On The Fed's "Stunning" Finding Of Gold As An Inflation Predictor And The Subsequent Cover Up [Laughter]

Tyler Durden's picture

The WSJ has an adorable article titled "The Fed's Laugh Track" in which it has done a word search for "laughter" and come up with some amusing results. Of course it would be far funnier if the WSJ had an article disclosing all the conversation transcripts between Jon Hilsenrath and the various Fed's presidents and executives. We won't hold our breath on that on. We would, however, like to present one of tha laugh tracks that the WSJ conveniently decided to drop. Not surprisingly, the topic of that particular transcript disclosure is, well, gold.

To wit, from the September 22, 2005 meeting transcript:

CHAIRMAN GREENSPAN. Several years ago I recall that we ran a correlation with the gold price against levels of inflation. We actually came out with some forecasting capability. Has that been rerun in recent years?

MS. [Karen] JOHNSON [(PhD. MIT, 1973)]. Not by us.

MR. STOCKTON: Not by me. I think we did that at your request. [Laughter] And we were not so convinced by the evidence that we’ve maintained that particular series for forecasting.

MR. REINHART. I think you actually alternated your requests—asking each one of us in turn—and we haven’t updated that in a long time.

CHAIRMAN GREENSPAN. The problem is that it kept coming out, for reasons I can’t understand, with some information capability. The reason I raise it, as you know, is that we have a big, fat spike here, and I don’t know what to make of it.

MS. JOHNSON. Yes, a 17-year high. I volunteer to run the gold price. [Laughter]

CHAIRMAN GREENSPAN. Provided that you don’t tell anybody you’re doing it!


This is indeed funny, because if the current Fed Chairman had only deferred to his predecessor, currently advising John Paulson to buy up every ounce of gold available, and to this transcript, he would figure out that the 30% surge in the price of gold in 2010 predicted precisely why there was a surging food price-based revolution in Tunisia yesterday and why the CPI confirmed the biggest jump in inflation in 18 months, and why food prices and corporate margins are about to prolapse. He also would not be at all confused when he told Congress back in June that he doesn't "fully understand movements in the gold price."

That said, we are confident the Federal Reserve will shortly come out with a statement that the first POMO/money-printing, pardon, monetary base-printing, driven revolution in Africa would have been much worse in the absence of QE2, and that Tunisia was really revolting against the possibility of deflation many years down the line.

As for Ms. Karen Johnson's kind suggestion to "run the gold price" we can assure her that she will not have to. After all CFTC just made sure that JPM will be able to continue to do that indefinitely [Laughter].

h/t Paul

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
traderjoe's picture

Thanks for posting that. I am in the process of removing my consent from the Ponzi, and will read further that site as time allows...

Thomas's picture

Read the original article: I am in the process of wiping the vomit off of my lap.


simonsito's picture

i am feeling just like that...

trav7777's picture

bunch of tinfoil garbage...seriously.

There are elements of truth, but power flows from guns.

Britain was on the verge of being destroyed by Germany-how powerful were these titles and contracts?

The government has no title to your ass that can be enforced anywhere.

ronin12's picture

Agree -

Also at the end of the day, it's not the "law" that matters but how the law is enforced that matters.

midtowng's picture

Yes, it is very hard to understand.

The Fed prints mountains of money and makes real interest rates negative, and for some unknown reason, gold goes up.

It's so hard to figure out. After all, its not like you can eat it.

benb's picture

100% correct. You cannot eat gold. Also, silver is an irritant to the digestive tract.

TheGreatPonzi's picture

Actually, you can eat gold. A French princess, Diane de Poitiers, drank gold nuggets all her life, believing it was the secret to longevity.

It is not a toxin for the body, however it has no effect and is not digested. It just tends to accumulate in certain parts of the body.

benb's picture

I stand corrected. Personally I cannot afford to eat gold like the princess. I haven’t the stomach for it…but on topic TD has brought up the point that the ‘experts’ and ‘officials’ act in the capacity of carnies to herd and throw the public off track.

LowProfile's picture

Where is she buried, again?

Sudden Debt's picture

You check out her background and I'll bring out my metal detector and shovels :)

And as gold doesn't digest, I won't even mind to check out her toilet :)

Jreb's picture

More importantly - where did she go to the can???

asdasmos's picture

So, can you eat money, CDs, stocks, bonds..... etc?


