How Much Longer Can Wall Street Buy the Big Fed Lie?

GoldFool me once, shame on you. Fool me twice, shame on me.

The explosive $40 move higher in the price of gold that rocketed off the launch pad with the employment numbers at 8:00 in New York this morning is a picture of Wall Street insanity. I call Wall Street insane because the very definition of insanity is to do the same thing over and over again and expect different results. And Wall Street has over the past several years drunk the Fed’s Kool-Aid. Perhaps it’s simply wishful thinking or perhaps it has to do with needing to keep customers optimistic so they can continue to sell them stocks.

Whatever the case, it should be obvious to anyone who ignores the mainstream TV shows and reads Austrian economic thinkers or independent economists like John Williams that the U.S. economy is in dire straits even if it lags Venezuela into a socialist hell hole. It should also be obvious that the policies of both the Republican and Democratic parties are going along with popular demand to destroy life, liberty, and property for the sake of a quick buck and whatever it takes for instant gratification. In the end of course we can’t blame political parties because the pathology leading to the demise of Western civilization runs so thick and so deep in our body politic that I do not see any answers save a return to an understanding that the Founders of America had—namely, that life itself is a gift given to us by our Creator.

JayEnough philosophy for now. The reason the gold price shot up like a rocket at 8:00 AM with the June 3 jobs report was that Wall Street has been drinking the “economy is great” flavor of Kool-Aid. But how many times into the future will Wall Street continue to believe that Fed line of baloney, which is nothing more than an attempt to save its bacon from decades of failed monetary policies? As I said in an interview I did in Vancouver at the Cambridge House show, there is no way the Fed can raise interest rates. At some point in time in the future, rates will rise but it won’t be due to the Fed’s actions. It will be due to a loss of confidence in the dollar and the demand by the markets for higher rates. Of course the Fed did raise rates once since then but the equity markets responded with a temper tantrum. The markets’ message to the Fed was clear, like the message of a spoiled two-year old. “Give me my candy or I will raise all manner of hell and embarrass you at the grocer check out.” You take our low interest rates from us and you will be blamed for the next stock market crash. As I explained in June 2015 at the Cambridge House show in Vancouver, the Fed is desperately trying to pretend its policies are potent. But it is the markets, not the Fed, that are calling the shots. Watch Video Interview

I also said at this Cambridge House show, which was definitely at or very near the bottom of the gold and gold share market, that there were some tremendous opportunities in the gold share market.  It took a few weeks into this year for the upturn to become apparent. But over time, as the Fed continues to promise higher rates only to be told by the realities of the marketplace that it is impotent, gold will continue to rise as the Fed and the petrodollar begin what may be their demise.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.