Bernanke Against Gold

Hello Fatima:

That paragraph is historically accurate and accepted among all credible historians and economist. What you posted was inaccurate, speculative and unsubstantiated by the historical record.

Amanda

 

Log in or Sign up to hide this ad.

It is well known that there is a large bank with a huge derivative short position in the US market, they can only hold the price down for so long. 1 year ago silver was 49 ish and gold was 1525. hey lost control then, and had to have the govt and increased margin hikes bail them out. Here is something they can not control. The Shanghai futures exchange will be listing its first Silver contract onThursday May 10th. China knows the value of precious metals, every where else in the world the metlas are trading higher in the real spot bullion markets, we in the states look at the CME group as the silver price, which unforntunately recently for longs is the truth. But worry not, as Europe gets worse and the Chinese can buy Silver contract in there own country, this will be an area we all look back on in a year and say.........remember that day silver was 29.80? with the Gold Silver ratio at 54:1, if it simply moves back to its two year average of 42:1.............voila we have 38.90 silver..............i am not a market predictor, just a student of history

 

Hello

James Bond will be sent to fix all this.

Amanda

 

Oh just a few more fact on recent market action that show fundamentals and reality are no longer in touch:
US has stated they will leave rates at near zero for another 2 years at least.
The Europe bailout fund has ecliped 2.2 trillion euros now.
Australia lowered rates this week unexpectedly by 50 basis points.
The jobs number today was horrible, but Gold and Silver were up. After 99 weeks the unemployed can no longer claim unemploymnet so the rate goes down with no jobs created.
Japan announced year 19 of quantitative easing this week. And Platinum traded 109.00 DISCOUNT to Gold.
Many says metals are a bubble but they have been around forever, and will be around after all of us.
When the US wrote the constititution, the Gold Silver ratio was roughly 15:1.
Does any one know any Mints or Coin shops selling Platinum for less than Gold?
Silver has averaged over 30.00 now for more than 75 weeks
Crude Oil everywhere else in the worls outside the states is at least 15.00 higher per barrel.
Gasoline is up 16% year to date even after a thrashing this week.
Silver is still up about 9% this year
just some facts if my posts are too much let me know and I will step back

sincerely qsilver007

 

You are offering up nothing but an opinion, and I don't really care if you believe it or not. If you are someone who decides that a paragraph written about just one year in American history, sets the definition of what is good and bad in the financial system that has existed for more than 2 centuries, then so be it. Obviously you don't care about the context of the time or the events that led up to it.

PS, Dear Heart, if you read my post following this one, you will have your substantiation.

 

I did not mean to imply that you plagiarized the statement. Your paragraph however is almost an exact summary, of a speech made by Ben Bernanke to Georgetown University some years ago. Specifically he said this:

...Central banks as well as private investors converted a substantial quantity of dollar assets to gold in September and October of 1931, reducing the Federal Reserve's gold reserves. The speculative attack on the dollar also helped to create a panic in the U.S. banking system. Fearing imminent devaluation of the dollar, many foreign and domestic depositors withdrew their funds from U.S. banks in order to convert them into gold or other assets. The worsening economic situation also made depositors increasingly distrustful of banks as a place to keep their savings. During this period, deposit insurance was virtually nonexistent, so that the failure of a bank might cause depositors to lose all or most of their savings. Thus, depositors who feared that a bank might fail rushed to withdraw their funds. Banking panics, if severe enough, could become self-confirming prophecies. During the 1930s, thousands of U.S. banks experienced runs by depositors and subsequently failed. ​

This is more or less is exactly what you also said which led you to the incorrect conclusion and statement that the gold standard had been bad for the country as it caused the Great Depression. This is the part where I say that you took it completely out of context because if you read Bernanke's entire speech, he will tell you himself that it was not the gold standard that caused the stock market crash and Depression. He says himself that it was the actions of the Federal Reserve trying to reign in the speculation caused by easy money that did it. Furthermore, he states this later in the speech. (The war he is referring to is WWI and the classical period is the gold standard.)

