, IncIgnore the gold price - Bernanke knows best.
May 1, 2011 – Just a week or so all the talk about the gold price was whether it would break $1500 an ounce. Now its at $1530 and climbing. You can chalk that up to Bernanke’s stunningly deluded outlook.
But what else could he do? In a few short minutes Bernanke told the world that his policies are doing just fine and while every other major economy is tightening its monetary policy, he intends to hold interest rates low for at least another quarter.
Mr. Bernanke said “the Federal Reserve believes that a strong and stable dollar is … in the interests of the global economy.” So he weakens the dollar even more, which is in our interests alone. “The slide in the U.S. currency is helping the U.S. recovery by making American goods cheaper to buyers abroad. That has spurred exports—a pivotal part of the U.S. recovery,” says the Wall Street Journal. Some 40% of the recovery, in fact, and nations everywhere are threatening protectionist measures if we persist.
As expected, Bernanke also dismissed concerns over inflation. But “higher energy and food prices pushed an inflation measure that's closely watched by the Federal Reserve up to 3.8%.” Still, Bernanke stressed time and again that the ends – the economic recovery – justify any means. But what recovery is he talking about?
Let’s see. “U.S. economic growth slowed to a 1.8% pace in the first quarter and new jobless claims rose last week,” says the Wall Street Journal. “The American economy is growing much more slowly than others around the world … Since the recovery began in mid-2009, the U.S. has grown at an average annual rate of 2.8%, far below the growth rates being registered in developing economies and slow even when measured against most past U.S. recoveries.”
“There is little indication of a change in policy from either the Fed or Treasury—or in underlying economic conditions—that would alter the currency's downward course.” It is remarkable that the Fed continues with policies that are the polar opposite of those proven successful in other, more rapidly recovering economies.
Bernanke says he knows best, but the gold price tells a far different story.
Stewart Lawson
Senior Staff Writer - GoldPrice.net
