Gold Price Manipulator Bernanke Admits He Doesn’t Understand GoldJuly 18th, 2013
Forbes is reporting on Bernanke’s comments before Congress today in which he admitted that he doesn’t understand gold prices. This comes right after an announcement that the Federal Reserve may delay its plan to taper off of its quantitative easing program, a move that leaves investors confused as to when interest rates will surge upward from the record lows that the Fed’s easing policies are artificially creating right now.
Based on recent events, there seems to be three distinct possibilities when it comes to Bernanke’s thinking on gold. One theory is that he is perpetually threatening to employ the tapering program as a way to suppress gold prices by fooling investors into thinking interest rates are about to rise when they really aren’t. Another possibility is that central banks are using secret swap arrangements and overstated reserves to mislead investors as to the market’s true gold supply. However, it’s also possible that Ben Bernanke is telling the truth, and he really doesn’t understand gold prices at all, and, if that’s true, he certainly needs to step away from the economy’s steering wheel and take his foot off the gas.
Ignorance or Deception?
Quantitative easing has been in place for so long now that most investors are accustomed to it. The US economy is now physically addicted to the stimulus, and to take it away would cause serious withdrawals, namely a massive interest rate spike. As a result, investors are now behaving erratically by doing things like pulling their money from the stock market when a positive jobs report comes in, mainly due to fears that Bernanke will cut off QE in response.
On the other hand, the threat that the Fed might taper off of QE pushes down gold prices. If there were no talk of tapering, investors would still be worried that inflation could run away at any time and would thus continue protecting their wealth by holding on to gold. It seems that Bernanke is flip-flopping back and forth between these statements in an effort to keep investors from committing to either disaster scenario, though one of them will have to come sooner or later, and, if tapering doesn’t begin soon, serious inflation could be on the way.
It’s possible and in fact likely that Ben Bernanke truly doesn’t understand gold prices. If he did, he would realize that his own policies have painted him into a corner where the Fed can either cause severe hyperinflation and maintain its profitability or cause severe deflation while going bankrupt. He seems to be trying to maintain the status quo by continuing to give statements that confuse investors into rotating their investment strategies between both possible outcomes.
Maybe Ben Bernanke doesn’t understand gold prices in general, but does understand how his comments can manipulate their prices on the short term. If he continues doing this indefinitely, his comments will eventually lose credibility. Then were left with a guy behind the wheel of the economy, pressing the pedal to the metal, who doesn’t even understand how gold prices work.
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