- Former U.S. Congressman blasts Fed’s role in markets
- Gives scathing analysis of modern economics and markets
- Highlights complete disregard of economic fundamentals in investment decisions today
- As will be the case with Greece, U.S. will eventually be forced to liquidate debt
- Attempts to forecast day of reckoning are futile as it is a function of psychology
- “They can’t print money forever”
- Gold and silver will weather and thrive in currency devaluation
Ron Paul, former congressman for Texas, laid plain the absurdity of central policy towards the markets in a recent interview with Amanda Diaz on CNBC. He believes a day of reckoning is in the cards because the central banks “can’t print money forever.”
Dr. Paul blasted the role of the Federal Reserve in markets where superficial pronouncements herd speculators to and fro: "I am utterly amazed at how these Federal Reserve Chairman reports can play havoc with the market: one word - what they say and what they don't say and who's going to interpret it,” he said.
He believes this manipulation of markets by the Fed is having very negative consequences for the economy. Speculators are chasing Fed-induced momentum rather than making investment decisions based on analysis of what is happening in the real world. Savings, once the bedrock of American capitalism, have been replaced by easy credit leading to “a lot of malinvestment and a pyramiding of gigantic debt”, adding, “People don't depend on savings for their capital - they depend on the Fed!”
He states that at some point the financial elites are going to have to admit that Greece’s debt is unpayable and will have to be liquidated. He sees the same thing eventually unfolding in the U.S. also, saying, “there will be an unwinding of this pyramiding of debt and all this malinvestment that has occurred for a good many years.”
The interviewer - abandoning any pretence that the markets are in anyway independent - states, “This is a Fed that has held this market up for quite some time now” and then asks Dr. Paul to indicate when he thinks the crisis will unfold.
He states that it could happen any time - maybe tomorrow, maybe two years from now. “It all depends on a psychological acceptance of this system. So, a lot of people who are still making a lot of money know that it is not going to last but they figure ‘well, everybody else thinks it's going to last…’ and they just keep owning bonds and buying stocks.”
He therefore believes that it is impossible to gauge when the day of reckoning will come.
“So no, I don’t think there is anyway to know what the time is but after thirty five years of a gigantic bull market in bonds: believe me, they cannot reverse history and you cannot print money forever and deceive the markets forever. Eventually, the markets will rule and that’s only a question of when that will happen and of course I’m running a little bit scared because I think there will be a day of reckoning."
In the event of currency devaluations, physical gold and silver - which cannot be printed and devalued by central banks with reckless abandon - will not only survive but thrive.
Must-read guide: 7 Key Gold Must Haves
Today’s AM LBMA Gold Price was USD 1,174.60, EUR 1,052.51 and GBP 748.80 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,175.75, EUR 1,048.93 and GBP 744.71 per ounce.
Gold fell $3.20 or 0.27 percent yesterday to $1,174.40 an ounce. Silver climbed $0.07 or 0.44% percent to $15.90 an ounce.
Gold in Singapore for immediate delivery was up 0.2 percent to $1,176.80 an ounce.
Gold's move lower is counter intuitive as the poor GDP number, while expected, allied to lower stock markets on continuing Greek concerns should have provided a boost to gold.
It suggests that the gold market is still largely controlled by speculative, fast trading money going long and short and trading the range between $1,150 per ounce and $1,225 per ounce. Passive allocations to physical gold and global physical demand is not impacting prices at this time.
Even the introduction of a gold dinar as currency by the ISIS fanatics has been greeted with a huge yawn as traders hold sway for now.
China’s Industrial and Commercial Bank of China (ICBC) is making a move to be part of the London gold price benchmarking process, the bank said during the LBMA bullion market forum.
Only last week, the Bank of China (BOC) became the first Chinese bank to participate in the LBMA Gold Price, which formally replaced the 100 year old London Gold Fix on March 20th.
Standard Chartered and Morgan Stanley will join present members JPMorgan Chase Bank, Scotiabank, HSBC, Société Générale, UBS, Barclays and Goldman Sachs including the two Chinese banks.
The ICE Benchmark Administration (IBA), was established in April 2013 to administer benchmarks, and currently provides the price platform, methodology and overall administration and governance for the LBMA gold price after a price fixing scandal.
Chinese banks are ramping up their commodities business while some western banks are exiting them.
In late morning European trading gold is U.S. dollars is down 0.01 percent at $1,175.23 an ounce. Silver is down 0.30 percent at $15.85 an ounce and platinum is up 0.21 percent at $1,076.44 an ounce.
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