Are they not all some sort of a medium of exchange?


This argument lacks any substantive point.


Also, what does the US air force give pilots in case of a crash and they need to barter?



Jasper M's picture

Panty hose and chocolate bars, if I remember correctly.

magis00's picture



concept of grouping

related ideas



has escaped the author.

Savonarola's picture

Why would you want to eat money, let alone a precious metal ?

unwashedmass's picture


it is time to buy gold, buy silver, get out of the city, and get beneath a desk, put your head between your knees ...

and start praying.

this is not going to last much longer, and when it goes, its not going to be good.

not good at all. it may be peachy keen in Bennie, Lloyd and Jamie's world, but....for the rest of the population who need food and gas on a daily basis.....

at a reasonable price.....

its going to be horrific. its already really rough for people where i live -- we're starting to see the dead seniors turn up in cold houses and the house fires from people desperately trying to heat up their kitchens with gas stoves......



IQ 145's picture

 "some unknown reason,"--don't you hate it when that happens. And that darn inflation went up too. Well, it's probably just a co-incidence.

EB's picture

How about this graph from the Feb '05 presentation materials:

Looks like a nationwide housing down turn was not only contemplatable, but contemplated.

put_peter's picture

This is hilarious... really.

Silversinner's picture

They sure know about gold,but pretend they

don't.Would be funny if it was not for all

the victims caused by their policy.

They got blood on their hands and

we all know it.You will run bankers,

but you can not hide.

gwar5's picture

The CBs covet the gold, they always have.

They're goal is to make us ignore it.

We need to get our gold away from the FRBNY. Now.

ronin12's picture

Buy it. Ounce by ounce.

The Rock's picture

Golden [Laughing] Cow Bitchez!

onlooker's picture

Where can I find charts showing the ration of gold/silver to the dollar, oil, Dow and other units of measure?

Gully Foyle's picture


And since oil and food are traded on international commodity markets, and they have gotten hold of all the money America is worth, and then some, they can play these markets as much as they want, whether it’s wheat or natural gas or gold. People like to claim that gold will rise as the US dollar becomes worth less, but they forget that it’s zombie money that has been buying gold, and that has thus lifted gold prices. Once daylight comes and the zombies are gone, there's only one way left to go for gold prices too.

Davilis's picture

They can stay zombied longer than you can stay solvent.  :-)

trav7777's picture

Ilargi and Stoneleigh are WRONG.  TAE has been pounding this same crap for years now.  WRONG.

I know this may be hard for people to accept, but they are using incorrect monetarist definitions.

Monetarism is FLAWED and a bogus doctrine.  When you approach everything through the bullshit of "velocity" and "quantity" in terms of THEORIES of money and these THEORIES themselves are fucked up, then it is no surprise that you cannot predict outcomes properly.

I have explained repeatedly why these deflationists are wrong and precisely how they are wrong.  Blaming fucking "speculators" for all price rises sets EVERYTHING as a MONETARY phenomenon which is ABSOLUTELY WRONG.

I don't care how "authoritatively" TAE's authors phrase it; their predictions have failed and will continue to fail.  They do not realize that they are subsuming their predictions within the framework of MONETARISM, which is a FAILED and erroneous doctrine.  And it isn't as if MONETARISM is the ONLY theory of money or value, it's one of FOUR or more schools of economics!  I am APPALLED by authors who ASSUME that Monetarism is somehow like freaking Relativity - even THAT was "proven" emperically; Monetarism has NOT BEEN.  Yet, idiot deflationists latch onto it like starving pigs on a teet.

The idiocy of maintaining that PRICES will fall and FRNs will be worth more when the ENTIRE FRN SYSTEM is structurally bankrupt - I absolutely MARVEL that otherwise seemingly intelligent people can not step back from Friedman's dead nuts and see the paradox in their basic claims.

Look.  The creditmoney system works in ONE DIRECTION.  If deflation occurs, the MATH makes implosion to 0 inevitable and that means that the FRN becomes useless, bankrupt, gone...the entire financial system built around FRNs collapses.  They will be worthless; that is hyperinflation as we know it.

