Wednesday, March 2, 2011

Did the Ben Bernank just tell us, indirectly, that Gold and Silver are set for infinity? Guest Post

Submitted By Jack C.

By Michael R. Crittenden
Dow Jones Newswires
via The Wall Street Journal
Tuesday, March 1, 2011

WASHINGTON -- Federal Reserve Chairman Ben Bernanke defended the central bank's effect on the dollar Tuesday, pushing back at the idea that policy makers should consider alternative proposals like the gold standard.
Bernanke, appearing before the Senate Banking Committee, was pressed by Sen. Jim DeMint, R-S.C., on the viability of a return to a gold-backed economy or the idea of the Treasury Department issuing bonds payable in gold.
Bernanke, who has studied the issue, said a return to the gold standard wouldn't work.
"It did deliver price stability over very long periods of time, but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold. So I don't think it's a panacea," Bernanke told DeMint.

Additionally, Bernanke said there were a number of practical issues that would prevent the return of gold as the world standard. Namely, there's not enough gold in the world to effectively support the U.S. money supply.
"I don't think that a full-fledged gold standard would be practical at this point," Bernanke said, declining to opine on the gold-backed bond issue because he was not familiar with the idea.
Sen. Mark Kirk, R-Ill., also engaged Bernanke on the currency issue, questioning whether the Fed's $600 billion bond-purchase program is in effect monetizing the U.S. debt. Bernanke noted that the U.S couldn't have currency outstanding if there were no Treasury securities to back it up, and that even the most steady economic times the Fed engages in the buying and selling of U.S.-backed securities.
Kirk, however, noted that the United States did have currency not backed by federal debt at one time in its history: under the administration of President Andrew Jackson, the nation's seventh president.
Bernanke, appearing amused, was quick to respond.
"So this was before the Civil War. This was during the period where individual banks issued currency. We didn't have a national currency," Bernanke said.
Not to be outdone, Kirk asked whether it was possible for a country to have a currency without a trillion-dollar debt. Bernanke said that was the case"

As I read this, I couldn't help but thinking to myself that his argument is very one sided. Either gold and other PM's are grossly overpriced or substantially undervalued. It would appear from that the Ben Bernank has his philosophy wrong, as his true fiat banker mentality shows. He is thinking of Gold relative to current price with a relationship to money supply. As he sees it, there is not enough gold "at it's current price" to back the massive money supply of the US alone. In real terms he has just supplied the basis for the argument that Gold, Silver and other PM’s are grossly underpriced within this relationship. We can have a gold standard and you do not need more metal to achieve it, the metal just needs to be priced in real terms as a relationship to the money supply. This underlying fundamental would imply that the PM's need to be 10's of times higher than their current value. We may very well see this as more citizen's around the world flee their current currencies for the safety of precious metals.

Jack C.

And thank Jack, by thanking me ;)


  1. it's going a lot higher than 10x is my bet...

  2. Weak HUI and XAU signaling raid coming.

  3. I love that argument: "...there's not enough gold in the world to effectively support the U.S. money supply" Ya, that's because you can't create it out of thin air anytime you need to bail-out your banker buddies.

  4. Kirk asked whether it was possible for a country to have a currency without a trillion-dollar debt. Bernanke said that was the case"

    Yep. That's how Lincoln managed to finance the civil war and got rid of predatory bankers:


    "In what may be the best piece of advice ever given to a sitting President, Colonel Dick Taylor of Illinois reported back that the Union had the power under the Constitution to solve its financing problem by printing its money as a sovereign government. Taylor said:

    “Just get Congress to pass a bill authorizing the printing of full legal tender treasury notes . . . and pay your soldiers with them and go ahead and win your war with them also. If you make them full legal tender . . . they will have the full sanction of the government and be just as good as any money; as Congress is given that express right by the Constitution.”

    The Greenbacks actually were just as good as the bankers’ banknotes. Both were created on a printing press, but the banknotes had the veneer of legitimacy because they were “backed” by gold. The catch was that this backing was based on “fractional reserves,” meaning the bankers held only a small fraction of the gold necessary to support all the loans represented by their banknotes. The “fractional reserve” ruse is still used today to create the impression that bankers are lending something other than mere debt created with accounting entries on their books."

