Jim’s Mailbox

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Greenspan spoke about gold at the Council on Foreign Relations two days ago.

Sadly, the world is just now waking up to what you’ve known all along.

CIGA Black Swan

Greenspan’s Warning on Gold
Editorial of The New York Sun | September 15, 2010

Alan Greenspan spoke at the Council on Foreign Relations earlier today, and what was his advice? That central bankers should be doing what these columns, among others, have been rattling on about, namely that they should be paying attention to gold. “Fiat money has no place to go but gold,” the former Fed chairman said at the Council, according to economist David Malpass, who quotes Mr. Greenspan in one of Mr. Malpass’ emails on the political economy. Mr. Malpass writes that the former chairman of the Federal Reserve’s board of governors was responding to a question in respect of why gold was hitting new highs.

Mr. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “simply don’t pan out,” as Mr. Malpass characterized Mr. Greenspan. “He’d concluded that gold is simply different,” Mr. Malpass wrote. At one point Mr. Greenspan spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes.* Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”



Consumer sentiment weakest since August 2009

Consumer sentiment unexpectedly worsened in early September to its weakest level in more than a year, as distress over jobs and finances intensified among upper-income families, a survey released on Friday showed.

Consumer expectations have breached August 2009 swing low. This brings the February 2009 low into play by 2012. Consumer Expectation and the price of gold are highly inversely correlated. That is, as consumer expectations declines, the price gold rises.

University of Michigan Consumer Expectations (CE) and Gold: A Correlation Study