Hi ho Silver

I attended a lecture at the LSE in London last monthby Thomas Hoenig of the Kansas Fed. The event details are here:

LSE Event 30 March 2011

If you listen to the podcast, at minute 55:30 there is a question from the audience about accusations of Fed collusion in Gold & Silver Market price manipulation:

Transcript:

Question from audience: Thank you for the opportunity, my name is Brandon. I wonder since the US constitution says only Gold and Silver is legal tender then what do you make of Bart Chilton, a CFTC regulator, corroborating a whistleblower named Andrew Maguire out of the LBMA, erm, thoughts that central banks through primary dealers are manipulating the gold and silver markets to make the world reserve currency and other fiat currencies look better against gold and silver.

Hoenig: Um, (nervous laugh), well I do think that we should obey the constitution of the United States that much I can tell you (nervous laugh). I don’t, um, I’m, I didn’t follow your question all the way through, but I do agree that the constitution of the United States should be obeyed. Alright.

Malmgren: The state of Utah has similar thoughts as what you’re expressing at the moment.

Hoenig: Well, there’s a couple of other parties too.

Podcast audio file

There are two things that stood out for me. Firstly, that Hoenig was caught off guard and really didn’t quite know how to handle the question. In fact he somewhat nervously ducked it. “I didn’t follow your question”. Didn’t follow the question?? I think he did fully understand the question, hence the hasty attempt to avoid confronting it. So, in some respects, he has not tried to deny or refute it. Secondly, he did seem to give a form of tacit acknowledgement of the importance of retaining “sound money”, i.e. his ambiguous assertion that “we should obey the constitution”.

It’s a shame that Peter Warburton wasn’t in the room, as he put the point a little more directly a few years back:

“[central bankers] incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies.”

It’s inflation Jim, but not as we know it

I wonder if Mr Hoenig would “understand” what Mr Warburton was saying here. Maybe he does understand it, but is just holding out until his retirement later this year.

Fed certainly seems to have something to hide here, and Hoenig has clearly given a tacit acknowledgement of this.

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Update: recently came across this article by Ned Naylor-Leyland called Gold – could the last person to get their coat please turn the light off!