Thursday, April 4, 2013
Paul Craig Roberts
“According to the Bureau of Labor Statistics, the US economy created 236,000 new jobs in February. If you believe that, I have a bridge in Brooklyn that I’ll let you have at a good price.”
Roberts discusses how the US government manipulates numbers—employment, inflation, GDP, retail sales, weekly earnings—in order to show real GDP growth.
However, statistician John Williams (Shadowstats.com) says real average weekly earnings confirm that Americans are taking home less purchasing power than they did in the 1960s and 1970s. Reflecting the dollar’s loss of purchasing power, the price of gold and silver in dollars has risen dramatically over the last eight years.
For the last year or two the Fed and its dependent banks have operated to cap the price of gold at around $1,750. They do this by selling naked shorts in the paper speculative gold market.
There are two gold markets. One is for physical possession by individuals and central banks. The rising demand in the physical bullion market points to a rising price for gold.
The other is the speculative paper market in which financial institutions bet on the future gold price. By placing large amounts of shorts, this market can be used to suppress price rises in the physical market. The Fed, which can print currency without limit, can cover any losses on its agents’ paper contracts.
It is important to the Fed’s low interest rate policy to suppress the bullion price. If gold and silver continue to rise relative to the US dollar, the Fed cannot keep the prices of bonds high and interest rates low. If the dollar is perceived to be declining in value in relation to gold, the price of dollar-denominated assets, including bonds, will also decline. If the dollar loses value, the Fed loses control over interest rates, and the US financial bubble pops, with hell to pay.
To forestall Armageddon, the Fed and its dependent banks cap the price of gold. It’s a temporary fix; as the Fed creates more and more dollars, the gold price will eventually escape its control, as will interest rates and inflation.
The Fed has produced a perfect storm that could consume the US—and perhaps the entire Western world.
Posted by Unknown at 11:00 PM