Monday, November 19, 2007

My take on Bernake's Statements to Cato Institute!

Much is being said of Mr. Bernake's presentation to the Cato Institute this last week. In various portions of the statement he appears to be suggesting that the Federal Reserve Open Market committee is shifting its focus from rescuing various capital markets to fighting inflation and keeping the main street economy going. While its nice to see a discussion that so called core inflation is not representative of what consumers face in so called non-core inflation, I simply don't believe anyone at the Fed to make good on their threats.

This sort of talk by Bernake is most likely a bluff. Why would Mr. Bernake signal a shift in fed focus? Why bluff? Well perhaps its to help shore up confidence in the plummeting dollar and try to put a lid on oil and other commodity futures prices. However on December 11, the next fed open market committee market we shall see whether Mr. Bernake and the Wall Street friendly Fed stick to its new focus of fighting non-core inflation. I view core inflation as a sort of a joke, an academic notion which has little basis in reality.

If the credit crunch of which I have warned for a while, continues to worsen (new accounting standards make more write offs all but certain) Bernake and the rest of the Fed will not have the balls to defy the Wallstreet MSNBC pundit machine and hold rates steady. Of course, as soon as another fed funds rate cut is announced it will send gold and silver prices soaring again.

Personally I am watching the correction in gold and silver prices to try and increase my positions in ETF's between now and December 11.

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