by Chris Marcus, Miles Franklin:
Years ago Federal Reserve chairman Ben Bernanke somewhat infamously declared that he doesn’t understand gold prices.
Yet a decade later, the policies Bernanke installed following the subprime collapse have set up the conditions that will drive the next bull gold market.
Now whether Bernanke was actually being genuine when saying he doesn’t understand gold is a fascinating topic for debate. Yet regardless of whether the man who was given the authority to manipulate the world’s reserve currency really doesn’t understand the role that gold plays or was just spouting political jargon, those with even a faint glimmer of comprehension of the gold market are in position to benefit in a big way.
As evidenced by this week’s recent Federal Reserve policy meeting.
In which the Fed did raise interest rates another quarter point to the 2.5% level. Yet also indicated that instead of the previously widely expected 3 interest rate increases next year, it’s now more likely to hike only twice. While hinting that future actions will be dependent upon the data.
If that is indeed the case, I can tell you now what that data is going to indicate. Because the recent stock market and real estate market declines are no coincidence.
They are occurring at this particular time because money is being withdrawn from the system. And if interest rates continue to rise, that effect will only be further exacerbated. But what the Fed did not mention, was that given any further interest rate increases, the economy is going to continue to slow down (although interestingly enough former Fed Chairman Alan Greenspan has warned about what’s about to come).
How this all ends up playing out is not a complete mystery. The numbers and trends are easy enough to decipher when you know where to look. However the problem that many will be challenged to overcome is in blindly trusting that the Federal Reserve is giving you the full story in an accurate context.
Which you likely already know is usually not the case. And is certainly not the case this time either. Because to put it as simply as possible, the Fed is either going to have to sit by and watch the markets crumble under higher interest rates, or do what it always does. Which is backtrack and print more money.