QOTD - Ben Bernanke

“I don’t fully understand movements in the gold price”

Quoted in an article in the Wall Street Journal yesterday.

Really? Are you kidding?

Let me break it down for you Mr. Chairman. Gold is a store of value. Gold's price moves as a result of three primary motivators: Greed, Fear, or Relative Worth to your fiat trash from the Fed.

Let's take the last one first, Mr. Chairman. Your wanton profligate printing of paper currency with no backing has inflated said currency and diminished said currency's value relative to precious metals. An ounce of gold's utility is roughly the same as it was 3 years ago, but its ability to be purchased requires more of your worthless trash to acquire. Hence, the price has risen.

Next, the price of gold is also an indication of the relative stability of geopolitics. As world events unfold, the price of gold fluctuates with the level of tension among adversaries. More tension (as with Iran's saber-rattling) equates to higher prices of precious metals. If you couple an unstable world with your unrestrained printing presses, people get a little worried about their ability to buy bread in the future and tend to run to things which will store value for them. Fear is a factor in the price of gold. Your policies are not helping calm the sheep. Really. Go look it up.

Lastly, let's look at greed. Seriously. Your friends at Goldman Sachs, Lehman Brothers, and the other brokerages have been speculating that the price of gold might rise given your policies at the Fed. I am not sure where they would get this wild idea from, since they are not all Harvard-educated like yourself. Maybe you could ask George Soros about currency speculation...I hear he might know a thing or two. He might be able to explain to you that in every political and economic crisis there is profit to be extracted. Further, if you can manipulate the crisis to your advantage, you can get the other players in the global speculatory regimes to play along and thus milk them for some squeeze too. It was just a thought...you might not actually know George Soros personally. You might have to get Barry to introduce you two so that you can get an education at his knee about things like gold.

Mr. Chairman, in all of your years studying economic theory at MIT (Ph.D. 1979) and Harvard (BS, 1975)), and teaching it at Stanford (1979-1985), you never fully grasped the prime movers of the price of Gold? I find this truly baffling.

Perhaps I can recommend a book to you that would help you understand the basic concepts. Heck, I'll send you my copy.

Pax,

Newbius