
so yes, THIS IS YOUR WAKE-UP CALL.”
“Hello Gold. This is US$. HELP, please. Im falling and falling hard.”
“Hi, This is Gold. Sorry I can’t take your call right now. I’m off to the races with my cousin Silver. Catch me if you can.”
“No State shall make any thing but gold and silver coin a tender in payment of debts.” ~ Article 1, Sec 10 ~ The Constitution of the United States
As much as I would want to be concerned, what can I do?
However, being a patient and prudent gold bug, it is good news in the making. Gold ~ up, up and away!
Yes, because the FED and the Government are punishing savers and rewarding spenders. We finally realize the fatal flaw of Alan Greenspan years and the housing bubble was low rates. So what does this FED do trumps Alan Greenspan and lowers rates less than 1.00% and said it will be there for a LONG time. I do not care where the FED puts rates this does not make people consume more or qualify for loans.
This is deflation (debt and money supply destruction) and a consumer secular change.
I see the Fed’s and the banks and the investment brokers and the ones who have put us in this situation,,,,and we all know who these crooks are ,,,are all being protected by our government…how wonderful 2009 will be…people are hungry and crying out for help and this bulls..t continues with these bailouts…I’m tired and I am sure alot of you out there are also…I say AGAIN…Help the people and not the crooks…. we are doomed in this once great country, the country my grandparents and parents helped to build…foolish…
Sure I worry.
I worry because the FED is so ABSOLUTELY SURE in its worldview.
Like the world’s Pope Of Finance would be.
The FED thinks it has The Solution.
For absolute ABSOLUTION.
The FED believes it cannot make a mistake.
Which of course is NONSENSE.
Or at least it thinks it cannot make a mistake worth TRILLIONS of dollars.
Or it thinks the gamble is worth it.
Do you?
So sure I worry the FED will make the dollar worth less or even worthless.
I know the FED can make the Dow Jones Industrial Index go up to 30,000.
That’s not the point.
I know the FED can even make the DJII go to 30,000,000,000,000,000.
But the stock market will be worth even less than it is today in purchasing power terms.
It just depends on how worthless the dollar becomes.
It just depends on how many dollars the FED prints.
It won’t help in the end.
We are in a different Financial STATE today.
This is not 2001. Or 1954.
IMHO Dr. Bernard Bernanke is miscalculating.
We have gone through what physicists call a State Change in the last 2 years.
The physics of the entire Money System have changed.
One will not get the economic reaction from this new system that one would have gotten 5 years ago.
Our Debt Boulder is on the other side of the mountain, coming down. No amount of pushing will get that boulder back up from that side of the mountain. We have reached the zenith and are on the way down. The Debt Bubble wants to implode and it will do so. This is only IMHO — my humble opinion. I would normally defer to a learned person such as Dr. Bernanke of the FED. But the FED has been so inept that I judge myself to be standing on pretty solid ground.
The reaction of the economy and consumers will not be what Dr. Bernanke is expecting.
The Germans made their currency worthless in 1922-1923.
At the same time their stock market went “to the moon”.
I quote from http://www.gloomboomdoom.com/gbdreport/download/GBD0306.pdf
“In the meantime, an index of German share prices (1913 = 100) rose from 126 in January 1918 to 531,300,000 in September 1923.”
Another more contemporaneous example comes to us from the Zimbabwean stock market which is the “best-performing” in the world.
Please see http://mises.org/story/2532
And also
http://www.newsvine.com/_news/2008/10/21/2025756-zimbabwe-stock-exchange-soars-as-others-crash
We can have exactly the same kind of stock market here — all thanks to the FED.
But I would not recommend investing in or emulating that kind of stock market.
Paul writes “Eventually, a weak dollar may also force long-term bond yields higher in order to make them attractive enough to foreign investors. If that happens, that could lead to higher rates for variety of consumer loans.”
Here I agree with Ben Bernanke in that I think a determined FED can continue to engage in the money markets in a way that will make Paul’s statement untrue, at least for a while.
We don’t need to borrow from offshore — we can just PRINT our own money here.
Of course that will collapse the dollar even more against foreign currencies as measured by exchange rates. [Eventually, the FED will have to "drain", neutralize, sterilize, its money-creating interventions -- otherwise it will get really serious price inflation. Please see http://abcnews.go.com/Business/Economy/story?id=6468374&page=1 ]
Not only that, with that freshly minted dough, the FED can continue its so-called nonstandard interventions by buying long-term bonds which have been newly-issued by the Treasury. Or the FED can buy bonds from the marketplace.
