Hallelujah, the world is waking up to the Fed’s con game and the gold market responded.
Posted by Adam King on April 25, 2011
April 25, 2011 – Hallelujah, the world is waking up to the Fed’s con game and the gold market responded. Sort of. Trading was so light that it barely snuck past the psychological barrier of $1,500 an ounce. For some reason a lot of people still see $1,500 worth of gold as a lot more expensive than $1,500 worth of anything else, and that has put the damper on the physical gold market.
However, in the wake of the S&P downgrade the world has begun to take a closer look at the true state of this union and it doesn’t like what it sees. As the ICE Dollar Index fell to its lowest level since the beginning of the financial crisis, the euro and the currencies of New Zealand and Canada reached multi-year highs against the dollar and new records were set by the Australian dollar and Swiss franc.
“The widespread perception is that the Fed’s stimulus strategy is to blame … with further missteps sure to send the dollar spiraling,” global foreign-exchange strategist Andrew Busch told the Wall Street Journal’s Andrew J. Johnson. And despite the havoc wreaked by dumping hundreds of billions of liquidity into the system, it is clear “that the Fed’s stimulus strategy has failed to fix the most problematic aspect of the U.S. economy – job creation,” Busch said.
That is bound to have global investors questioning everything Bernanke says. Even a cursory examination of the facts will lay waste to his claim that the federal debt is just 70% of GDP, which by most standards would not be all that unreasonable.
“But it’s a con. They’re not counting the debts owed to the Social Security administration,” said Brett Arends in MarketWatch. Real gross federal debt is more like 100% of GDP. And that doesn’t include Medicare. “These unfunded healthcare mandates may be off the map.” And an even more realistic figure for the true “national debt” would be the Fed’s own non-financial sector total, which is about twice the GDP.
Still, many cling to the belief that just because we’re the USA we can keep right on living beyond our means. But the “truth is, we can’t get away with it … we’re too big to bail,” Arends says.
Why it took so long for the world to get wise is anybody’s guess, but it won’t be much longer before big money turns to gold for safe haven. When it does, record prices in the gold market will cease to be barriers – they will just be milestones.
Stewart Lawson
Senior Staff Writer – Certified Gold Exchange
Categories:
US Gold Market
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