Chairman Greenspan and Governor Bernanke of the
Federal Reserve Do a Major Commercial for Gold
By
James Sinclair

We have two recent major fundamental pro-gold developments. In fact, if there was a Gold Scripture the words we are going to review would be the akin to those sacred words, "In The Beginning Was The Word."

Bernanke and Greenspan of the US Fed uttered the most pro-gold statements that I have ever heard. These statements, properly understood, confirm to me beyond any doubt that we are in the very early stages of an extremely long-term gold bull market and a US dollar bear market. These words from the highest level of monetary management tells me that it is presently Fed strategy to see the dollar well under 100 on the US dollar index as an inflationary strategy to offset deflationary concerns. Greenspan said that "Even with the key lending interest rate only slightly over 1% , the Federal Reserve would stimulate the economy by expanding monetary aggregates even if that rate were close to zero." Ben Bernanke, one of the Federal Reserve's seven governors followed up by saying "The US government has a technology called a printing press - or, today, its electronic equivalent - that allows (The Federal Reserve System) to produce as many US dollars as it wishes at essentially no cost." Chairman Greenspan said "There is virtually no meaningful limit to what we could inject (money supply) into the system, were it necessary."

I respectfully disagree with both eminent gentlemen, Mr. Greenspan and Mr. Bernanke, in the assertion that there is no limit to freely printing or electronically creating money at any level they deem required by a failure of low interest rates to stimulate the US economy. Will external holders of US Treasuries sit back and enjoy being pillaged? We have had years of lower interest rates with no stimulative effect on business. What makes anyone believe that businesses will aggressively borrow money and expand activity because money is cheaper now? The cost of money has been cheap, cheap and cheaper on a constant basis for a long time. Clearly, we are being told that we are on the verge of even higher levels of monetary growth. That means lower quoted market levels for the dollar and higher market levels for gold. It means to me that the world dollar reserve currency acceptance and present theories of global markets are going to come under reexamination. Without question the adoption of the dollar reserve standard and global markets as expounded by the World Bank and IMF Ivory Tower Ph.D. instructions decked Central & South America because the sharply rising dollar held down their key commodity prices while globalism failed to deliver what the IMF and World Bank promised. Does China want inflation now on top of their internal banking problem? Do the Islamic oil producing nations want dollar inflation? As the dollar now falls, the USA exports inflation to dollar reserve asset based nations like China. With gold being re-monetized by the events of the Gold Dinar, will Asian Islamic nations be tempted to consider alternatives to a dollar which our banking system manager now say can be created by electronic printing presses at practically no cost? How can no-cost dollars command respect either in the market or as a reserve asset? Who thought up the strategy of the World Gold Council promoting gold jewelry when Greenspan and Bernanke just did the best commercial ever conceived for gold's true role as a the currency of choice. The more you produce of anything the more likely to are to see the price decline.

The dollar is not different from any commodity going into oversupply. Its price will decline and that decline will finally produce the limit to the printing press. The free and wanton creation of dollars to attempt to resuscitate a national economy will impact other nations who have bought into the proposition of using the dollar as an alternative reserve currency. As the dollar rose significantly we exported deflation. As the dollar falls we will export inflation. As the dollar falls gold rises. As gold goes, goes the non hedged gold shares.