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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Little Joe who wrote (99204)	10/24/2008 10:22:00 PM
From: Pogeu Mahone	4 Recommendations Read Replies (1) \| Respond to of 110194

Allegations that the world's major central banks actively work together to suppress the price of gold were given credence in only 2004 when Paul Volcker — chairman of the U.S. Federal Reserve at gold's all-time top — wrote in his memoirs that "letting gold go to $850 per ounce was a mistake" during the last great bull market in gold bullion. At one of the policy meetings led by Volcker in late 1979, his Federal Reserve committee noted the threat of "speculative activity" in the gold market. It was spilling over into other commodity prices. One official at the U.S. Treasury called the gold rush "a symptom of growing concern about worldwide inflation." "We had to deal with inflation," as Volcker said in a PBS interview in September 2000: "There was a kind of great speculative pressure. "It was the years when everybody wanted to buy collectibles from New York. The market was booming, and other markets of real things were booming — because people had got the feeling that things were inflating and there was no way you could stop it." But besides waving a gun at anxious gold owners, there seemed only one other route to stopping speculators profiting from — or, rather, defending themselves against — the demise of the dollar. Fix it up with higher interest rates. The Volcker Fed took U.S. interest rates to 19%...and put the real cost of dollars above 9% after adjusting for inflation. The gold price sank almost in half inside 12 months. Because just like Wayne Angell says, the price of gold really is determined by central bankers. They hold it very easily...simply by causing the opportunity cost in terms of interest rates and U.S. Treasury bills to make it unprofitable to own gold. To do that, however, they have to raise interest rates dramatically above inflation. If you don't trust the Bernanke Fed to do that — not least after it cut 0.5% off the returns paid to dollar savings in mid-September — then you want to consider buying gold today. Regards, Adrian Ash BullionVault whiskeyandgunpowder.com