I’m not one to subscribe to conspiracy theories but something fishy keeps reining in the gold market. Posted by James Randolph on April 04, 2011
Only Wall Street has anything to gain from reining in the gold market.
April 04, 2011 – I’m not one to subscribe to conspiracy theories but something fishy keeps reining in the gold market. Let’s take a look at what we do know.
The Fed, of course, is the logical place to start. Bernanke has made it no secret that he wants the average American to stop saving money and start gambling in his Wall Street cronies’ casino. What better way to do that than hold down interest rates, which punishes "Americans who have done everything right, have worked hard, saved their money and stayed out of debt," said president of the Federal Reserve Bank of Dallas Richard Fisher to the Wall Street Journal.
Returns on savings accounts and other safe cash investments are now losing well over 5% in light of 5.6% annualized inflation over the last quarter. For retirees that represents a dangerous loss of income that has driven nearly a third of them to start tapping into their principle. For those still working it is eating away at any safety net they may once have had.
At the same time corporate profits are up — the S & P 500 gained 12% in earnings last quarter over the previous year — increasing returns and making equities a tantalizing alternative. That performance was made possible by high unemployment, which lets employers hold back wages. While real wages have been in steady decline over the past decade — down 5% over the period — the current annual rate of decline is nearly that much at 4.6%.
But there is a fly in the Fed’s ointment. The rapidly declining disposable income of American workers means less is being spent on the very things they produce. It’s like Fordism in reverse. New home sales hit their all time low since they started keeping records back in the early 1960s. Having less disposable income also means fewer Americans are likely to have sufficient resources to keep Wall Street’s machinery running, even if they fell for the scheme.
What bothers me is that this is all old hat. And yet gold investment, which would have more than compensated for Fed-induced losses, has remained weak throughout it all. Only a concerted effort to discourage Americans from buying gold seems likely to account for that.
And only Wall Street — and thus the Fed — has anything to gain from reining in the gold market.
Senior Staff Writer – Certified Gold Exchange