Category Archives: Outside Commentaries

“The other problem I find with the inflation-to-gold ratio analysis is this: We are truly in unknown territory with the U.S. and world money supply. In 2008, when the Fed geared up its printing press, the entire balance sheet of the Federal Reserve, accumulated in its 95 year existence, was $1 trillion. For the last several years, it has been growing its balance sheet $1 trillion per year.

The only reason we don’t see rampant inflation is that the velocity of money is so low. If the economy ever picks up for real, watch out. Fortunately, or unfortunately, depending on how you look at it, there seems to be no immediate threat of that.”

“To some investors, gold seems arcane: a non-productive asset that is simply extracted and stored. To many others, gold plays an important role as a store of wealth and portfolio risk management vehicle. To most, a key challenge is finding an appropriate framework of reference: what gold does, what it does not do, how and why it responds to various economic environments.”

“In his semi-annual testimony before the House Committee on Financial Services, Fed Chairman Ben Bernanke was very clear about how the central bank engages in quantitative easing. We are printing money, just not literally, the Chairman told policymakers, while contradicting himself regarding recent record highs in stock markets, first attributing them both to the strength of the economy and the impacts of monetary policy. The market didn’t seem to care, rallying tepidly upon the release of the prepared remarks and remaining range-bound through most of the session.

‘Where does the Fed get the money to buy [assets],’ Congressman Keith Rothfus asked the Chairman. ‘Do you create the reserves,’ he queried in a follow up, receiving a simple ‘yes’ from Bernanke. And finally, the money shot: are you printing money? ‘Not literally,’ the Fed Chairman surprisingly responded.”

“There isn’t a central bank in the world that wants to go back to a gold standard. But that’s not the point. The point is whether they will have to.

I always tell people who say we’re not on the gold standard that, in a way, we are. You can put yourself on a personal gold standard just by buying gold. In other words, if you think that the value of paper money will be in some jeopardy, or confidence in paper money may be lost, one way to protect yourself is by buying gold, and there’s nothing stopping you.”