TAE thinks the world revolves around fucking US HOME PRICES?  That is HORSESHIT.  The housing bubble was MERELY the tip of a vastly gigantic credit bubble iceberg.  Swaps and related derivatives dwarf outstanding mortgage credit by several orders of magnitude.

cityguyusa's picture

Gold stays neutral only the $ devalues.  The dollar is only worth what people believe it's worth or what you are buy with it today, tomorrow it may be worthless.

LeBalance's picture

Such derisive laughter in a publicly recorded (and now publicly available) document does not speak to well of the survival instincts of certain individuals.

DavosSherman's picture

This is scarey shit. The Morg now runs the White House with Bill Daley.

benb's picture

Why be Frightened? We’re just in the Twilight Zone. (Daley has nothing to do with the Chicago Mob, The Syndicate.)


trav7777's picture

it's a real hoot, ain't it?  You could not GET more establishment insider than Daley and here he is the chief of staff.

JPM must've felt left out of the revolving door in the NeObama administration between GS and the Capital

duncecap rack's picture

Fall 2010 meeting:

Chairman Bernanke: Lets talk about exit strategies [laughter]

MarketTruth's picture

"In the absence of a gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good and thereafter decline to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as claims on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to be able to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

The above was said by Alan Greenspan, 'Gold and Economic Freedom' in 1966.

asdasmos's picture

......and then he turned to the establishment.


Volcker was hated for what he did, but I guess it is easier to keep feeding the monster.



Fish Gone Bad's picture

Our central bankers may not be the smartest people in the room, but they are also not complete idiots.  How people perceive money (and its equivalents) has a great deal with how much money they have and how they acquired it. 

Mark Beck's picture

From Fisher;

"to provide the bridge financing until the new Congress gets to work restructuring the tax and regulatory incentives",

this is one of the first public acknowledgments that the reason for QE is to finance the government. Also, if you control the churn you can control the bid, which is a way to manipulate rates (price). However, by the time QE2 is complete, there is no way for the FED to backout. Especially if its is trying to agressively sell Treasuries into the market.

Fisher seems to imply that the FED has limits to monetization of debt which may threaten the FED's existance through congressional action.

But, exactly how will this play out?

How can congress abolish the FED when the FED is the only mechanism to inflate away the debt congress creates? For any soft political landing the FED must exist to debase the currency, and fill the role of congressional whipping boy as the USD is put to rest. Without the FED congress will shoulder all of the blame. This is inconsistant with their finger pointing ways.

It is interesting to note that the statement was made after extension of the Bush tax cuts and the expansion of regulatory control for new oversight (just more government overhead).

What restructuring of tax? To improve the business climate?

A further reduction of tax would help business, but how would this help fiscally?

The remainder of the quote;

"American businesses need to confidently expand their payrolls and capital expenditures here at home."

Fisher seems to imply that to foster growth you need an effective foundation for investment, sound money, and the rule of corporate law. That's correct, unfortunately the FED exists to undermine all of these.

Bottom line; Fisher is everything we have come to expect from the FED. However, Fisher need not defend the FED against congress. The FED's role is obvious going forward.

The FED is the only USD debasement option open to congress to fund government until crisis.

Mark Beck

johnnyBoy's picture

Read "The Creature From Jekyll Island: A Second Look at the Federal Reserve"  My neck hurts from reading it.  With each page, I was shaking my head in disbelief that we allowed this institution into existence.  More incredibly, why do we allow it to continue to this day?

Dantzler's picture

Plus a mole of your favorite element, jB

I'm more than 1/2 way through now and should have read this long ago.

Every American should read this book!


The Talmud Kid's picture

"The Secrets of The Federal Reserve" by Eustace Mullins.

monopoly's picture

The fed is so incompetent and useless in this society. They are destroying the moral fabric of this country. Just today, in the NYT business section, "Evergreen solar" who opened a factory in Mass. with 41 million  of state money in 2008 is now closing that factory, moving the business to China and laying off 800 workers.

And our plumber and heating company just advised effective March 1st, all products including copper, steel, plastic, fittings, glue, all going up 15 to 20%. But they cannot raise there rates as housing is now officially in a depression.

And the market moves higher.