Lyin’ Yellen Is Forced to Tell the Truth at Federal Reserve Meeting: Gold Up, Economy Down

The meeting is over! The FOMC has spoken, and the reality has been recognized:  The US economy is a disaster and as a result gold will benefit as it always does from fiat’s misery.

Janet Yellen didn’t say that of course. She is trying to pretend that there is a “recovery” going on in the US economy.

But by backing off serial rate hikes, she made her and the Federal Reserve’s real feelings clear. The economy is not recovering. Jobs are not returning. Industry is not recovering. The only thing that is recovering is the price of gold against the dollar. The rest of the economy is in a recession verging on depression. In fact, “depression” is a better word. But mainstream’s presstitutes have been taught not to use it. Just the way they’ve been taught to cover these horrible FOMC meetings. Sonorous monetary and economic phrases are employed in their articles to ensure the results sound deeply thoughtful.

Actually, the entire process is ridiculous. Fed members look at falsified government numbers, white paper analyses based on those fake numbers and maybe an article or two – also unrepresentative of the truth – before making up their minds about the single, idiotic question that they have to decide. Up or down.

That’s basically what the fuss is about. Interest rates – higher or lower? Should they charge more or less for the fake fiat currency that banks issue when you come in to borrow some money?

Fundamentally, the system is corrupt. This small group of academics is simply fixing the price of credit and forcing people to pay an arbitrary number. But interest rates have a wider function than simply lining bankers’ pockets.

Interest rates govern the balance between the supply and demand for credit, which is funded by savings,  i.e., actual sacrifices in consumption. If consumers abstain from consumption they are freeing up real resources for reinvestment in various higher order stages (or lines) of capital goods production. This investment is the source of growth, and of the ability for a society to consume ever more on the whole. The central bank policy on the other hand tricks us into spending our wealth instead of creating more of it. It does this by obliterating the trade off between investment and consumption.

No need to sacrifice consumption, the central bank will fund investment by enabling and supporting fractional reserves instead. Nobody need save ever again! Obviously, aside from the strain on the fixed amount of resources (labor, fixed capital, equipment, etc.), much investment is wasted on projects that are never finished because when the banks stop issuing duplicate receipts on the existing pool of savings, i.e., when they stop inflating money, it is revealed that there are not enough savings to fund the plans and we have simply consumed our existing wealth.

Instead of several different interest rates determined democratically in the free market like most prices of most other goods, which optimizes their allocation, a small group of know-it-all bureaucrats force the markets, communist central planning style, to stop everything they are doing every couple of months while they weigh their political interests off against each other in a constant fight over control of the nation’s pool of wealth.

Price fixing never works, whether in credit or other goods.

It’s caught up to them now. They’ve printed and printed and created great asset bubbles but they have destroyed real economic capital in the process. They have tried to direct investment top down, with the printing press, effectively destroying the entire function of interest rates. It’s why we have recessions. The manipulation of interest rates.

Now, unsurprisingly, nobody wants interest rates to go up, even though if they don’t there will be hell to pay on the inflationary front. Nobody believes this right now but they will. Indeed, after years of asset inflation leaving equities, fixed income, and real estate assets over valued almost everywhere (by most reasonable standards), the central banks find themselves in the familiar historical position where nobody wants them to raise rates.  At some point, the gap between the central bank’s bearish economic outlook and the market’s bullish valuation of stocks and bonds has to narrow.

That’s what the Fed is struggling with currently. That’s what is on the minds of central bankers around the world.

And so… forbearance.

Yellen couldn’t hike. She couldn’t even announce more hikes. Instead, on Wednesday, Lyin’ Yellen announced that rates would stay the same, just as we said they would, and that the Fed wouldn’t be hiking anytime soon. She couldn’t even bring herself to read the lying script about the “economic recovery.”

There ain’t one. Instead, as we’ve mentioned numerous times before, gold is benefiting from the Fed’s reluctant economic honesty. Gold prices  spiked as soon as the announcement was made on Wednesday and  extended gainsThursday after it became clear that the Fed, far from initiating a series of rate hikes, was going to go out of its way to make sure that any hikes in 2016 would be few and far between. Say one or two at 25 basis points.  And I don’t think they will at all.  I said that after the last meeting.  I actually guaranteed they wouldn’t.  The next moves will be down and then negative… they just need to get cash out of circulation before going too heavily negative so you can’t take your money out of the bank.

Yellen’s statements dropped the dollar and sent crude oil over $40.00 a barrel. April Comex gold moved up toward $37.50 at $1,267.50 an ounce. May Comex silver up $0.501 at $15.72 an ounce.

Gold generally is on a tear, up some 16-percent plus in 2016. The golden bull is intact, even if the mainstream media never writes about it. We’ve been in a secular bull market cycle in the precious metals for about 15 years now, since 2000-2001. We’ve seen several short lived stock bull markets through that time period but they’ve always lapsed. This latest one will, too, because like all the others it is the result of Fed stimulation and not much else.

In fact a study came out recently showing that something like 90 percent of the current stock market move was due to the Fed’s policy of low interest rates and liquidity.

Axel Merk, president and chief investment officer at Merk Investments, which runs the Van Eck Merk Gold Trust (OUNZ) ETF is bullish on gold as a risk diversifier. He was quoted as saying. “The long-term story for gold is in place.”

Indeed it is. That’s one reason our resident gold expert and trading superstar Edmond Bugos has been piling up such good numbers recently. His NUGT trade for instance is up 125% over six months and the Bitcoin ETF (GBTC) recommendation is up 27% -and actually a lot more given that we’ve been recommending it for many years.