In either case, as with other of its price-fixing activities — like the price of cash, which is the interest rate — the FED can FIX the price it buys those bonds at — at least it can set the floor price at some “higher” level that it is comfortable with.
At times, other participants might offer less for these U.S. government bonds, thus imputing the higher interest rate Paul alludes to. Or the Asians can start to sell their U.S. bonds.
But the FED, through the magic of that most modern invention that Bernanke so admires — the printing press — can just print more money. The FED can thus buy all the bonds at whatever higher price it wants. It can outbid every other buyer, thus keeping long-term interest rates where it wants — at some comfortably low level, whatever it imagines that to be.
This is called Monetizing the Debt. It is what countries like Argentina used to do. Now, unless the FED is willing and/or able to do this indefinitely, Paul will eventually be proven right. Long-term interest rates will go up. The longer we put it off with the FED’s artificial money injections, the higher and more damaging those rates will be. The economic headwinds we will then face will be nothing as compared to what we face today.
Of course, American citizens won’t be buying much in the way of imports at that point. And foreigners can come in and buy what they want. Their money will be worth its weight in gold; ours won’t be worth the paper it’s printed on.
Bernanke wrote in his famous Helicopter Speech:
“Lower rates over the maturity spectrum of public and private securities should strengthen aggregate demand in the usual ways and thus help to end deflation. Of course, if operating in relatively short-dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years. Yet another option would be for the Fed to use its existing authority to operate in the markets for agency debt (for example, mortgage-backed securities issued by Ginnie Mae, the Government National Mortgage Association).”
What Bernanke thinks he can do is to keep long rates low. He thinks he can stimulate aggregate demand at the same time. It SEEMS logical.
And that would be a noble goal. But he can’t do it IMHO.
He thinks he can avoid his other scary monster, Deflation.
Deflation is only a symptom of falling aggregate demand, like fever is of a disease. But you can have moderate inflation with falling aggregate demand also.
So avoidance of Deflation is like throwing the feverish patient into a bath of ice water. The fever comes down, for a while. But unless the patient is also cured of the underlying causes of the fever, the disease will progress.
[Note]: My own take on Deflation is much more moderate than is Bernanke’s. But in the money system we run and live in, price inflation is the operating presumption, because Central Banks are all in the business of inflating the supply of money, so as to cause “moderate” price inflation.
Their take on it, and their seemingly-logical last-ditch defense of debtors, whose debt loads would get more onerous under price deflation, is that deflation is to be avoided at all costs.
Clearly for savers, deflation is somewhat less frightening, other than for the fact that we have lived in a debt-based consumption society for the last 6 decades.
And also other than for the ’small’ fact that if debt-based consumption collapses (which it will no matter what the FED does) even many of the savers will lose their jobs.
Of course that paradigm is dying anyway, since we are on the other side of the mountain. But Bernanke will fight the death of that paradigm tooth and nail.
He is too wedded, as are many of us, to the Debt-Based Society.
Had we never gone down that road, we wouldn’t be struggling with our current mess. [End of my Deflation Comment]
Given extreme levels of inflation, we will buy anything we can get our hands on. That likely won’t be much in the way of anything we want. Just look at a photo of the empty shop shelves in Harare, Zimbabwe.
I know that Bernanke is not a fool. He will not let price inflation get to the levels that would lead to the sad state of affairs in Zimbabwe.
My point is that he has a working upper limit for price inflation beyond which he dare not go. That would kill the economy. He is trying to work his magic BEFORE the state of affairs would ever get that bad.
But that is the point. He can only do so much.
He cannot force debt-impaired consumers to spend money they don’t have. He cannot force them to borrow, no matter how enticing the carrot might look (that would be his low interest rates). He also cannot force them to borrow, no matter how painful the stick would be (that would be the moderate inflation that he can intends to induce by swelling the money supply).
Why am I so confident that the FED’s policies won’t work? Not only that, but why do I think they will be harmful? And if they do work this time, why do I still think the FED is wrong to follow such policies?
First we are keeping an immoral system going. So it is wrong to keep supporting it. We used to save, and then buy. In a price inflation-based economic system, only idiots save.
