ben bernanke

Flashback: De Gaulle and the Gold Standard

In 1965, former French president Charles De Gaulle called for an international return to the gold standard. De Gaulle said a monetary standard based on gold would keep government spending in check and prevent the sort of economic crisis we are now enduring at the hands of the money masters.

“The fact that many countries, accept as a principle, dollars being as good as gold, for the payment of the differences existing to their advantage in the American balance of trade,” said De Gaulle, “this fact, leads Americans, to get into debt and to get into debt for free at the expense of other countries. Because what the US owes them it is paid, at least in part, with dollars the are the only one allowed to emit. Considering the serious consequences a crisis would have in such a domain, we think that measures must be taken on time to avoid it. We consider necessary that international trade be established as it was the case before the great misfortunes of the world, on a indisputable monetary base, and one that does not bear the mark of any particular country. Which base ? In truth no one see how one could really have any standard criterion other than GOLD !”

De Gaulle later said that the United States “exports inflation” and should agree to major reforms of the world monetary system and help to establish a pure gold standard in international finance.

Richard E. Caves, at that time the chairman of the Economics Department at Harvard, said “De Gaulle doesn’t know what he’s talking about” and lauded “reforms” instituted by the IMF and praised the idea of special drawing rights for countries that faced serious deficits in their balance of payments.

De Gaulle’s gold standard “scheme” was “wildly irrational,” Caves said. Paul A. Samuelson, professor of Economics at M.I.T., added that De Gaulle’s chief advisor was “an idiot” for suggesting such a proposal.

Fast-forward more than forty years. Gold is climbing toward $1,800 and ounce. Central banks are now abandoning the dollar as the world’s reserve currency. The United States has lost its top-tier AAA credit rating from Standard & Poor’s on concerns over budget deficits and a no-end-in-sight debt burden. Economic growth is anemic at best. Unemployment keeps climbing.

Meanwhile, the boss of the privately owned Federal Reserve, Ben Bernanke, has warned government not to cut spending “in the near term,” thus guaranteeing a continuation of unsustainable deficit spending and debt.

It makes you wonder – who was the idiot? De Gaulle or the academics at Harvard and M.I.T.?

Article written by Kurt Nimmo
August 26, 2011

Emerging Signs of A New Global Crisis

A more than one trillion dollar debasement in 2013 is now apparent.

Last week, the Federal Reserve announced an expansion of its bond-buying program consisting in large scale purchases of long-term treasury securities.

These purchases come in addition to the monthly $ 40 billion in mortgage-backed securities (MBS), the so called QE3, launched in September of this year. This means that now, monetary expansion will be equivalent to a total of $85 billion a month. Simply put, this is an unprecedented rate of currency creation for the FED.
Thus, a more fitting name for this latest round of easing would be QE4Ever (QE forever).

The novelty in the Fed’s most recent statement is that for the first time it has linked its bond purchases to specific economic parameters.

The FED stated it would hold its target interest rate (currently between 0 and 0.25%) and continue easing for as long as unemployment remained above 6.5% and inflationary expectations did not exceed 2.5%.

How did the FED select the given unemployment rate parameter?

Perhaps it is associated with the fact that unemployment sat at 6.5% at the cusp of the financial crisis in October of 2008.

If the labor market does not improve substantially (hint, hint… it won’t) the FED’s Open Market Committee will continue its purchases of Treasuries and MBS indefinitely with a likely possibility of increasing these purchases in the future.

The central point for stock markets is that this ultimately leads to a trap. In the future, positive employment data could be judged as negative, by signaling an end or a reduction to the FED’s stimulus to an economy that has become dependent on it. This would be negative for stock markets, as it is no secret that there exists a direct correlation between monetary stimulus and rising stocks.

However, we must realize that Ben Bernanke, FED chairman, is not willing to tolerate high unemployment nor is he willing to tolerate falling stock markets. This exposes an already evident problem: QE dollar debasement will remain the essential wonder drug to sustain this ficticious notion of a “recovery”.

A simple reminder that in order to lower the unemployment rate from its peak of 10% in October of 2009 to 7.7% in November of 2012, the FED added $ 1.8 trillion to the currency supply, today closer to $ 2.7 trillion (see chart). A high price.

At the advertised rate, in less than a year, the FED’s balance sheet could be approaching $ 4 trillion or beyond.

Continue reading QE4 Ever: Emerging Signs of A New Global Crisis at