Since the TDV investment conference in late February, Ed’s top three picks are up 11%, 30%, and 60% (subscribe to TDV Premium to get access to that information or stay tuned as we’ll be releasing the video of the TDV conference for purchase next week)). Even more impressively, Ed’s overall gold stock portfolio is up about 50% on a weighted average over the past year, with most of that progress being made since September. Ed is one of the very smartest traders working anywhere, and we’re fortunate to have his exclusive picks to present to our TDV newsletter subscribers.

Our subscribers just in these past six months have been provided a series of trades that have had mounting success, some of them doubling or tripling or going much, much higher than that.

To receive Ed’s trades on a timely basis, you’ll need to subscribe to our newsletter. You can do that HERE. I suggest you do! You’re losing money every day that you wait.

We’re making fortunes while everyone else is losing in the stock market and hope it goes higher.  They’ll soon find out the folly of listening to the mainstream media cheerleaders and hoping Janet Yellen will print enough money to keep inflating values of stocks that will soon be plummeting as the Greater Depression we have already entered into becomes obvious to everyone.

Originally Appeared At The Dollar Vigilante

3 comments on “Lyin’ Yellen Is Forced to Tell the Truth at Federal Reserve Meeting: Gold Up, Economy Down
  1. keith says:

    How much longer can we carry on believing in the weird science?

    Neo-Liberal Economics – The Weird Science

    In 2008 the world economy suffered the biggest economic shock known in the history of mankind; the weird science attributed it to a mythical creature, “the black swan”.

    In times past we used to attribute eclipses to mythical creatures swallowing the sun, but real science has move on.

    The weird science governing the global economy has been trying unconventional solutions since 2008 to try and get things back on track. When the problem was caused by a mythical creature, “the black swan”, these are the only solutions available. These unconventional solutions, or “stabs in the dark” as they are technically known within the weird science, are not having a great deal of success.

    The Neo-Liberal, “weird science”, has been rolled out across the world and it is the only version of economics now taught in Universities around the world.

    No economic history is now taught so the students don’t see different ways of thinking and don’t question Neo-Liberal economics.

    Neo-Liberal economics is right and should not be questioned within any mainstream institutions.

    Students must concentrate on building complex mathematical models on the base of the Neo-Liberal, economic model, it is right and cannot be questioned. The only way is up, building on these foundations.

    To believe in Neo-Liberal economics you have to believe in the mythical creature, “the black swan”, which explains the major events that occur outside of your belief set.

    Neo-Liberal economics it’s weird science.

    Just to clarify there are two species of black swan:

    1) The real black swan – lives on lakes and rivers and does not interfere with the global economy

    2) The mythical black swan – causes major shocks to the global economy not seen by the complex mathematical models of Neo-Liberal economics

  2. keith says:

    Outside of the mainstream, Neo-Liberal, “weird science” devotees are there economists that don’t rely on mythical “black swans” to explain things?

    It is time to look for those that know what they are doing.
    In 2005, Steve Keen, saw the crisis coming and the private debt bubble inflating.

    In 2007, Ben Bernanke, could see no problems ahead.

    We know Central Banks were using fundamentally flawed economics prior to 2008 and have not put forward any reasons why they didn’t see 2008 coming, apart from the mythical “black swans”.

    It should hardly be surprising that their fundamentally flawed economics does not come up with the right solutions.

    Steve Keen is a man that can see what Alan Greenspan, Ben Bernanke and Janet Yellen can’t:

    https://www.youtube.com/watch?v=qrz76_j9MRs

    He is an economist that does take debt, the true nature of money and banks into account in his models and he is way ahead of the Neo-Liberal, Central Bankers.

    The IMF and Central Bank models always show things will be better next year.

    When they have missed the cause of the problem, this is inevitable.
    Private debt has swamped the world and the repayments are sapping global demand.

    Since 2008 nothing has been done to address the problem of private debt.

    Eight years have been wasted through the flawed Neo-Liberal, economic models of the technocrat elite.

  3. keith says:

    For devotees of Neo-Liberal economics, “the weird science”, prepare for a shock.

    Some economic history outside the carefully selected version you have been bought up on.

    Malthus and Ricardo never saw those at the bottom rising out of a bare subsistence living. This was the way it had always been and always would be, the benefits of the system only accrue to those at the top.

    The benefits of the industrial revolution did accrue to those at the top in 19th Century England and they were fabulously wealthy. Those at the bottom lived a life of bare subsistence, though now through meagre wages rather than what they produced themselves.

    It took the ideas of Marx, and collective labour movements, to prise some of the benefits away from those at the top to those at the bottom. Though those at the top were still fabulously wealthy and those at the bottom lived a miserable existence, but slightly better than it had been before.

    By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required to purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic over-supply the Capitalist system could produce.

    A system bringing prosperity to all was now in place and relatively wealthy consumers were required to keep the profits flowing to the top in ever larger quantities.

    Adam Smith:

    “The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.”

    Like most classical economists he differentiated between “earned” and “unearned” wealth and noted how the wealthy maintained themselves in idleness and luxury via “unearned”, rentier income from their land and capital.

    We can no longer see the difference between the productive side of the economy and the unproductive, parasitic, rentier side. This is probably why inequality is rising so fast, the mechanisms by which the system looks after those at the top are now hidden from us.

    All rentier activity is detrimental to the productive parts of the economy, siphoning off prospective purchasing power to those that like to sit on their behinds.

    If we were still able to recognise the difference between “earned and” “unearned” wealth we might realise that encouraging rising prices of stuff that exists already is not very productive, e.g. housing booms.

    Same houses, higher prices, higher mortgages and rents, less purchasing power.

    As the rentier economy booms, rents and interest repayments on debt escalate and purchasing power goes down leading to the current debt, deflation.