by Dave Kranzler of Investment Research Dynamics
The appointment of Janet Yellen as Treasury Secretary fully removes the “Chinese Wall” that is supposed to separate the Fed and the Government. I believe her appointment signals a decision to transition monetary policy into the unfettered implementation of “Modern Monetary Theory.”
This will encompass a record amount of Treasury debt issuance, which started last Monday with record 2-year and 5-year Treasury Note auctions. The Fed will be required to fund a large portion of the coming bond issuance or risk a rapid escalation in interest rates, especially at the longer end of the curve. As evidence of this, the Fed is considering increasing the amount of longer-dated Treasuries it is buying. This is MMT in a nutshell and it is exceedingly bullish for the precious metals sector.
The New York Sun found it interesting that Congress nuked the appointment of Judy Shelton to the Fed, who is a gold standard advocate, on the grounds that it would compromise the Fed’s “independence from the Treasury” and now will get to evaluate the nomination of Fed Chairman, Janet Yellen, for Treasury Secretary:
News that Vice President Biden intends to nominate the former chairman of the Federal Reserve, Janet Yellen, to be treasury secretary certainly has its ironies. We’re still in the midst of watching the Democrats maneuver to defeat the nomination to the Fed board of Judy Shelton on the grounds that she would compromise the independence of the Fed from the Treasury. Mr. Biden’s move is practically a merger.
How is that going to be handled by the Republicans who used Fed independence to libel Ms. Shelton? Are Senators Susan Collins, Lamar Alexander, and Mitt Romney going to go after Mrs. Yellen the way they did Ms. Shelton? What of Senator Sherrod Brown and the rest of the Banking Committee Democrats who are rallying against Mrs. Shelton in the most demagogic fashion? Not to mention the New York Times and the Washington Post. (New York Sun)
Mussolini described “Facism” as a merger between private corporations and the State. Unequivocally, Yellen’s appointment as Treasury Secretary represents a merger of the Federal Reserve, which is a private corporation owned by the banks, and the U.S. Treasury Department. The integration of the Federal Reserve into the U.S. Treasury Department is the hallmark of fascism. The regulatory capture of the Government by the Too Big To Fail Wall Street banks is now complete.
The flip-side to this – the “dark side of the moon,” if you will – is that this set-up is extraordinarily bullish for gold. The Fed under Bernanke and Yellen ushered in the application of Modern Monetary Theory to the Fed’s monetary policy. With Yellen in charge of the Treasury, MMT will be be unleashed full-throttle.
I can’t think of a more positive development in support of higher gold and silver prices.
Buying physical gold and silver – not GLD or SLV – should be your first priority in seeking shelter from the eventual fate of the dollar. But mining stocks offer the potential wealth enhancement as well “optionality” upside to the prices of gold and silver. If you would like some ideas for investing in mining stocks, take a look at my Mining Stock Journal.