But it is not just wrong, it cannot work. The reason is that each visit to the Debt well becomes less and less productive as far as GDP goes. There is less and less bang for the buck. Pretty soon you cannot “grow” the economy no matter how much you pump up the overall Debt. I think we are at that point.
Mark Faber writing in 2006 addresses this point and the possibility of price inflation — he qualifies his prediction since he doesn’t KNOW what the future FED will do. But it looks like his assumption about the FED’s likely behavior was correct. Please see http://www.whiskeyandgunpowder.com/corrections-or-bear-markets-in-asset-prices/
Even if none of these worst-case scenarios come to pass, there will be harm.
The bigger the Debt Burden, the more crushing the eventual correction.
Just imagine if you could go back to 2001-2002 and convince the then-head of the FED Dr. Alan Greenspan, to allow a small ‘corrective’ recession to occur. Instead he fought that pending recession “tooth-and-nail” and we all got the debt-based boom from 2003 to 2006.
From the short-term pain that the economy would have then better shouldered, now how much more long-term pain could we have avoided?
And yet this is the same scenario that someone will be writing about 3 years from now, if that person could travel back in time to today.
They would say “what exactly are you trying to do Dr. Bernanke? Don’t you think a serious recession now, is better than a great depression 3 years from now?”
I don’t know if that is the point in economic life we are at — for it may not just be a recession we are facing at this time. But I hope it is only that.
It really amounts to the basic fact that a debt-based consumption paradigm will fail. It can only succeed if the debt can grow without a limit.
The other question I have is why does the FED have to tell a free society what their interest rate should be? Is that not a matter to be worked out between the aggregate of saver-lenders and the aggregate of borrowers? Because what is this, the Soviet Union?
Not really, It sill stave off some of the deflation concerns and make american exports more attractive. we’ll need tobe vigilant on the turn around and pull back money supply fairly quickly.
It would be great if we raised taxes instead of interest rates when the economey turns. It will be on of those “twofers” Obama likes; a growth moderator and a revenue generator for Uncle Sam. It worked great in the 90’s.
Here’s a plan: give the gold bulls a whipping. Maybe no Comex default. Then pull the plug on the dollar. Sorry about your job. Amazing we just happen to have a “global” solution.
Don’t worry, your crazy uncle has been talking for years and it never happens.
Ben Bernanke and the Fed are the traitors Thomas Jefferson warned of when he said, “I believe that banking institutions are more dangerous to our liberties than standing armies.”
Mmwaah! There, I have given the dollar one big final wet kiss, goodbye. It’s been nice knowing you Mr. Strong Greenback and it’s too bad that you have to leave us. However, I am afraid that your grim fate was set in stone back in 2002. Soon you are to be replaced with Mr. Hyperinflation worth-less-than-dirt Greenback.
Are you concerned that the dollar is starting to weaken again?
Well, there are lots of things to concern about. Dollar value doesn’t make the top 20… Number 1 concern is job…
the amount of fraud going on on wall street and the goverment,not only the dollar will became or already is playmoney,the criminals responcebly for all this are the same ones that have taken the UNITED STATES econo,y over to red china.we don’t longer have a goverment that represents the american people,we have lost thisd country,the criminals are stealing everything out of this country,its technology,industry and now the banking system.counterfit currency from asia is over 40%of the dollars that are in circulation around the world, we are finish
Of course I’m concerned! The Fed claims that they can reduce the rate because of reduced concern for inflation?! The dollar has lost over 10%!!! We import more than we export! Those guys in Washington might not be idiots, but they sure think the American taxpayers are. And when they give reasons like that to back up their actions, they absolutely look like idiots.
What a stupid comment made about a cheaper dollar reducing the trade deficit! Have you not seen that a weak dollar policy by the Bush administration did nothing but increased the deficit? We will not stop our reliance on imports and the dollar must be strong for the US to remain the financial stronghold of the world.
No, I’m not worried that the dollar is slumping compared to the Euro or other foreign currencies.
The discount rate absolutely had to be opened up to get more liquidity out to businesses and consumers; to bring a thaw to the credit freeze so the macro-economy can break the ice and hopefully start expanding again.
It really doesn’t matter who is at fault for our current circumstances at this point. What is important is that the Fed takes steps in the right direction to keep the economy afloat, and those actions have costs.
