Insiders to Fed Chairman Ben Bernanke’s speech, delivered at a gathering of the National Association of Business Economics, popped silver futures higher by more than 60 cents within minutes of the NY open on Monday. In his speech, Bernanke has finally admitted that more QE is needed, and his needed excuse is: fight stubbornly high unemployment.
The recent alleged decline (see ShadowStats.com) in the unemployment rate reflects a “a reversal of the unusually large layoffs that occurred during late 2008 and over 2009,” he said to attendees in Arlington Virginia. “To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.” Sign-up for my 100% FREE Alerts
“Continued accommodative policies!” Translation: Attention silver bugs! Get back into the pool—NOW!
While the FOMC is now stacked with nine doves to Bernanke’s 10-person committee, with Richmond Governor Jeffrey Lacker playing the sole bad cop in his role of providing the occasional head fake for those traders who don’t quite grasp the Fed’s communique con game, yet, there’s nothing stopping the Fed from its mission to monetize crushing levels of U.S. Treasury debt (save a long-shot Ron Paul win in November, of course).
To that point, on Friday, Gabelli & Company’s Caesar Bryan warned precious metals investors of the Fed’s ability (and a complicit media) to sway sentiment among the uninformed momentum traders who routinely push the silver market to massive extremes on the way up and on the way down.
“What we’ve seen is some optimism surrounding the U.S. economy,” Bryan told King World News. “This has led to people now thinking that the Federal Reserve can stop expanding their balance sheet and indeed begin to withdrawal some of their stimulus.
“So there’s been a pretty big change [due to Fed and media propaganda] in the last six weeks. However, I think it’s important for investors to understand these mood swings can be pretty quick and violent.”
Bryan goes on to tell KWN that, though the Fed talks a tough game, it cannot stop expanding its balance sheet without imploding the entire global financial system—a point still not grasped by the majority of investors holding sovereign and corporate debt as well as money market accounts.
“There is real pressure for the central bank to continue to buy at the long end of the bond market to prevent long-term interest rates from rising,” Bryan said. “So don’t be surprised in the next couple of months when psychology shifts back to people thinking the Fed will remain active.”
In retrospect, those “next couple of months,” according to Bryan, turned out to be only a couple of days.
But if investors can take to heart 50-year veteran Jim Sinclair’s macro outlook for gold (by extension, silver), long and drawn-out declines in the silver price provide excellent entry points for newcomers and accumulators, or ‘stackers’.
According to Sinclair, the Fed had already set course to monetize debt and devalue the US dollar following the collapse of Lehman Brothers in 2009, no matter what Bernanke may say about unemployment, the economy or anything else.
Moreover, geopolitical considerations regarding Iran and the White House’s decision to cut Iran from SWIFT only serves to hasten the dollar’s decline.
On Saturday, Sinclair posted on his Web site JSMineset.com:
The major financial weakness in the U.S. is the level of the U.S. dollar due to sundering use in international contract settlement [accelerated by cutting Iran from SWIFT], the clear and present trend of substituting both the Yuan and Euro as international settlement currencies, and the lack of true economic buyers in the U.S. long bond market.
History will record this decision at this time as a major factor in the final move to financial unwind in the West.
The letdown of the housing report today does not support the majority view that the U.S. is gaining take off speed economically. It is not. It will not and QE will go to infinity, about that there is no question. [Emphasis added]
Of course there’s no question about QE-to-infinity, as Sinclair has suggested all along; the question really is, who will be blamed for the roaring consumer price hikes to come? The Fed or Iran and speculators? Sign-up for my 100% FREE Alerts