Bernanke.......ah.
Paul Krugman, another Princeton Economics Dep't brilliant guy, probably roomed with Bernanke, but got himsel a Nobel, thus outshining The Bald One, and therefore moving into the same league as Al Gore and other luminaries, had this to say about gold as recently as 2009, proving that SAT scores, PhDs from Princeton, Nobel Prizes and Federal Reserve Chairmanships are about as useful as tits on a boar in the real world.
Why? In a nutshell, these guys lack wisdom and judgment but their impressive credentials have propelled them higher and higher. When they f*ck up, which is often and spectacularly, they rely on their credentials. Odd, that word, credentials, has the same root as credibility and, probably, credit, i.e., the thought that we are to take things on faith because.....well, just because we are smarter than you....bollocks.
As you will see, he suggests that the gold thing is a marketing scam, never mind that the central banks of just about every nation are buying as much of it as they can and that Joe and Jane Six Pack have not caught on. Two years worth of experience to the contrary, a spectacularly rising gold price, and a total and complete failure of the Keynesian model, have not changed the fraud's perspective as he has not said anything about the erroneous blog article he published in the NYT.
krugman.blogs.nytimes.com
The Glenn Beck / DeBeers Connection Kash, at the Street Light, has a very good post on the price of gold and its relationship or lack thereof to inflation fears. He points out that the market for gold is surprisingly small, so that it would take only a relatively small number of extra buyers to push the price way up, even when other, more direct measures of expected inflation remain low. And he draws a parallel with diamonds:
It’s also conceivable that a good advertising campaign by gold producers could be enough to move the price of gold. Imagine that an effective, sustained advertising campaign, targeted at wealthy, conservative individuals in the US, is able to persuade 25,000 of them per month to switch a portion of their financial assets into gold. (Note that the target audience would be those roughly 3 million US households that have over $1 million in financial assets.) Suppose for the sake of argument that each of them is persuaded to shift just 5%, or $50,000, of their portfolio into gold. Such an advertising campaign would have the effect of pushing $15 bn per year into the market for investment gold — very possibly enough to have a significant impact on the price of gold, given how small the overall market for gold is.
Note that a very similar thing happened to the market for diamonds in the middle of the 20th century. The DeBeers diamond cartel used an incredibly successful advertising campaign in the 1950s to cement the idea of the diamond as the premier gemstone, and in so doing permanently changed the value of diamonds.
Surprisingly, though, Kash doesn’t say explicitly that this parallel is not at all hypothetical. Glenn Beck was financially intertwined with Goldline, and therefore had a financial stake in pushing fears of hyperinflation. And he had many, many viewers. So there was a direct channel through which conservative Americans were being pushed into buying gold.
Market prices almost always tell you something useful. But sometimes what they tell you is that there’s a marketing scam in progress. |
