GOLD vs. VOODOO ECONOMICS: U.S. Treasury and Fed Testify to Congress

By Craig R. Smith

Bernanke While watching the testimony of U.S. Treasury Secretary Geithner and Fed Chairman Bernanke today, I was struck by several answers provided by the witnesses. One answer stood out amongst them all.

In answering questions about funding of the IMF for the financial needs in the Eurozone, the U.S. Treasury Secretary said the chance of a default by the IMF, or any of it's borrowers of money provided by the U.S. is extremely low. Why? Because the loans are all "backed by IMF gold".

How striking it was to hear a man, who has spent his career as a central banker of fiat money, calm the concerns of Congress by saying relax, the money Congress allocates to the IMF is backed by gold, and as such, the loans are virtually default-proof. Gold is the protector of paper. Relax.

If owning gold is good enough wealth insurance for the greatest nation on earth as a guarantor of paper assets, shouldn't it also be good enough for all of it's citizens?

Mr. Geithner didn't talk about bonds, equities, real estate or natural resources as the guarantee. ONLY GOLD!

Later in testimony Ben Bernanke was asked "Are we, the U.S., much like Greece? Could we face the same default possibility if we don't tackle our fiscal issues?" In a long, convoluted answer which never actually answered the question, Bernanke showed his discomfort of saying either yes or no. Watching him squirm it was clear the real answer was yes, we are headed the way of Greece.

Before Bernanke could take a breath, Geithner chimed in and made it clear that we are not Greece and the comparisons are not valid.

The body language that followed from the Chairman and Secretary was rather revealing. It was as if they were calling each other a liar. This dynamic duo quickly morphed into every man for himself.

Bernanke, who is supposed to be politically neutral, wanted to give an economic answer that was truthful. But Geithner, who must at all costs protect and defend his boss's reckless spending and accumulation of massive debt, said comparisons with Greece were essentially ludicrous.

Later Geithner was pressed about how much the debt ceiling would need to be raised to meet all of the current and long term obligations? He would not answer. So the Congressman asked would it be $20 trillion? $50 trillion? More?

Geithner again would not answer the question, but would only offer "a lot...the number would very uncomfortable.” The chairman of the hearing was heard repeating Geithner's answer "Uncomfortable, uncomfortable".

No one could witness this hearing and not be both amazed and terrified at the same time regarding the economic mess our nation faces and the incompetence of the men who are supposed to be leading us out it.

Geithner, who allowed the N.Y. banks to get us into this crisis, is now the man in charge of fixing the mess he allowed to happen?

Bernanke, using artificially low interest rates, quantitative easing and operation "Twist" programs to manipulate the economy back to health, is the modern day Moses leading us out of the financial wilderness?

Keep in mind that the talk among politicians is, "Well, the banks paid back the TARP so what is the problem?" That answer is simple. The FED, with your and my taxpayer guarantee, bought $2.5 trillion in bad paper from the banks in their repurchases to give the banks the cash to pay them back.

Talk about voodoo economics! The bad paper and losses are still there. However, they are now on the FED balance sheet accumulating interest. The banks look great, and the Fed is holding all of the garbage debt. And they are the controller of our future? Yuck!

Bottom line: In my opinion, the next banking and financial crisis is right around the corner, and the only question is how long can the magicians keep this deception from being exposed for what it really is. I suspect not much longer.

Gold is the only money immune from political spin and capable of protecting nations or individuals from financial ruin, a fact simple enough that even central bankers understand- including our Treasury Secretary Geithner.

Vote Gold in 2012! Don't become a casualty of voodoo economics.

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