What does it matter if we have a strong currency if jobs are lost by the millions?
My hero. I am in awe, cutting and slashing like a mad drunken Samurai. I don’t know whether to watch the accident like a rubbernecker or run screaming for the hills.
5+% days — absurd
David in WY. Make that 11 people, I am with you. We are pulling out all stops to prevent a recession and at the same time prolonging the agony which will be the result of this spending binge. Wait till foreign investors start pulling out their financing of our budget deficits as our dollar becomes worthless. We will be in deep doo doo.
Start investing in commodities like oil and gold because they will start to skyrocket along with general inflation as the Fed comes to realize that the the only solution left is to monetize this huge debt we have run up.
How long can this country survive on people becoming “millionaires” in Wall Street scams ie, day trading, options trading, furures markets, bond trading, currency speculation, flipping real estate, the reality shows, the Idol, and making babies and going on welfare. All the while hoping that people working, in real jobs, overseas will support our life style. How long could any country.
I am very worried about the fall of the dollar and the bailouts to all. Negative real interest rates are pure stupidity. The lack of consequences of risk taking with the bailouts and the nonsensical policies of the Fed and Treasury are leading us down a slippery slope to economic ruin. Systematic redistribution of wealth from creditors and the responsible to debtors and the irresponsible is a problem for a society that wants to have an economic system that is logical and sustainable. The end (actually desire to be seen doing something) justifies the means economics really means the end of personal freedom, especially economic freedom. We are on a slippery slope as a country to a place that we don’t want to go. It especially worries me that no one else besides me and perhaps 10 other people in a country of 300+ million think that deficits, moral hazard, too big to fail, systematic redistribution of wealth, …. are a problem.
Nope…………..I diversified into gold stock some time ago. When the dollar goes down my gold goes up.
Never keep all your eggs in one basket.
Why are we even talking about exchange rates? We know they’re not going to be stable while the global economy’s in turmoil, and dropping the exchange value of the dollar isn’t going to kill us right away.
We ought to be talking about oil import tariffs and gasoline taxes to fund green infrastructure. The current level of oil prices presents an opportunity we would be buffoons to squander. If we taxed gasoline at $.80-$1.20 a gallon, we’d keep consumption from exploding again, and we’d be able to fund most of Obama’s green infrastructure projects without growing the deficit.
We look to the past too much. We should look at the past for lessons learned, the present for opportunities, and the future we want to make. The past is what we know, the present is what we have, the future is our mission, and the way from present to future is our strategy.
We’re Americans, let’s get practical.
Vastly concerned – Gas prices will increase, price of goods (including food) and services will increase, and since we are printing more money “non-stop”, I would think foreign countries that have purchased Treasuries would be “rushing for the door”.
O.K. stick a fork in the US economy it’s done, toast, fini. Feds just lowered rates to float between zero and .25 percent. Guess they did not have the guts to just come out and say it was at zero.
We have the accelerator all the way down on the floor and we are still going in reverse.
This can not end well at all.
Bye Bye Ms American Pie, drove my Chevy to the levy but the Chevy just broke.
Bernanke had better warm up those helicopters and start throwin gmoney from them.
Now I understand why the stock markets have fallen almost 50 percent this year. All of the fund managers were paying principle as interest the past few years. The SEC did not find anything wrong with Madoff as this is legal. So the whole stock market Ponzi scheme has finally come undone.
This means the dollar is worthless and should fall. By end of next year it will take 1,000 US dollars to equal one euro.
Yes, very worried. This country imports waaayyyy too much of what we need, starting with oil. A crashing dollar increases costs of all of our imports (our balance-of-trade deficits are incredible) and here comes inflation!
Are you concerned that the dollar is starting to weaken again?
Yes.
I’m living in Europe. The Dollar’s landing back in the toilet makes it that much less economical to access my dollar denominated assets. I’m now living on the Euros I’ve been earning here.
Frankly, I’m becoming very, very tired of the foolishness playing out in the US these days. Sometimes I think about jumping ship. It’s not that far yet, but it’s getting there.
Once the current crisis is over, there has to be a return to fiscal discipine. We saw in the 2001 recession how resilient the economy could be when we were running a surplus. Running constant huge deficits is killing the economy.
