That 'frightening' chat with Ben Bernanke


Editor’s note: Mark Leibovit is one of the investment world’s top-rated gold timers, and helps investors anticipate and benefit from both the ups and the downs of the precious metals markets with his Leibovit VR Gold Letter (available to WND readers at a huge discount).
From Bloomberg News:
Einhorn finds dinner chat with Bernanke ‘frightening’
David Einhorn, manager of the $10 billion Greenlight Capital Inc., said he found a recent dinner conversation with former Federal Reserve Chairman Ben S. Bernanke scary.
“I got to ask him all these questions that had been on my mind for a long time,” Einhorn said in an interview today with Erik Schatzker and Stephanie Ruhle on Bloomberg Television, referring to a March 26 dinner with Bernanke. “It was sort of frightening because the answers were not better than I thought they would be.”
Einhorn, 45, has been critical of Bernanke’s willingness to leave interest rates near zero for more than five years. The hedge-fund manager has said the benefits of low rates diminish over time until they are more harmful than helpful and that the Fed’s stimulus has led to income inequality. Bernanke, a former Princeton University economics professor, stepped down this year after eight years helming the U.S. central bank. …
From King World News:
‘This is what’s going to happen when all hell breaks loose’
Forty-two-year market veteran John Hathaway, co-portfolio manager of the Tocqueville Gold Fund, spoke with King World News about what to expect when “all hell breaks loose.” Hathaway is one of the most respected institutional minds in the world today when it comes to gold, and also discussed the bullion banks’ secretive involvement in the gold market, including such banks as JP Morgan, Goldman Sachs and Morgan Stanley.
Hathaway: “It’s scary that Bernanke can be so complacent and say to David Einhorn (hedge fund manager and president of Greenlight Capital) that there is no risk of hyperinflation. There has to be some risk. The Fed is arrogant, it’s complacent, and there is erroneous thinking. You pretty much name the accusation and the Fed is guilty as charged.
“But I am also watching the U.S. Dollar Index. Normally when you have geopolitical tensions, there is a kind of Pavlovian, kneejerk rush into the dollar. Up to now we have seen quite the opposite. The continued weakness in the dollar is saying to me that America’s protective cover for geopolitical risks is certainly not what it used to be.”
King World News: “When you see the dollar hitting 19-month lows, and very close to hitting two-year lows in this environment, investors are beginning to say, ‘Something is wrong here.’”
Hathaway: “This is definitely not what we would expect to see based on the history of how the dollar has traded. But the dollar is now in an area where it has mounted countertrend rallies. The reality is that the foreign exchange market is pretty tough to control. I’m sure central planners are in there trying to manipulate currency rates. So the dollar is the canary in the coal mine. It’s something for everybody to watch because it is certainly anomalous that the dollar would be so weak at a time when investors are circling the wagons.
“The carry trade, to me, is something that is never talked about. But if you think about it, when you have borrowed gold, which these guys have done, and used it as a funding mechanism for lots of different things, the reckless borrowing and leveraging of gold has now become an incredibly crowded trade.
“This is especially true when the price of gold is weak because you have low funding costs in terms of lease rates, and then on top of that you’ve got your basis risk going your way because you are short that currency. In a rising market that is not a factor, but it was certainly a factor back in the late 1990s when we saw the whole syndrome of central bank selling, gold companies hedging, and a 20-year bear market. So it was a free-for-all in terms of abusing the gold market with that type of trade and leverage.”
Embry: Hold onto gold as ‘currency event’ likely
John Embry, chief investment strategist at Sprott Asset Management LP, said last month that the rally at the beginning of the year was encouraging, but to remember that sentiment for gold is still extremely negative. He says the stock market’s new highs are a result of the Fed “jamming cash into the economy.” With nowhere else to go, cash is creating bubbles in stocks, real estate and bonds, he warns.
Q: “Gold has fallen back down over the last month. Do you think optimism for a fast recovery in gold has fizzled out?”
Embry: “I believe that is probably a fair assessment of what has happened since. I think that the decline in the last month has hurt confidence in the West. But I can assure you that the Eastern interests are rubbing their hands and piling into all the physical gold they can get. Once they realize that there is a limited amount remaining for them to pour their U.S. dollars into, I believe the price will move up sharply.”
Putin, gold and silver: What you need to know right now
According to Larry Edelson with Weiss Research:
It’s a fait accompli. War and bankrupt economies go hand in hand. When desperate, like the governments of the United States and Europe are now, strange things start to happen.