  5. Hey, physical silver is up around 24 cents this morning, and Sprott (PSLV), which holds 0.38 ounces per share, is up about 44 cents.

    Methinks a lot of people are bailing out of SLV and putting their bucks into PSLV. I wonder if they're worried about SLV's custodian?

  6. This really all comes back to the question "What is money?"

  7. I read the lastest post from WB.

    With that said, what is the point of anything she says?

    Assuming she is not full of shit (BIG IF), what is the point if she says one thing and then they change their position to match the facts and tells us AFTER they do it?

    What's the point of her posts then? Screw her...

  8. Thankful reader here..I just checked out kitco prices for maples: 38.11. Does anyone see a pull back anytime soon? I haven't even recieved the maples I ordered at 34 and now its and thanks..

  9. Oddzon; I guess they're giving us nothing more than a little more artificial insight into what we already know... The paper game is a fuckin' joke, the COMEX has very little physical, the game will continue until some time in the future?... OK.


    Lady Winter

  10. DAVID MORGAN Says a Correction in Silver Soon, pushing the G-S ratio up to 50-60

    Even though David Morgan is bullish for silver hitting $40 in 2011, he sees a correction coming soon. According to Morgan:

    Firstly, he says, " sentiment is too high and secondly gold hasn't really confirmed this move yet - it's very close to breaking out, it has a triple top around the US$1,424 level... and it hasn't broken through there significantly yet."

    Morgan says that if gold does break out significantly, then silver is likely to continue its run but, he says current indications are that gold is looking to correct.

    "With all of this geopolitical tension it [gold] should be soaring to new highs and it's not doing so. I've seen it time and again that people say gold is the best thing you can buy right now and I see it not reacting as favourably as it should be to what's going on, on the ground on the political front. When that takes place the smart money usually is backing off the gold trade."

    First off.....I don't agree with DAVID MORGAN. I have really never cared for Morgan as an silver analyst. To me, he is more like a SILVER BUREAUCRAT.

    Second...He has no clue about silver manipulation.

    Third....He and Jeff Christian were on Financial Sense Newshour this weekend. For some reason, Jim Puplava keeps bringing these two on to discuss the silver market. Puplava brought these two on a few weeks ago to dismiss the so called SILVER SHORTAGES.

    Fourth....Looks like middle east tension has put GOLD at new highs....silver leading the way.

    SGS...what on earth do you think of DAVID MORGAN.

  11. Sorry: David Morgan needs to take another ride in the limo with his pal Mike Maloney and this time they need some girls in the video. The dollar index is below 77 now which is a good benchmark for more high end on gold and silver. And there's a little dip there intraday.

    David Morgan has a reason for saying this and unfortunately he gets on The Street with that good looking blond Alix Steel. People might run after hearing that.

    It would be very bad for gold and silver if we pull back here. Oh well!

  12. You don't want to know what I really think of David Morgan and Mike Maloney. I just hope I'm wrong.

    I would rather listen to:

    Marc Faber
    Peter Schiff
    Trader Dan Norcini
    Eric Sprott

    The rest of them I'm not too confident with.

  13. He must have got on The Street and CNBC with his B.S. here just now. Guys like that can move a bunch of people and even the insiders to do some strange things.

    Now I'm going to be as pissed off as I can possibly be!

    This could start trouble here.

  14. Those of you who want to buy a dip you can try it here. At least get a little bit. Those of us who are bullion buyers are going to wait and see if it tests 33.00 again. What a drag!

    Screw it: I'm SHUTTING THE COMPUTER DOWN for the rest of the week!--maybe.

  15. Well that was weird. It wasn't the dollar that did it. It might actually be David Morgan, CNBC and The Street bunch.
    I don't watch T.V. so I don't know.

    This really isn't a dip worth buying either.
    Maybe some PSLV and PHYS.

  16. RE the David Morgan quotes, I think it is important to read the whole interview, I didn't get the impression is was a bearish as some posters, he would appear to be conservative with his estimates.
    Here's the link:
    Read it all & draw your own conclusions