Cash Will Soon Be King…For A While

Ben Bernanke, Chairman of The Federal Reserve,  at Jackson Hole, Wyoming in 2010.
He issued $500 Billion QE, sending all asset markets rushing north, especially precious metals.  
This year at the same location, he said more QE would soon be on its way, lifting gold again,  from $1475 to $1683 in six weeks.

Two months later, as the US government starts to cut spending in some areas for the first time in twenty years, as the Credit Rating Agencies reduce the US from AAA to AA,  he drops it into the conversation that, as far as QE is concerned, he’s changed his mind, claiming now that he’s worried about inflation.  These are all rapid-fire signals, coming on consecutive days, that prices are now going to allowed to drop.

These are the big players.  They lift markets and they pick the moment to crash markets once they’re cashed out.  Later they buy back in while the little guys get burned.

Here’s my comment on Guido, not moderated.

Gold has gone from $250 in 2002 to $1650 in 2011. It might go higher, but had there been no QE, the gold rally might easily have stalled in 2009 or 2010 at $500 lower.  Physical demand for the metal is dead.  The price runs up in the gold paper market alone.  Ordinary people and physical traders worldwide are selling their gold.
As for QE, this time there appears to be none coming after all, despite Bernanke’s comments at Jackson Hole two months ago.  Gold had fallen back to $1475, when Bernanke said more QE  would be soon forthcoming, sending it on yet another spurt to $1683.
The ending of QE (if real, and the Fed says now that they are worried about inflation and will not be making any) will send all asset markets plummeting, gold included. The most savage deflationary period of our lifetimes will be started. 

The people who make money from asset markets have to convince everyone prices can only go one way, and then throw the switch so they go the other. Guido’s been had this time, like millions of others. Sorry to say. Bernanke’s not playing the QE game any more.  Without the cash to drive commodity and share markets they will reverse, all of them, gold included.

Britain’s top blogger, Paul Staines knows what his readers like to hear.

Guido Fawkes believes the price of gold can only go one way.  He might be right, and so too nearly all his readers.  But to think any price can only go one way is usually an error.  I know my views on gold don’t match 99% of others’, but this is still my blog, and even though Fawkes won’t publish my views on his blog, they will always be posted on here!  Assets markets are a game for making money, for the big players.  The little guy gets burned every time.  Cash will soon be king once more (for a year or three).

Here is a good piece that explains why deflation not inflation is the underlying problem.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.
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11 Responses to “Cash Will Soon Be King…For A While”

  1. Me says:

    Interesting view. I’ve never been a reader of Guido Fawkes. I’ve picked up my view from people like Alex Jones, Gerald Celente, Bob Chapman, Max Keiser and sites like
    http://silvergoldsilver.blogspot.com/

    As far as I’m concerned I think cash will be okay for a while longer as assets deflate… but not but gold and silver, which will continue to rise because people realise that is their safe haven. You are right about deflation but wrong on the precious metals. Lindsay Williams was warning everyone that would listen this spring that the big players had sold out of the stock market.

    It’s also worth remembering hyperinflation doesn’t always begin with money printing. It’s caused by increased velocity of money as the psychology of market participants (individuals, institutions, businesses) changes to a “hoarding mentality”. Retailers are force to price up to keep stock on shelves. This forces the government to then print money again.

  2. Twisted Root says:

    When everyone is agreed and the price can only go one way crowd climb on board that is usually a pretty good sell signal in any market.
    Calling the top of a market is practically impossible which is why I disagree, but at some point you will be correct.
    Your analysis is useful and welcome, it reminds people not to get an emotional attachment to gold, but rather use it as one element of a defensive strategy against the long term devaluation of currencies.

  3. Me says:

    Tap, the Duggan killing was staged to get in the US “Supercop”.

    why had the police got into a situation where a shoot-out could occur in a very public area where by-standers could have been killed or injured, which is against their rulebook? assume Duggan shot first (we don’t know that). the police marksmen must have already had their guns drawn. otherwise they couldn’t have instantly shot back. if they already had their guns drawn, that means, on their account, they tried to make the arrest when he was in a cab. why not let Duggan get to his destination, resolve the situation with negotiation in a stand off? if they knew he was armed, I have read they were worried about a “reprisal killing”, why didn’t they approach him with more care? Where is the police radio with the bullet in it, which saved the PC’s life and proves Duggan shot (first?)? Can a police radio stop a bullet?

