Most reading this might not realize that the Fed secretly gave banks and other countries $7.7 trillion during the 2008 financial crisis.
The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing.
The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day.
The reason you may not find many references to the Bloomberg article is of course Bernanke’s rebuttal claiming that “it’s not true.” He made reference to the steps that have been taken since the financial crisis of 2008 to shore up the banks and make sure something like this doesn’t happen again. But what he said, I have a huge problem with. Let me preference this analysis with the fact that it was the Fed Chairman policies of Alan Greenspan and Ben Bernanke that created the bubbles that eventually burst through their low interest rate manipulations. For more on this read “Meltdown” by Tom Woods, PhD. Bernake’s rebuttal:
The words by Bernanke I take issue with are “including enhanced supervision for large, systemically significant financial institutions.” The Dodd–Frank Wall Street Reform and Consumer Protection Act did nothing to reduce the amount of sub-investment grade derivatives the nations top banks have on the books and in fact, they have more than at the height of the crisis! So how is Bernanke and the Federal Reserve doing in supervising these “too big to fail” banks? Not very well.
Future Federal Reserve Intervention Assumed
There is no doubt in my mind there will be a future need for Fed intervention in implementing emergency lending programs as they will be the only counterparty to these sub-investment grade derivatives. The question is, will it be secret since the Fed can never be audited and can pretty much do even more to “stabilize the markets” thanks to both sides of Congress who gave them additional powers via the Dodd-Frank bill, or will it take the form of another TARP bill funded by the taxpayers via Congress again? My guess is they’ll choose the secret route. Don’t want people to panic.
There is one more statement that Bernanke made in defense of the Federal Reserve from the Bloomberg article.
Here is what you need to ponder; if the Federal Reserve did in fact lend out $7.7 trillion, the lowest of the figures thrown around by the media (which were as high as $24 trillion), this accounts for $24,000 for every man, woman and child in the U.S. Now we know that 50% of these loans, if the money was just handed to individuals, wouldn’t be paid back, but just spent if handed to U.S. citizens. But the loans were made to banks, businesses and other countries with the assumption they would be paid back. What makes anyone think that Greece would pay back what they already owe the IMF? What about the other PIIGS that would receive handouts from the Fed (like their main banks that passed the stress tests not too long ago, which of course I knew they would because that’s how things work.
Another good question is, what would happen if the Federal Reserve did suffer a credit loss? The answer probably lies in the fact that they would somehow, publicly, never allow that to happen as they can always create money via some magical wand and press a button to have it appear to pay the debtor. The fact that they bail out their favored sons shows you to what lengths they will go to in protecting their interests and that of their connected friends. Instead of letting those banks (and businesses) that make mistakes fail, and allow the financial system to weed out the bad associated with it so the good can thrive (like credit unions), the Fed claims they must intervene. Their in lies our future. Ther in lies the reasoning to own gold and silver.
The Gold and Silver Market At Present
I am still looking for the 88,89 figure on the Dollar Index as I mentioned in my last article Confused About Falling Prices Of Gold and Silver? This would coincide with the Euro falling to the 118,119 level. The Dollar Index moving back up to these levels could also have a further effect on the prices of gold and silver.
The hard part to predict is how much of an effect because one has to remember there will be those in Europe clamoring to buy gold (primarily). Since I can say that no one is selling their gold and silver here at Buy Gold and Silver Safely, only buying, I have to turn bullish at some point, and I will.
I do expect a little bounce now after this last downturn in gold and silver, even with the dollar moving past 80 again. Silver is close to the 50% retracement which would be a good buy at $25 in my opinion. For both gold and silver though, I do expect to see that one last washout that market makers love to do with investors. They like to see “panic” and we might be getting close to that.
This current downturn is definitely going to have some hedge fund managers deleveraging (again) and mutual fund managers possibly doing some year end tax loss selling that could further put pressure on gold while the dollar moves higher with the Euro mess.
The best way to play this precious metals market, as I have said countless times, is dollar cost averaging into a position where you really don’t care much of what happens with price except that you get a better overall price as gold and silver falls. The future price appreciation is baked into the disastrous economic policy cake. So if we do get that last “blood in the streets” pullback in gold and silver, BUY!
My next article will be 2012 Predictions. My 2011 predictions for gold told investors to dollar cost average into a position. It was another good year for gold. With an election year coming, and Obama pulling out all stops for reelection in 2012, including keeping the stock market propped up, it won’t be an easy year to make predictions.
Happy New Year and have a prosperous 2012!
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.