Gold

By: Fred Sheehan | Thu, Apr 19, 2012
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Gold and silver will both rise far above their current levels. "When" is unknowable. "Why" is due to the unremitting and insolent amorality of central bankers and their practices. If not Simple Ben at the Fed, his compatriots across the globe are a daily source of confusion, contradiction, and stupidity.

The stupidity may be real or it may have evolved from an unwillingness to think, as George Orwell wrote of Stanley Baldwin's and Neville Chamberlain's abdication of responsibility in the 1930s: "What is to be expected of them is not treachery or physical cowardice, but stupidity, unconscious sabotage, an infallible instinct for doing the wrong thing.... Only when their money and power are gone will the younger among them begin to grasp what century they are living in."

It is important - for those who care about the ascent of gold - to understand it does not matter why they are stupid. It matters that their stupor will continue until the current monetary and credit system is paralyzed. We can be sure of that. Orwell explained: "Clearly there was only one escape for them - into stupidity. They could keep society in its existing shape only by being unable to grasp that any improvement was necessary."

The central bankers have no other policy than to support asset prices. They have elevated and taken control of markets beyond the point of withdrawal. There is no way back.

As discussed in "Peak Imbalances are Falling," foreign central banks have bought over $5.5 trillion of U.S. Treasury securities: the reason 10-year U.S. Treasury bonds yield 2.0%. Interest rate suppression is also fundamental to Eurocrat domination. The two attempts at salvaging the European banking system (over one trillion euros lent by the ECB to European banks in December 2011 and February 2012) have failed. The stock price of Banco Santander, the Spanish bank advertised as not exposed to Spanish real estate, has fallen back to the level of mid-December 2011. The country's banking system is kaput. Again, there is no way back.

Bianco Research in Chicago calculates the balance sheets of the world's six largest central banks are now twice the size of 2006. With $13.2 trillion of assets, they will double their size again, if they can. For as long as they can, there will be times when confidence in Bernanke and Draghi knock gold and silver for a loop. At some point ("When"), the emperor will where no clothes. Central banking currencies will be rejected. Gold, and gold stocks (hang in there, any day now), will be the currency of choice.

In Frozen Desire (1997), James Buchan wrote: "I have watched the most able men and women in my generation, who might have created unexampled monuments in moral philosophy, mathematics, or engineering, waste their time in a prattle of non-accelerating inflation rates of unemployment.... [E]conomics...has retreated into algebra. A profession that begins with priests [alchemists]... ends with hermits. Political economy is now, I suspect, in the same condition in which Scholastic learning found itself on the eve of the Discoveries. It is about to explode."

 


Frederick Sheehan writes a blog at www.aucontrarian.com

 


 

Fred Sheehan

Author: Fred Sheehan

Frederick J. Sheehan Jr.
aucontrarian.com

Frederick J. Sheehan

Frederick J. Sheehan Jr. is an investor, investment advisor, writer, and public speaker. He is currently working on a book about Ben Bernanke.

He is the author of Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession (McGraw-Hill, 2009) and co-author, with William A. Fleckenstein, of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve (McGraw-Hill, 2008). He writes regularly for Marc Faber's "The Gloom, Boom & Doom Report."

Sheehan serves as an advisor to investment firms and endowments. He is the former Director of Asset Allocation Services at John Hancock Financial Services where he set investment policy and asset allocation for institutional pension plans. For more than a decade, Sheehan wrote the monthly "Market Outlook" and quarterly "Market Review" for John Hancock clients.

Sheehan earned an MBA from Columbia Business School and a BS from the U.S. Naval Academy. He is a Chartered Financial Analyst.

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