A tweet from Daily Reckoning:
“Bernanke says one lesson from the Great Depression is to not let monetary policy get too tight.”
With a link to a BusinessInsider story:
Reminded me of a video posted by ZeroHedge from CNBC of Rick Santelli talking about ’cause/effect’ (talking about the Fed at 1:24).
…where he talks about the Fed and the actions they took during the depression and how this time it’s different. The Fed says, ‘the lesson we learned from the depression is that you have to keep printing.’ Santelli points out that there was a bank run during the depression where a cash injection was needed vs. a break down in confidence in the banking system starting in 2008 where the added cash is just pumping up the shadow banking system – doing nothing to restore confidence amongst banks – making the current problems worse.
Which brings me to Gold and the Germany’s announcement to repatriate hundreds of tonnes from New York and Paris: on the back of several other countries doing the same. Because the response to the crisis has been the wrong medicine (the zombie banks should have been allowed to die) central banks and large pools of capital are building up their positions in the only currency without counter-party risk: Gold. The Fed is losing trust and confidence, not gaining it.
The rising Gold and Silver price is telegraphing Fed (and world CB) policies are failing. Trust is breaking down and the added liquidity is making the situation worse as all its doing is cheapening the currencies. The ‘trillion dollar coin’ hoax highlighted this perfectly. Stamping $1 trillion on a few grams of Platinum and getting $1 trillion dollars in return from the Fed – and having Paul Krugman and others back this – served to make folks like the Germans even more nervous than they already are. Not to mention the Chinese and Japanese; the two biggest creditors of the US, who are now on a war footing while China ups the stakes as both the biggest miner and buyer of Gold in the world.
Bernanke is fighting the depression of the 1930′s, not the current crisis and nobody believes a word that is coming out of his mouth; and the more he prints, the worse the situation gets.