On June 3, 2009, Fed Chairman Ben Bernanke made a simple statement before Congress, under oath: "The Federal Reserve will not monetize the debt."
If any doubt remained that the Fed will do just that, Dallas Fed President Richard Fisher squelched it last Friday when he bluntly stated in a speech, "For the next eight months, the nation’s central bank will be monetizing the federal debt."
As I see it, there are two possible explanations for Mr. Bernanke's mis-statement:
I can't decide which is worse... Either way, a good old fashioned impeaching is definitely in order.
It won't happen, of course. But a man can dream, can't he?
The good news is that Bernanke's credibility is stretched razor-thin at this point. If you aren't convinced yet, watch this video on YouTube.
Eventually, the banksters will be exposed and restrained. Hopefully that happens sooner rather than later.
Unfortunately, we'll need a big catalyst to spur real change; that catalyst will probably not be something pleasant.
At least we won't have to suffer through more ridiculous editorials about Fed "exit strategies." There is no exit strategy — only a desperate fight to prop up TBTF banks at all costs.
Extend and pretend, the bonuses must flow. Wall Street firms will pay out a record $144 billion of them this year, by the way.
Savers and retirees will continue to bear the brunt of this greed and recklessness, another point Mr. Fisher slammed home in his speech:
But I take no comfort, and see considerable risk, in conducting monetary policy that has the consequence of transferring income from the poor and the worker and the saver to the rich. Senior citizens and others who saved and played by the rules are earning nothing on their savings, while big debtors and too-big-to-fail oligopoly banks benefit from their subsidy.
It is refreshing to see such blunt criticism coming from a sitting Fed President, but Mr. Fisher and his hawkish allies are hopelessly outnumbered by doves at the Fed.
Bernanke and William Dudley (NY Fed Pres, Goldman alum) run the show for now. As long as they do, the beatings printing will continue.
When inflation rears its ugly head, they'll sheepishly defend their actions as "necessary to prevent yet another Great Depression"; that they "couldn't have seen it coming," and things would have been unfathomably worse, had they not acted.
It's a easy argument for them to make, as it is impossible to disprove.
The precious metals owner's conundrum
As much as I despise the Fed, with this run we've seen in precious metals I'm tempted to send a gift basket to Maiden Lane.
Silver is trying to break out above $28, gold is setting fresh highs, and palladium continues its parabolic move up — all due to those mad economists at The Fed, who precious metal longs like me have a love/hate thing going on with.
The move in silver has been freakishly strong. So much so that I suspect there's something at play here besides the obvious money printing angle.
Readers may remember a story we told you about in May. Silver was trading in the $18 range at that time, and news broke that JP Morgan was being investigated for fraudulently manipulating the silver market.
Back then I wrote, "But if the allegations prove true and banks are forced to cover massive short positions, a relatively thin silver market could see a big squeeze — and far higher prices."
We don't know if this short squeeze caused the latest runup, but silver is up almost $10 since — higher than even my most optimistic guesses, and $50 silver seems more realistic every day. If it gets there, those dollars in your pocket will be well on their way towards parity with toilet paper.