The Beaver Creek Accord
This past fall, I attended what I thought was another gold industry event in a small Colorado ski town. Instead, I found myself sitting across from the world’s largest private gold buyer — a man quietly preparing a financial revolution. What he told me could ignite a new monetary era… and hand early investors a rare shot at 100X gains.
Go here to read what really happened in Beaver Creek.
Suasion.
That might sound like some kind of French culinary tradition, but it’s the word Federal Reserve Chairman Jerome Powell uses to describe his efforts to control the narrative around monetary policy and expectations.
If you’re under the age of 40, you might not realize the Fed Chair used to be a relatively non-verbal role. Alan Greenspan (Fed Chair from 1987-2006) was notoriously famous for the very little he said during his tenure, and is really only known for a two word phrase he uttered in a speech to bankers about the market’s “irrational exuberance” leading up to the tech crash. Those two words echoed for years and even became a kind of meme in econ circles.
But Ben Bernanke began a new tradition in 2011. He was the first Fed Chairman to hold a press conference.
He did so 5 years into his tenure as Fed chair, and 3 years after the Great Financial Crisis began.
If you watched his presser, you would have noted how nervous and awkward Bernanke came across. It’s not a knock on Ben… after all: Fed Chairs are not picked based on their public speaking abilities or their charm or wit.
Chronologically, Bernanke’s nerve-wracked press conference came just 3 months before he bickered with Ron Paul over the role of gold on the Treasury’s balance sheet.
Bernanke, appearing a bit more composed in his spat with Paul, made the incomprehensible claim that gold is not money. Central banks hold it out of tradition, he claimed. Tradition!
It was an obvious and ridiculous lie – but it highlights the new role that Bernanke believed the Fed Chairman should embrace: someone who provides the official narrative around monetary policy. But listening to what monetary authorities say is useless. You should pay attention to what they do.
The question of why a Fed Chairman would give a press conference to explain interest rate policy to the public was recently answered in a paper Bernanke wrote for the Brookings Institution.
In July of this year, Bernanke wrote: “Effective communication about what the Federal Reserve sees in the economy and how it plans to respond helps households and businesses better understand the economic outlook, clarifies and explains the Fed’s policy strategy, and builds trust and democratic accountability.“
In short, Bernanke seems to think the Fed needs better PR. Maybe that’s true – but for the first 98 years of the Fed, it had very little PR. Most of the public still has zero idea what the Fed is, or what it does, or even that it exists at all.
For people paying attention, the “suasion” coming from the Fed is not very “suasive.”
We gold investors saw Bernanke lie about gold’s role as money. The US Treasury owns thousands of tonnes of the stuff, stored in the world’s most secure vaults – out of tradition? Maybe that’s true in a sense that traditions tend to exist for justifiably valid reasons.
And since Bernanke broke the tradition of the silent Fed Chair, the role now means the Fed must come up with monetary policy AND get in front of cameras to explain it. They broke tradition because they felt like they needed to mold the narrative.
But it’s not working out great.
Remember when Powell claimed inflation was “transitory” right before inflation soared to 40 year highs?
The whole charade becomes ridiculous, because the more you pay attention, the more you realize the Fed is not really in control of much. They NEVER hit their target inflation rate of 2%/year, nor of maximum employment.
The lies about gold have stopped – and now we know that there’s a movement within the Federal Government to re-center gold as money.
Something big is underway.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio