Sunday, May 25, 2014

Gold Expectations

Perhaps you have heard Ben Bernanke or Janet Yellen speak of "inflation expectations" and wondered, "why do they always talk about inflation 'expectations', instead of just 'inflation'?" Or, in a more general sense, why do central planners hold "expectations" about something more important than the thing itself?

I have wondered that as well. Let us just say that it is a very serious "tell" about how central planners "plan" values through the deeper application of "managing expectations".

In our centrally planned and managed global monetary financial system, ALL prices of all tradable commodities, equities and even foreign exchange values are the byproduct of "managed expectations."

Gold happens to be a key element which helps hold this entire system of managed expectations together. Yet the great oxymoron here is that gold itself has little to do with this. It is rather only the (future) expectations of gold price which are the critical thing to manage, because they define the price of gold itself in our current derivative / physical world paradigm.

Today, great effort is being expended to manage the expectations of the value of gold at right about $1300 USD. The expectation to be created and sustained by this is that the world is stable, the price of gold is stable, equities are rising, inflation and interest rates are under control, and oil and other commodities are stable, within a range of about 2%.

The cost to maintain this larger macro expectation world wide? Another oxymoron to consider. In the hands of some, the paper represented by that action would seem the windfall of a lifetime, but for central planners it is nothing more than the unlimited supply of sentiment or expectations within their control, backed by an unlimited supply of paper claims of expectations.

In this manner, our global monetary system is a ubiquitous, socialized, yet involuntary Ponzi scheme of sorts. For it is confidence in the central planner's ability to manage participant expectations that has kept the current dollar-based system intact for so long.

As described one way or another in former posts, central planners (both central banks and their primary dealer networks) are the real market makers in our derived real world. And they have complete control over the physical market, by commanding unlimited supply of "sentiment" in the paper derivative markets.

Just as inflation expectations are a derivative of inflation, gold expectations are a derivative of gold. Both can be represented by an unlimited amount of paper supply in derivative form with which to move or control the underlying physical market.

This has been explained before, in this blog and elsewhere, but the connection to the words of the representatives of the central planners themselves may add a dimension to both the understanding, and the sheer power, of our derivative system, with it's unlimited supply of paper backed sentiment, over the management of expectations, which stabilizes and controls all valuations of our real world today.

In this relatively short 2013 speech by Ben Bernanke, the word "expectation" (in some tense or form) is mentioned 57 times, with regard primarily to interest rates, but it could very well apply to any key index: inflation rate, deflation rate, gold inflation or deflation (price change), oil deflation or inflation (price change), unemployment rate, equity depreciation or appreciation (price change), dollar index, treasury yield, foreign exchange rate, etc.

Does the derivative (debt based, paper backed) world of expectations still effectively manage our real world? Yes, to a large degree we see that gold is still managed by continued expectations of around $1300, with a few exeptions here and there, some not very publicly known. And inflation you see is still under management, except where it's 33%, but most do believe it's averaging around the expected 2% or a little higher (we hope?). Interest rates are still low, and oil is still cheap for now - at least within the realm of inflation expectations ... over time.

Our paper world has served a suitable purpose for mankind in terms of growth and stability for some time now. But the special measures taken by the issuers of our paper money to guarantee the promises that hold managed expectations together seems to continually benefit the "systemically connected" so much more than the little people.

How much longer will the working class be willing to bail out this system ... which only a few are now beginning to suspect is "inimical to their interests"? Why, as long as they can to be sure.

We could get to the last ounce of physical gold ever offered for sale before "run-lock" and if the seller truly believed it was worth $1300 USD it could sell for that. But there is a limit to this management of expectations. It needs credibility. For now, even the "run on gold" in China has been kept in check.

And in the meantime, the price of gold is exactly what we expect it to be, or rather what our expectations are managed to be ... for now.


  1. What kind of pathetic, spineless specimen are you? You asked for some proof of my claims, and now that it is available, you run and hide, seeking comfort in fofoa's edicts, in remaining in the dark. Oh, fear not..i understand. I was a Clin Psych for 20 years. You fit the template beautifully. In the dark, you can lash out, can't you? You can project your twisted mind on to those you know to be in the light, a knowledge which gnarls at you. Well, here's one for you to ponder. It is entirely likely FOA will not talk again. The most obvious reason for this is that instantly i disclosed his ID to fofoa, that insensitive and idiotic fuckwit deemed it a smart move to contact FOA's daughter to seek his contact details. (I later provided FOA's email and fone number for fofoa).. But the damage had been done. FOA, despite fofoa's earnest homage, rejected all his advances, announcing in the clearest terms what he thought of fofoa. Poor old fofoa let a great deal of his deepest pathologies out at that time, and it was painful to watch and try to support him through his devastation. Hey, wanna see the hard evidence? Come on! When you gonna venture out of the familiar comfort of your darkness, and brave the light. Come on, kid.

  2. By all means Pete, keep proving who and what you are with your comments. I'll leave them up, and I welcome more.