Black swan events often have great impact on the gold and silver markets. Discussed herein are three developments that should unfold between now and the end of the year that may turn out to be black swan events.
First, Ben Bernanke does not want to be considered for a third term as Chairman of the Federal Reserve, which means Obama will have to select a replacement. If Bernanke were confident that things really were going to turn around, he’d stay and that would be his legacy–and a monumental one. Instead, he will be remembered as the guy who jumped ship before the sailing got really rough.
According to Fed watchers, five persons are in the running to succeed Bernanke, with Larry Summers and Janet Yellen being the front runners. All five are Keynesian economists, with Yellen maybe having a slight edge because Obama loves to appoint minorities and women. However, recently Obama publicly defended Summers as more than qualified to head the Fed.
Yellen is Vice Chairwoman of the Board of Governors of the Fed. Previously, she was President and Chief Executive Officer of the San Francisco Fed and Chair of the White House Council of Economic Advisers. She is considered a strong advocate for more quantitative easing.
Summers has equally impressive credentials. He is Director of the National Economic Council and has held numerous prestigious positions, such as president of Harvard University, Secretary of the Treasury and Chief Economist at the World Bank.
One Fed watcher speculates that Summers has the edge not because of his credentials but because he is not as contentious as is Yellen, who has been known to confront Bernanke on his policies. Obama does not appointed subordinates who will get in his face.
Regardless of the new Fed Head, there will be no reversing quantitative easing. Current purchases are running at $85 billion a month, and the Fed may “taper” that to $65 billion monthly to show the pundits that the Fed–and not them–makes the decision as to how much money to print. $65 billion monthly would be at an annual rate of $780 billion versus the $1020 billion ($1.02 trillion) rate, either of which would remain simulative and create the potential for serious price inflation.
Bernanke’s term ends January 31, 2014, and Obama could make his choice well before then, but not likely. Regardless, Obama’s selection of a new Fed head will coincide with two other potential black swans.
Black swan event #2: Mike Lee, the freshman senator from Utah, wants an “up or down vote” on funding Obamacare. As has been the case for six years, the federal government is not operating with a budget but via a “continuing resolution.” Lee is willing to give Obama whatever he wants for all government programs except Obamacare, for which Lee wants a separate vote, where all members of Congress can let their constituents know where they stand on Obamacare.
Lee’s proposal is ripping the Republican Party because many in the GOP don’t want the controversy. They’re “go along to get along” guys. Some conservative talk show hosts fall into the same camp. When they have a chance to snatch victory from the jaws of defeat, they won’t play hardball.
This move by Mike Lee is taken so seriously that in a recent talk Obama went on the offence, talking about some Republicans wanting to keep 30 million Americans from getting medical care. The president didn’t mention that 72 percent of the American people oppose Obamacare.
Black swan #3: May 19, the federal government reached its debt limit, but it’s not a news topic because through accounting machinations the government is still paying its bills. Guesses are that Congress will have to raise the debt limit sometime this fall .
These issues will have to be resolved over the next few months, which will means that the federal government’s horrific financial affairs will again be in the news. The US acknowledges $16 trillion in official debt, but total liabilities probably exceed $200 trillion. Some analysts say that number is much higher.
These potential black swan events may propel to the forefront another national discussion about the federal government’s dire financial straits. In the past, gold and silver prices have risen during such discussions