    http://www.google.com/hostednews/afp/article/ALeqM5hg_WfWE8Ae_cKj5UTmdVtnaXiPzg?docId=CNG.7e885139e8a1bc75f092f9

    Now this –

    “The post office, shops, news agents, mobile phone shops, council building that deal with customer complaints, smashed to pieces by mindless, mindless people last night – many of whom are not from Tottenham and had come from afar into this community intent on causing violence.” Come from outside the community to wreck it? Who would have known other than the community itself?
    http://www.telegraph.co.uk​/news/uknews/crime/8687150​/Tottenham-riot-burned-out​-shops-may-contain-dead-bo​dies-MP-David-Lammy-warns.​html

  4. Me says:

    Intended to be a peaceful vigil

    “The Metropolitan police has admitted it “had not anticipated” the extreme violence that saw police attacked and buildings and vehicles set alight during sustained rioting in Tottenham, north London.

    As questions were asked about the level of policing, Commander Adrian Hanstock said a peaceful vigil by the family of 29-year-old Mark Duggan, who was fatally shot by officers in the area on Thursday, had been “hijacked by mindless thugs” and that the situation had “escalated out of all proportion”.

    http://www.guardian.co.uk/uk/2011/aug/07/tottenham-riots-police-had-not-anticipated-violence

  5. israelite says:

    Both paper gold and silver have been sold 100 times over that which physically exists. This was admitted by Jeff Christian of CPM London in front of the CFTC around 2 years ago.

    This means that the same oz of gold and silver has been sold 100 times.

    All fiat paper currencies throughout history have crashed and burned after an average life span of 37 years. Our present fiat system has been going 40 years.

    The only reason gold and silver are not trading higher is because of massive government and central bank suppression.

    Last night gold rose over $40/oz in the far East markets and is now trading at over $1700/oz. China is airing TV commercials explaining how the continued printing of $s is leading to $ devaluation and recommending its people buy gold and silver to protect themselves.

    Germany 1929: 1oz gold=140 Reichsmarks

    Germany 1933: 1oz gold=84 trillion Reichsmarks

    Go figure.

    Paper currencies are the barbarous relic and not gold.

    Think of gold and silver as condoms, they both offer protection.

  6. Tapestry says:

    Gold and silver are sold over 100 times in the futures market. That means that there is no real demand only speculative demand. That’s a bubble. The debts that people have will have to be paid in $$$$$.

    As the future plays unwind, it will be $$$$ that will be scarce.

  7. israelite says:

    Tap, I don’t think you get it. The 100 times paper gold and silver are not the reason for the rise in the price of gold and silver, they serve to keep the price down.

    The paper metals serve no other purpose than to short the market in precious metals, and thus force the price down.

    It has been estimated that JPMorgan have sold the equivalent of several years supply of physical silver in paper, hundreds of millions of ozs, to keep the price down. Not surprising when you realise that the stock price of JPM is connected to the price of silver.

    The more the price of silver rises above JPM’s stock price the deeper JPM ends up in the dog poo.

    This is called naked short selling, the selling of something you do not possess. This is illegal.

    Fortunately the demand for physical metals continues to grow and one day soon will overwhelm the paper market. Then we will see default at the Comex and the LBMA.

    When that day comes nobody knows how high the price of gold and silver will go. You aint seen nothing yet.

  8. Tapestry says:

    If people need cash to pay their debts it creates a massive demand for ‘paper’ currency. What better idea than to sell precious metals to raise the cash now they are at historic levels….or at least gold is. Silver seems to have given up the struggle.

    The futures market can be used to suppress or boost the price of assets. Precious metal prices were suppressed somewhat ten years ago. They are currently either in a blow-off (gold) or have completed their blow-offs (silver, platinum etc)

  9. israelite says:

    Blow off!!!

    How can we be in a blow off stage when only 1% of the market is invested in precious metals. Back in 1980 25% of the market was invested in PMs.

    When a taxi driver tells you his £5000 oz of gold just went up a fiver, then maybe we are close to a blow off.

    I enjoy your blog. But when it comes to your views on gold and silver I believe you are way off the mark.

    Having said that, eventually one of us will be proven right.

  10. Tapestry says:

    If Bernbanke issues QE3, then commodities and other assets will rise, I would imagine. If he doesn’t, the trend for most has to be down. The need for cash to meet margin calls, and other calls will force many to liquidate their gold positions. That could trigger a stampede. I see gold holding $800 in any fall.

    Nothing rises forever Israelite. As gold falls, the much-maligned dollar will be in heavy demand.

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