U.S. House Fed Audit Proposal Gives Gold Another Boost
Source: Reuters, James Saft (11/24/09)
". . .just discussing it seriously will tend to drive the price of gold higher."
The House of Representatives Financial Services Committee last week voted to approve an amendment that would bring about an audit of the Fed, its monetary policy and lending programs. Since then gold has gone higher, hitting an all-time high of $1,174 per ounce Monday.
The amendment, a provision to a broader financial services reform bill that is still under consideration, was cosponsored by Republican Representative Ron Paul, author of the book End the Fed.
The Fed, understandably, hates the idea, the administration loathes it, and really it will almost certainly never become effective in a recognizable form.
Even so, the fact that it has gotten this far will cause some serious people without an ideological dog in the Fed fight to buy a bit of gold, which is really a sort of anti-currency, as a hedge against increased political influence in the process of making monetary policy.
Many people who think keeping the Fed on a short leash attached to an elected body is a good thing also think it should have been much less aggressive in creating money and risking inflation. The risks are actually skewed the other way: tighter political control of central banks more often means more inflation and a higher risk of a debased currency.
Thus, the people who support this because they think the Fed shouldn't debase the currency are probably raising the risk that the currency is debased. We are now in the bizarre situation of watching the price of gold being driven higher both by people who don't trust the Fed and people who don't trust the people who don't trust the Fed.