Precious Metalhead #5: New Light on the Fed

November 9th, 2010

This last month has been a whirlwind of Silver Circle news and activity.  We have silver price manipulation lawsuits, a turnaround election, a surge of inflation, and huge advances in metal prices.  And, we’ve attended 5 trade shows – one comics, two political, and two metal shows, oh, and meanwhile we’re animating like crazy to get the first “blocking shots” done from our performances.  But we’re not tired yet.

By now, the news of the Fed’s latest plans to inject $600B of newly printed cash into the markets is not new to our readers.  The Fed had been signaling about it for weeks before, so it is surprising that the equity and commodity markets hadn’t already priced in those intentions.  Silver is up 30% – from $22 to almost $29.   Better put, the value of the dollar is already down 23% against silver.  Because of the multiplying silver lawsuits, you may expect to see silver begin to lose the dampening effect of price manipulation.

The really encouraging and interesting thing is that the public, the press, and the world is critical to this.  China’s central bank today says it is “absurd that the dollar remains a reserve currency”.  The mainstream press reports on strife against the Fed at the G-20, and the search for new reserve currencies, and even casting accusations about whether Bernanke is lying about our economy, and his recent spat of profanity against critics.

This stimulus, which incidentally no one voted for outside of the Fed, will have a short-term effect on the equity markets; that’s almost mechanical.  The equity markets are not the same as the economy, which did not significantly improve with QE1.  The real issues are more systemic:

  1. There is a strong case that this will lead to no unemployment change and a new, stronger, bigger equity bubble.
  2. The risk of international competitive devaluation, part of the preamble to World War II.
  3. The risk of losing “reserve currency status”.   This is actually key to Silver Circle’s plot.
  4. The moral hazard of monetizing debt, which slickly enables government spending without taxation.  It enables spending, and buying votes with projects, to be paid for by people who are too young to vote yet.  It warps policy choices.
  5. Monetary policy itself does nothing about underlying issues.  It does nothing for productive capacity or systemic risk.

There’s just too much to report on, too many links to link, too much to rant about.  There is so much (digital) ink spilled about this issue this week.  This won’t be the last wave of Quantitative Easing, so I’ll return to my main point, about public opinion.

Look at the press, look at world leaders – for once in the last almost-hundred years of the Federal Reserve its operations are not secret or ignored.  People are paying attention.  Of course, since we’re making a movie about the Fed, we love this.  We can thank the internet and the tireless work of Fed-watchers for this.

I’m only glad that the Fed STILL isn’t as bad as we make them in the movie – yet.

This month’s metal song: Blood Death & Taxes by Agnostic Front!  In typical hardcore form, the song is only 1 minute 23 seconds long, but they nail it…   Next month I will start working in some Death Metal – any suggestions!?

Also I want to look at the Tea Party dynamics some more – it’s more complicated than just it seems – any thoughts there?

About the Author: Pasha