You only need look at the historical record. The collapse of Rome was accompanied by many different civil rebellions and international conflicts. Ditto for the Ottoman Empire. The British Empire, when it fell on desperate times. For Spain. For Germany.
For every major economic power throughout history, when governments became bankrupt and desperate for cash, they imploded by attacking others and their very own citizens, through sleight-of-hand tax increases, through confiscatory policies that first racked everyone’s money, then confiscated it, through loss of civil liberties, through propaganda and more, lots more.
Weakened, they lash out. They prepare to rally the people, they look for distractions, reasons to spend even more money, all with the aim of consolidating the national psyche. This is what the United States is doing now. Russia is doing the same thing. Putin is rallying the national psyche. The Russian economy, weakened internally by corruption, by alcoholism, by declining revenues from the three-year bear market in commodities, is not in much better shape than Europe or the United States. So the battlefield is now prepped. Russia versus the West. Russia versus Europe and the United States.
From Got Gold Report:
Gold trade nearly net long Comex gold futures
The “Got Gold Report’s” Gene Arensberg says that what he calls “the gold trade,” the biggest operators in the gold business, have cut their usual short positions to almost nothing, indicating that they see little downside risk to the gold price. Arensberg’s commentary is headlined “Gold Trade Nearly Net Long Comex Gold Futures.”
From the American Enterprise Institute:
Coins that go clunk: 50th anniversary of the disappearance of silver money
The year 2014 is a little noticed 50th anniversary: the anniversary of the disappearance of U.S. silver coins from circulation in 1964. In that year, the American people decided that silver was probably going to be a better store of value than paper dollars, regardless of the pronouncements of the central bankers and politicians of the time. The people were right. At silver’s year-end 1960 price of 91 cents an ounce, the 0.77 ounces of silver in a silver dollar had been worth about 70 cents. But by late 1963, it was worth a dollar. Today, with silver at approximately $20 an ounce, the silver in a silver dollar is worth more than $15. (Silver has been as high as $49 an ounce.)
Up to the 1960s, American dimes and quarters (as well as half-dollars and silver dollars in those days) rang when you dropped them on a table. Now they go clunk. This change from coins made of silver, it might be said, is of little practical importance. Yet it symbolizes a profound shift in the behavior of the U.S. government with respect to money, a precursor to the immensely destructive Great Inflation of the 1970s.
Long before the 1960s, all the gold coins and bullion of American citizens had been confiscated by their government under its diktat of 1933. At the same time, the same government defaulted on the bonds it had promised to pay in gold. It took the extreme, indeed despotic, step of making any possession of gold coins or bullion by American citizens illegal and a punishable, criminal offense! It became harder for Americans to protect themselves against money printing. This law, which today is hard to believe, was real, and lasted four decades, until 1974.
From King World News:
What’s really happening in Ukraine and the war on gold
An outspoken hedge fund manager out of Hong Kong spoke with King World News about what is really happening in Ukraine and the ongoing war in the gold market. William Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, also discussed the relentless propaganda coming out of the Western mainstream media outlets:
“To make gold an asset of serious interest again to a range of investors, we have to get through the next big number which is $1,400. That’s pretty important. We talked about this a while back and I was skeptical at the time that we would get through $1,400 in the short term and we didn’t. The defense of that number was extreme.
“When gold was approaching $1,400 we weren’t seeing the type of tightness in the market that you would want to see in order to break that key level. And then, after a reversal in which gold went below $1,280, we started to see real tightness in the gold market once again.
“So we started to see backwardation in gold, and we also saw GOFO [Gold Forward Offered] rates which were negative. In that situation, people are holding on to their gold and not lending it into the system. Every time they have taken the gold price to $1,280 or below we see the reemergence of those symptoms of tightness.
“If we see increased geopolitical tensions and the reemergence of India fully coming back into the gold market, these are the types of things that can act as a catalyst to move gold through key resistance levels. There have been clear signs of renewed Indian buying, which is interesting because you wouldn’t think that prior to a new government being installed, which is expected to be more gold-friendly, that you would see mass buying.
“I believe the renewed buying is from dealers who anticipate more gold demand and want to be in a position to fill it when a lot of these controls get relaxed and the tariffs come down. So that could be one of the driving forces for the gold market. And if we see that increased Indian demand along with robust Chinese demand and strong demand from Russia and Eastern Europe, then the cartel could be put on their back foot. We are not there yet but over the long term I anticipate far higher gold and silver prices than we see currently.”
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That ‘frightening’ chat with Ben Bernanke
Mark Leibovit
Thu, 15 May 2014 01:14:31 GMT

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