That day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.
Friday, September 16, 2011
Or at least try to? Here's a quote from Paul Volcker from a 2004 interview, in reference to January 1973 when the dollar was devalued against the yen:
- Paul Volcker, "Nikkei Weekly" 2004
And here's a famous quote from Alan Greenspan in 1998, when he was Chairman of the Fed: "Central banks stand ready to lease gold in increasing quantities should the price rise."
Those two quotes should be plenty of proof that - as I said in yesterday's post - the ECB, SNB, BOE and Fed acted in concert to try and suppress the price of gold while the SNB devalued the Swiss franc and the group of central banks collectively put together a bailout liquidity facility in place to keep the EU banking system from collapsing.
At some point gold will have a "snap-back" reaction in its price that could be quite breathtaking. The massive emergency funding programs being put in place will eventually have to be monetized by central banking printing presses and transferring liabilities from the banks to the Taxpayers - just like in 2008...Someone I know of who is in a well-connected position said this last week: "Do NOT keep any money in money market funds." (Money market funds - most of them - have heavy exposure to short term European debt - corporate and sovereign - they also have exposure to the rapidly deteriorating mortgage-backed paper in this country).
It's going to get really interesting over the next 3 months. Buy some more gold, make some popcorn and pull up a comfy seat - the entertainment value should be spectacular!
Have a great weekend.
Posted by Dave in Denver at 11:09 AM