A subscriber sends this my way... "This gem, in today's WSJ, is worthy of the Onion." I agree.
By Jon Hilsenrath
Federal Reserve Chairman Ben Bernanke says he’s a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, might be interpreted as a loud signal from markets that big inflation pressures are building in the U.S. Gold is seen by many investors as a hedge against inflation risk.
Ben: All we did was ramp the money supply to whatever level was needed to raise asset prices. What's all the fuss about?
In this case, it might instead be a risk against risk broadly [Huh? --gt]. Mr. Bernanke notes that the inflation signal isn’t confirmed by movements in other asset classes. Yields on Treasury bonds tend to rise when investors worry about inflation, but those yields have been falling recently. Inflation expectations as measured in Treasury Inflation Protected Securities (TIPS) markets remain low. And other commodity prices are falling. Gold is breaking records, but copper prices are down 17% so far this year.
Ben: Duh, the assets we targeted for price increases like the stock market, oil, copper, food... you name it, they are all in danger of dropping again. But since there is no inflation - other than whatever the heck this pesky gold is saying - we will simply inflate the reserve currency again. No biggie; I think err... hope.
“I don’t fully understand movements in the gold price,” Mr. Bernanke admitted. But he suggested it might be another example of investors fleeing risky assets and flocking to assets that are perceived as less risky, not only Treasury bonds, but also ones like gold.
Ben: This real world stuff is a lot more challenging than I thought. So many confusing crosscurrents. Back in academia, every theory I put forth was accepted at face value by sycophants and mental masturbators throughout educated society. Why the fuck won't gold cooperate without coordinated intervention?!? Okay, gotta go... time to call Goldman and Morgan.
