Fed Heads Lose Their Head

Their findings were that switching from negative to positive tone in the voices of Fed Chairs could raise the S&P by up to 200 basis points. For this, they built a neural network to compare segments of each audio recording against a database. The database categorizes how emotions are reflected in human speech using recordings of actors delivering the text in different ways.

Investment banks have been using a similar type of models already but with nowhere near the sophistication of this model. But this will clearly be their next step. Analyzing statements not just from central bankers but from finance ministers, corporate Ceo’s, etc will become mainstream in coming years.

So let’s turn to the Fed speak in relation to gold. The neural system discussed above did not have the same accuracy for gold and forex as for stocks.

GREENSPAN ON GOLD

That politicians speak with forked tongues is a well-known axiom. The day they put the political cap on, it is impossible for them to tell the truth.
The same with the heads of the Federal Reserve. Whatever views the appointee previously had about sound money is completely blown out of the water, once he/she enters the Eccles building.

My colleague Matt Piepenburg wrote about the author of the “Everything Bubble” Alan Greenspan last week. And the “Maestro” is the epitome of someone who lost all his senses as he had to violate virtually every single principle he stood for when he became chairman of the Fed.

In 1966 Greenspan wrote his famous essay “Gold and Economic Freedom” in which he said:

“Thus, under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a worldwide division of labor and the broadest international trade.”

In a 1978 Congress hearing, Greenspan stated:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”

But as my colleague wrote last week, all Greenspan’s noble principles of sound money were thrown out of the window once he became Fed chief in 1987. Instead, he fathered the everything bubble which is now reaching a crescendo.

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