Brady Willett's Blog

The price of gold was off by nearly 5% yesterday, with comex gold losing over $97 an ounce on an intraday basis. This price collapse is comparable, in percentage terms, to the carnage seen in other precious metals, but well beyond the damage seen in other ‘risk’ areas of the marketplace (i.e. commodities and equities).

In an October 16, 2008 op-ed entitled ‘Buy American. I Am’, Warren Buffett revealed that he was moving his own wealth into equities, adding that “If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.”

Following up on Bernanke’s ‘don’t blame me’ shtick last week, Federal Reserve Bank of Atlanta president Dennis Lockhart had this to say yesterday.

Unconscionable or not, the statistics released by the Fed in December speak for themselves: $3.3 trillion (at its peak) in emergency lending to primarily large financial firms. As for Mr. Bernanke’s March 2010 epiphany, at the same time he was decrying ‘too-big-to-fail’ the Fed’s emergency TAF program was dolling out more than $3.5 billion to U.S. banks and the Fed’s emergency TALF scheme was kicking out billions more to numerous LLC’s.

On November 3, 2010 the Federal Reserve Board announced another round of money printing (aka quantitative easing), and yesterday Chairman Bernanke defended the Fed’s actions in the Washington Post. It is unusual for Mr. Bernanke to use the op-ed format to impart the Fed’s thought process. This speaks to the fact that while so many are aware of the risks of QE2, so few see the potential benefits. Before some thoughts on QE2, first an overview of Bernanke’s commentary.

Joseph Stiglitz is a Columbia University Professor and a Nobel Prize-winning economist. He extolled the wisdom of Keynesianism on Bloomberg yesterday.

CNBC ran an interesting article last Friday entitled, “Lawmakers Take Steps to Protect Gold Investors”. The article discussed how politicians are questioning the tactics used by those selling gold, with Rep. Anthony Weiner contending, “The television gold industry is an industry, and is led by one particular company that has built up the industry on fear, lies and rip-offs.”

Background: The reason the ‘net worth’ data is an important consideration today is self evident: unable to explain why the outlook for consumer spending is positive given that debt service costs are hitting record highs, savings are near record lows, and wages are failing to keep pace with inflation, optimistic economists point to the consumer’s balance sheet and calmly conclude that everything will be all right. And although these analysts have indeed been right for a long time (16-years and counting), there is ample evidence brewing to suggest that the US consumer is about to fall down... – August 21, 2007 - Forget Peak Oil, Peak Net Worth is the Real Danger

The U.S. government bond market is the last of the great asset bubbles. We know this, first and foremost, because no one in any position of power in America is willing, and perhaps more precisely able, to enact the painful policies required to ever repay current/future obligations - and yet the market does not, as yet, seem to care.

Ben Bernanke’s machinations since the financial crisis began are widely celebrated as having saved the financial markets from complete ruin. Question is, was preventing the ruin of an over-leveraged, non-transparent, and bubble-driven financial system really the best path? For that matter, did the actions of Bernanke and company simply delay the day of reckoning and/or ensure that this day will be even more severe?