We have to take a long, hard look at our foreign commitments. Some of them have to be scaled back to save money. We need to engage internationally only where our interests lie, not in nation building. Things are probably going to go badly for several years overseas, but we have to make those hard choices to get the balance sheets back in order.
I truly believe the Iraq War was the ultimate beginning of this economic mess and the dollar’s fall. I didn’t shed a tear when Saddam fell to the end of the rope, but the whole war was a massive misallocation of resources and it was poorly managed. To pay for all of the war spending, the government has had to ramp up the printing presses. To keep the war from becoming more unpopular, the government has encouraged low interest rates to keep people at home happy and cover the drain the war was creating on the economy. The low interest rates created housing and finance bubbles.
There will be lingering, long term economic expenses from the war in veteran care. These expenses, combined with the retiring baby boomers, will be a huge drain on the economy over the next 20 years.
Remember, this war was initially sold with a $50 billion price tag and assurances that the “Iraqis would great us a liberators and reimburse us with oil revenue.” Instead, we are geting reimbursed in thrown shoes.
If we had taken the Iraq War money and invested in energy independence, I think we would be far better off. Freeing ourselve from dependence on the Arabs for energy would give us much more latitude in containing our expenses in the future and conducting our foreign policy. Plus, we would keep a significant amount of currency at home which would increase the value of the dollar.
If you want to hit someone hard, hit them in the pocket book. If we don’t buy Arab oil because of terrorists, you can bet that those terrorists would be found very quickly.
Any way you look at it, we are in a very, very big hole. The dollar is going to be highly devalued for a decade or so until we can climb out of this hole.
It’s worthy of concern later, because it’ll be inflationary if/when the economy recovers, but for now it will domestic production and exports over imports, and help the trade deficit.
As for our labor costs, we do NOT want to compete on a dollar-for-dollar basis with nations where people live on $1 a day. I’m somewhat of an economic nationalist, I don’t believe it acceptable to depend on foreign suppliers for essentials such as food, clothing or necessary durable goods.
Keep falling along with everything else that needs to drop….commodities, home values, food, labor, manufacturing, car values, …..come down from your bubble inflated values back down to reality where our salaries always remained.
Unhappy about it dropping?
No, I am still cheering it down.
DOWN! DOWN! DOWN!
We will never shift manufacturing back into the US as long as our labor costs 20X that of other nations.
Like it or not, with our current silly money system, labor is the only standard to test the actual value of money against. Who cares about the Euro? What about the Yaun or the Bot?
When comparable labor costs the same in all nations, then you will know that moneys are fairly valued.
Should be interesting when the treasury bubble bursts; Then maybe a iceland or greece-type group hug.
Then again who knows, likely the rules of the game will be changed to make sure wealth distribution flows towards the productive and needy — lobbyists.
A weak dollar is good in a recession it makes American goods & services more attractive to foreign buyers, which is exactly what we want. The only thing it hurts is the ability to import. But since world demand for oil will be low for the next year or so, oil prices should remain steady.
This is actually good for the USA, especially for those of us who are still producers of manufactured durable goods. Probably not too good if you want to be a foreign car and a bunch of Airbus. It should reduce our trade deficit and keep more dollars over here.
US, China, Japan, Britain and Europe all trying to devalue their currency. Not sure where this will end, but it probably won’t end well. Might be good for gold.
No. The dollar has been overvalued for many years, resulting in a large trade deficit. If it takes a cheap dollar to balance our trade flows, let’s do it.
P.S. Just say ‘No’ to bailout for Madoff investors. They are ‘accredited investors’, and they know the risks they take. They are also very rich and do not need bailouts. In fact, they should be bailing us out.
OUr dollar is worthless thanks to the Fed just printing money because it has paper lying around. The bailout is a failure and now anyone who has lost money can get their money back from the government; the latest being the guy who stole over 50 billion in his ponzi scheme. His victims can get money from a government fund. Why?
There are no consequences to anyone’s actions anymore. The dollar wil be worthless for a long time to come.
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The dollar will drop some more and I’m invested accordingly.
All you debt chicken-littles need a reality check. US debt is ~65% of gdp, same as Canada and Germany, less than Italy or Japan.
I’m not thrilled to hear lil-Bush and chuckles-Obama encourage adding another ~13% to the debt. That’s inflationary, but not the end of the dollar.
Anyone recall what happened to the pound inthe past