Thursday, July 18, 2013

Bernanke: I'm Clueless About Gold

In testimony today on Capitol Hill before the Senate Banking Committee, Fed chairman Bernanke remarked:
Gold is an unusual asset. It’s an asset that people hold as a sort of disaster insurance.
He should have added it's insurance about disaster as a result of reckless Fed money printing. He went on to admit he is clueless:
Nobody really understands gold prices and I don’t pretend to understand them either

Then there was this scary exchange on Wednesday between Rep. Keith Rothfus (R-PA) and Bernanke:
Rep. Rothfus: Simple question that I have is when I have someone in my district that is going out to buy a Treasury bill, an individual is looking to make an investment, they go to their bank, they go to their broker, they have $1,000 or $5,000, and they get a bill. Where does the Fed get its money to buy its Treasury bills?

Chmn. Bernanke: When we buy securities from a private citizen, we create a deposit in their bank, and it shows up as reserves. So if you look up our balance sheet, our balance sheet balances. We have Treasury securities on the asset side. On the liability side we have either cash or reserves at banks, and on the margin that’s what has been building up as excess reserves at banks.

Rep. Rothfus: You create the reserves?

Chmn. Bernanke: Yes

Rep. Rothfus: Is that printing money?

Chmn. Bernanke: Not literally.

Rep. Rothfus: It’s troubling to me when I look at the balance sheet that the Fed has and you look four years ago it was $800 billion and now we’re up to $3.5 trillion. I know you say you’re confident that you have the tools available to do a draw down when necessary without risking hyper-inflation, but by your own admission this has been unprecedented what you’re doing. What assurance can you give to the American people that we’re not going to have a round of rampant inflation five years down the road?

Rep. Bernanke: It’s not unprecedented because many other central banks use similar tools to the ones we plan to use.

Rep. Rothfus: Currently? Or can you look back in history and see a country that has blown up its balance sheet by 311% in four years without any kind negative consequences?

Chmn. Bernanke: Absolutely. Japan, Europe, U.K. All have done similar kinds of things with very large balance sheets.

Rep. Rothfus: I appreciate your feedback on that, and we may reach out to get that information. Thank you.

What Bernanke fails to mention is that the "tools" he has may work, but they likely would result in a spectacular increase in interest rates.


  1. The "Bernanke" will go down as the man who destroyed the empire of the west.

  2. Rep. Shitforbrains; well I suppose its ok, if everybody else is doing it.

  3. The Fed has the "tools" to unwind. Sure... but at what cost?

    The Fed bought a load of toxic crap. What price would they have to accept to get anyone to buy it from them?

    What utter bullshit...

  4. The Fed has the "tools" to unwind. Sure... but at what cost?

    The Fed bought a load of toxic crap. What price would they have to accept to get anyone to buy it from them?

    What utter bullshit...

  5. Only Gold??????????????


  6. Whenever a near perfect SAT scoring MIT grad says he doesn't understand a financial instrument like gold- people need to take pause.

    Banks have been using gold since the dawn of time. For a man of Bernanke's background and intelligence to say that he does not understand gold or specifically how it is priced makes no sense whatsoever. It would be something akin to a carnivore eating carrots. I find his remarks to be- rather eye opening.

  7. Yes gold has some industrial value. What about the perceived value for hundreds of years? Why? It's just some shiny metal that people think is precious. What is it's real value? We have all been led to believe it is valuable and it is if people keep wanting it.

    Does it really have any real use?