"...Second, the new system lacked effective international leadership. During the classical period, the Bank of England, in operation since 1694, provided sophisticated management of the international system, with the cooperation of other major central banks. This leadership helped the system adjust to imbalances and strains; for example, a consortium of central banks might lend gold to one of their number that was experiencing a shortage of reserves. After the war, with Great Britain economically and financially depleted and the United States in ascendance, leadership of the international system shifted by default to the Federal Reserve. Unfortunately, the fledgling Federal Reserve, with its decentralized structure and its inexperienced and domestically focused leadership, did not prove up to the task of managing the international gold standard,....."​

​

i.e. The Federal Reserve screwed up the system in the years after WWI and this caused the financial collapse. You can go and read the speech yourself and I assume that you will put more thought in it than our friend Amanda above who only shows up to say she doesn't like my posts. The history of this is well documented and if one puts Ben Bernanke words with any credibility, as anyone must do who supports the Federal Reserve, then all they need to do is go back and read his speech along with the conclusions on what really caused the collapse of the gold standard and the Great Depression. it certainly wasn't gold.

 

One should also note that Bernanke himself said that the Gold Standard worked extremely well for over 200 years as it was managed from the 1600s. Yet it took less than 2 decades of Federal Reserve "intervention" to destroy it. It was replaced by a semi-gold standard that lasted just under 40 years where the USA was forced to default on the dollar in 1971 again due to endless Federal Reserve interventions and excessive government spending enabled by it. It was then replaced by yet another system, the one we are on now, that is just 41 years old where at best, a huge number of people are losing faith in it.

So we are on our 3rd monetary standard since the Federal Reserve was created. The chairman of the Federal Reserve once said that it was the actions of the Federal Reserve that destroyed the first two. Why is it different this time? Anyone looking at this objectively would have to conclude that if you want stability, prosperity and economic expansion, then you go back to the system that has the history of lasting not for mere decades, but one that worked for centuries.

 

Fatima, thank you for your post and the excepts from Bernanke's speech. I am glad to find that A.) I do not owe royalties since it was a speech by a public figure and B.) I somehow remained on topic since the speech was made by Bernanke himself.

I have looked at some of the problems faced by the Bank of England after WWI in their attempt to return to the gold standard. It is my understanding that the official value placed on gold was far less than the market value traded internationally which resulted in a flight of gold from Britain. If the US transferred gold to Britain after this point, then a contraction of the money supply was in order which may have resulted in the mini-depression of the early 20's. I will have to do more research and look closer at this.

My primary premise that in order to maintain a viable "gold standard" one must protect the gold reserves to a point where it is secure and not subject to trade or speculation remains in place. The private ownership of gold bullion will need to be curtailed to increase the reserves as the economy expands and the monetizing of gold coins will need to be suspended. (No more shiny Gold Eagles) This however does not protect us from the actions of politicians. As in 1933 after the gold confiscation, the official value of gold jumped $12.00 an ounce in the blink of an eye, thereby increasing the money supply. The 1930's version of QE-Gold.

 

The speculation and destruction is only made possible when fiat is created that can be directly exchanged for gold backed dollars on an even basis. The second hybrid/fiat gold standard that existed between 1933 & 1971 failed for this very reason. Charles de Gaulle wasn't happy with the Anglo-Saxon hegemony created after WWII and felt that France deserved an equal seat at the table with the UK & USA as one of the victors. So he withdrew France from Nato, built an independent nuclear defense system to be used against the Soviets, and then he hit them where it hurt the most. He began redeeming his excess dollars for American gold. The redemptions got so large they were sending battleships to NY to pickup the shipments and an alarmed Nixon finally slammed the window shut. Of course the real culprit here wasn't France but rather the monetary policies of the USA where money was being created that wasn't backed by anything.

--------------------------------

I recommend a full reading of Bernanke's pre-Fed Chairman presentation to Georgetown U ~2004 or so. It's interesting an it also gives a fairly rare look at how the central banks really operate. This comment is one of the more telling:

"...a consortium of central banks might lend gold to one of their number that was experiencing a shortage of reserves....​

Of course he is describing how the central banks dealt with gold during the gold standard days. I would suggest that nothing has changed. Between themselves, they keep a substantial amount of gold on deposit at nominal values right on their balance sheets. The Fed values the gold at $42.22/ounce. The dollar amount doesn't matter because the $ amount means nothing to an organization that can create $s out of thin air. What IS important is the fact that the Fed has control over more than 7000 tons of it via Gold Certificates issued by the USA against the gold in Ft. Knox and other places. So while current Ben will tell you there is no point to holding gold, he certainly doesn't take this advice for the Federal Reserve itself. IMO, it's the way central banks deal with each other and it hasn't changed for centuries.