Gold Daily and Silver Weekly Charts - Brad DeLong: 'Bernanke Defines What the Market Is'

"For the greater good, I want to do what must be done."

Dolores Umbridge

Brad DeLong, the Berkeley history of economics professor, said on Bloomberg TV today that Bernanke is 'the whale that can't be harpooned.'   

And hedge funds missed an easy trade by not going along to get along by riding the rising markets.  Those that are fading Bernanke are going to be overwhelmed by his power.  So just follow the Fed's guidance, obey, and get rich.

As Brad says, and I quote,  'Bernanke defines what the market is.'  

That is a fairly profound statement, containing certain judgements and assumptions, if one thinks about it.  So much for old fashioned concepts like price discovery. Wasn't there some lesson in this most recent financial crisis about the mispricing of risk?

I cannot say I was entirely surprised, because Brad also derided the moral hazard objections to the TARP, when it was proposed by Hank Paulson on a single sheet of paper, as puritanical.

What would we call such an intellectual position, that the Fed has and should have the power to define the market and what it is?   

It is a big ironic that the omnipotent Fed doesn't hesitate to claim cluelessness and non-involvement after something in the economy blows up, generally a bubble of their own making whether they admit it or not.

I don't think Bernanke is a whale. I think he is the captain of the Titanic.  And I think that Brad aspires to a position on the bridge.

We all understand the theory of a modern money which can be created and distributed at will, whether it be by a central bank or the Treasury. And control of the world's reserve currency is certainly what some might call an 'exorbitant privilege' of power. 

Bernanke and the Fed may be powerful.  But they do not control the whole world, at least not yet.  And so their power may have some boundaries.  And if those boundaries are transgressed, the result might be rather memorable.

I suppose we could turn to someone with a knowledge  of the history of economics for examples of that.  But perhaps not the history of economics professor from Berkeley.

Hedge Funds Receive Bernanke's Market Decrees, Janet Yellen Escorts Them Out

SP 500 and NDX Futures Daily Charts - Complacency Buys the Dip

Or as Brad DeLong, the blogging Berkley economist said on Bloomberg today, the Fed is the market and don't fight the Fed.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

The premiums are pressed rather heavily, reflecting both short selling and a type of capitulative pessimism.

As you know I tend to view 1420 as key downside support for gold.

Gold Daily and Silver Weekly Charts - Acts of Desperation

"It is not at all uncommon for someone to arrive at a scene of brutality or injustice and, with a sympathetic murmur or heroic flourish, attack the victim."

Renata Adler

Intraday gold tagged the 50 percent retrace of its rally off the bottom, and then bounced back.

From everything I hear all these paper price declines are met by heavy physical buying. The jokers may have overplayed their hand.

The potential 'bull flag' is gold is very much intact.  The rally from the bottom has now been retraced. 

See you Sunday evening.

SP 500 and NDX Futures Daily Charts - Complacency

This is the longest beginning streak for a year without at least a 4% correction since 1995.

Have a pleasant weekend.

BBC2: Bankers Fixing the System

"In our time political speech and writing are largely the defense of the indefensible."

George Orwell

Libor scandal: Can we ever trust bankers again?

"In the five years since the crash that brought the world's economy to its knees, bankers have lurched from one crisis to another.

Scandal after scandal has raised questions about their pay, their values and their judgement and after the industry received billions in taxpayer bailouts, the public is in no mood to forgive and forget.

Like it or loathe it, banking is a vitally important industry to London and the whole of the UK.

But can we ever trust bankers again?"

If you live in the UK you may watch the series here. BBC iPlayer

Otherwise you may watch episode one below.

Gold Daily and Silver Weekly Charts - The BRICs Are Restless and Demanding Change

Apparently the depressed prices in mining stocks have resulted in record insider buying in junior mining shares.

The Yen broke 100 to the US dollar today.  That is a 'big deal' in forex circles.

David Rosenberg thinks that:

"We currently are witnessing the Potemkin rally. For a quick background the phrase Potemkin villages was originally used to describe a fake village, built only to impress. According to the story, Russian minister Grigory Potemkin who led the Crimean military campaign erected fake settlements along the banks of the Dnieper River in order to fool Empress Catherine II during her visit to Crimea in 1787..

The term, however, is now used, typically in politics and economics, to describe any construction (literal or figurative) built solely to deceive others into thinking that some situation is better than it really is.."

Ben Bernanke, recently proclaimed “The Hero” by Atlantic Magazine, is the “Wizard of Potemkin.”

There has been little or no mention of or word out of the G20 conference in Turkey about 'Reinventing Bretton Woods.'  I have been talking about this for some time and linked to the original agenda when it first came out.  I reminded you of it a couple of weeks ago.  But there is little heard about it so far.

The G7 did call a special meeting for this weekend to discuss serious bank reform.  The Bankers were not pleased with this, but apparently had no choice.   And some were not happy with having to make all the last minute arrangements for this august gathering of central bankers and finance ministers.

The G7 tried to spin this as a late reaction to Cyprus, but that is what the Brits like to call 'bollocks.'

It is said to be a response to a request from China and Russia and a few associates for the G7 to get their dirty financial house in order.  Cyprus was the last straw in a series of outrages.  Europe is none too pleased with having been sold all that dirty paper in the last bubble.  We already knew that from Jeffrey Sachs talk to the Philly Fed last month.

And as always, gold is talked about in whispers.

"It's very rare for a G7 to focus on financial regulation," one of the officials said, speaking on condition of anonymity.

There is also a general displeasure about the currency games being played by London, New York/Washington and Tokyo, and their playing fast and loose with global commodity prices that are disrupting other nations' economies.

There is apparently some behind the scenes 'horse trading' going on at the G20 currency conference.  And there is a push back by the Anglo Americans to defer any action or announcement until later this year,  other than the usual bilateral and multilateral currency agreements.

I hear that this may culminate in September.  But words are cheap, and rumours are plentiful, so let's see what happens.