Is gold money? VIDEO HERE!!!
This was a bold question directed towards Ben Bernanke by Congressman Ron Paul. Ben Bernanke in his response flat out stated that gold is not money and it’s only by tradition that it’s stored by central banks. Of course, gold has been real money for thousands of years and it’s not by coincidence that as global uncertainty continues to grow, gold continues to appreciate while central bank buying is accelerating. As always, Ron Paul presents himself with a solid foundation of main street facts and is educating America on where this country is headed. It was conceded that the Fed has been a major profit center. Unfortunately, it has been at the expense of the working class who are being squeezed by the Fed’s injection of trillions into the system that is artificially fudging the free market time and time again. We should also note that Ben Bernanke should take the time to read the U.S. Constitution, where it clearly states that only gold and silver shall be accepted as legal tender.
James Turk, founder of GoldMoney.com, has stated that gold is in fact money. It is not an investment. He has simply said that when considering whether or not to buy gold, you evaluate it against other monies. It’s a finite resource that cannot be printed and distributed in the same way all other fiat paper currencies are.
Gold has been on a run the last week or so and acting accordingly compared to other currencies as pointed out by James Turk. This week, gold is breaking through all-time highs and is currently around $1586 an ounce. According to Martin Murenbeeld, the chief economist at Toronto-based DundeeWealth Inc., which manages 50 billion in assets, “we’re in a very difficult financial period of the world. You have the European situation. The faith in paper currency is rapidly ebbing.” No shock to CrushTheStreet.com members of course, but certainly the end game is near now that major fund managers are turning towards creating new demand for gold.
This week, the world has seen the euro fall to its lowest point since May. The Greek two-year note has risen to 31% yield. Ireland joined Portugal and Greece yesterday as the third euro nation to have their credit rating fall below investment grade. If we see a eurozone currency crisis, we expect to see some short term dollar rallies as individuals flock to store their wealth into other “safe modes” of wealth storage. As yields for euros continue to rise, the yields for U.S. debt securities continue to fall, even though the U.S. is under the same sort of financial burden that the European countries are. The U.S. has trillions of dollars worth of deficits and is literally rounding the corner to not being able to cover its obligations. It’s so strange to think that conventional thinkers still feel some sort of security when saving in “greenbacks.” It is ironic, but the system is on its way out and the same way the government is facing the debt ceiling today, they will be dealing with a currency crisis tomorrow.
Ben Bernanke is not just hinting at QE3, he is saying it’s locked and loaded if need be. He stated, “The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge implying a need for additional policy support. The Federal Reserve remains prepared to respond should economic developments indicate that an adjustment of monetary policy would be appropriate.” There are 3 options the Fed Chairman stated could be a potential move for the future, one being the plan to keep the Fed Funds rate close to 0-.25% for a record long period of time. Another option would be to start up the third round of government bond purchases or to simply increase the average maturity of the Fed’s current securities holdings. The third option he mentioned was that the Fed also could reduce the interest rate that it pays to the banks on excess reserves stored at central banks. Of course by the latter half of 2011, we’ll be in a recovery.
These are ideas that the government is actually responsible for the stability and backbone of the economy. There is a double-edged sword that we’re talking about that the Fed will inevitably have to face. These two things include a collapsing economy that is sure to come if they pull out of their interventions or hyperinflation that will arise as a result of the printing press. There is no artificial way to get around these things. We need to go through the bad to get to the other side. It’s important to understand the more we fill the balloon with air, the bigger the pop is going to be.
CrushTheStreet.com is always searching for investment ideas for its subscribers that will have a chance at making it through and side stepping the recession resulting in large gains. The fall is going to be huge… Stay tuned!!!
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“With the monetary system we have now, the careful savings of a lifetime can be wiped out in an eyeblink.” -Larry Parks
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