Jeffrey Snider: Granny’s Obsession With Gold Perfectly Rational

This is a remarkably well-written piece by Jeffrey Snider, Chief Investment Strategist for Alhambra Investment Partners. Snider tears down the façade of central banking prowess to take a peak into what’s really puzzling to Ben Bernanke.  As Bernanke was testifying before Congress this week, he remarked that “nobody really understands gold prices”.  Why should they when they’ve been fed an endless diet of lies and misinformation?  As Snider points out, grandma’s interest in gold is perfectly rational, because she has experience with arrogant central planners who think they can defy gravity indefinitely.  Recent history has proven that our beloved central bank and the FOMC have been completely oblivious to the bubbles they’ve blown and the damage they have created within the real economy.

As the recent Bloomberg article proves, there are still those within the mainstream media willing to demean or condescend to anyone who has interest in an alternate currency or isn’t willing to tow the line for the status quo, just as Barry Ritholtz recently did when he stated, “The bull market is broken, the prior narrative has utterly failed, and is no longer taken seriously, except by yellow metal jihadists and other assorted suckers.”  And we’re supposed to believe you’re agnostic about the yellow metal? LOL! As Snider details in a very well-constructed piece, the narrative hasn’t failed at all. Bankers, and particularly central bankers, are still egregiously arrogant and ignorant of real money and anything that doesn’t fit within their tidy constructs provided by an Ivy-league education.  They live in a vacuum, not in the real world.  That’s why they fail so miserably when it comes to their economic projections. Snider elaborates…

“What is true in Vietnam today is equally comparable to every developed nation under the thumb of central bank unilateralism.  To this even Bernanke admitted the appeal of gold against “extreme events”, which fully contrasts with his puzzlement.  But where this partially reconciles in the modern economic canon is that he trusts his own abilities to perform as central planner, while discounting that so many may not (he has a Princeton pedigree, after all).  In the conventional narrative where gold is a misunderstood asset class, the Federal Reserve is populated by heroes that saved us from the mess of banking and free markets.

We know better, as banking has not been about free markets in a long time, most certainly under the interest rate targeting schematic, and the desperate crises that continually roil into volatility are the handiwork of unilateral management of fiat without competition.  If gold was actually money today, paper dollars would have been spent into oblivion.

The patterns here are fully recognizable to anyone with an open mind.  Central banks say, “trust us”, but then intentionally rid the world of any choice.  That is fully incongruous behavior and doesn’t lead to trust, but some kind of Orwellian dystopian fantasy of control that is largely unobserved (it is here that financial complexity is most dubious).  For the uninitiated, dollar denominated asset classes appear to provide varying degrees of protection from the “occasional” central bank misstep.  But, as 2008 should have shown without ambiguity, there really is no place to hide inside the dollar system.”

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