Tuesday, September 7, 2010

Fed's Last Bullet May Be "Golden"

Now why didn't I think of that...?

Ben Bernanke's last bullet: drive up the price of gold and create an inflation expectation (or perception) so that people are scared into spending fiat money (US dollar) fast.

Here's the "golden bullet" part of the article from Zero Hedge:

Jim Rickards Tells His Clients To Get Out Of Stocks And Discusses The Fed's Final "Golden" Bullet (9/6/2010 Zero Hedge)

[From the interview of Jim Richards, Senior Managing Director for Market Intelligence at Omnis, Inc., with Eric King of King World News. Emphasis is mine.]

If you're worried about deflation and you want to cause inflation and you're printing money as fast as you can and the inflation is not happening, at some point you have to stop and ask yourself well what else can I do? Well the answer is that you can severely devalue the dollar against gold...So the Fed wakes up one day and as fiscal agent for the Treasury, we're a buyer at $1,495 and we are a seller at $1,505, and that represents a 20% depreciation in the value of the dollar.

You have to scare the American people into spending money. Right now the American people are more afraid of not having money, they are not afraid of inflation, but if you make them afraid, they will go out and start spending. So what better way than to devalue the dollar 20% against gold, and the way to do that is through open market operations...Well if that happens to be $2,000 an ounce what have you done? You've depreciated the dollar by not quite 50%. Well that's pretty powerful stuff if you are trying to get people to spend money and dump dollars. So they are not out of bullets, they have what I call the golden bullet...They have that kind of ace in the hole if they really want to trash the dollar.

(The whole interview is here.)


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