Beware the Turbulence that Lies Beneath the Surface, Part I

October 9, 2007 - Those of you that have been reading my blog and newsletters for a while know that I view the vast majority of government released economic reports as nothing but manufactured, cooked reports designed to generate whatever confidence governments need from their citizens to keep the economy and stock markets stable and growing. In the U.S., the reported numbers about inflation, housing starts, and so forth are so distorted and distant from reality that they are virtually meaningless. I’ve always said the same about the statements made by the most powerful Central Bank in the world, the U.S. Federal Reserve. Yet at times, their Chairmen have been exceedingly honest in their comments, though the masses seem to ignore them. Years before he would spend more than two decades as the Chairman of the Federal Reserve, Alan Greenspan stated, “This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” At least Greenspan told us the Fed Reserve’s plan and before they executed it and explained why a bear market would be manufactured in gold for 21 years.

Likewise, current U.S. Fed Reserve Chairman Ben Bernanke explained his deep 0.50% rate cut on September 18th with the following statement: “We took the action to try to get out ahead of the situation and try to forestall (emphasis mine) potential effects of tighter credit conditions on the broader economy. The resulting global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans.” Read more …

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