Dollar Capped by FED Printing Press, Gold Price Holds – "Contrived Panic" Meme: For How Long?

Diane Francis | 13/04/13 | Last Updated: 13/04/12 1:39 PM ET

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By 1554, The Netherlands had become the world’s first “modern economy” and a leader in technology, trade and banking. That year, some Dutch entrepreneurs imported tulip seeds from Turkey. The hardy, beautiful flower became popular and by 1637 horticultural innovators produced a rare strain that fetched 10 times the annual income of a craftsman, four oxen, eight swine or 1,000 pounds of cheese.

It’s all about a ‘market sentiment’ called… contrived panic?

But that year, the tulip mania crashed when the Dutch succumbed to another panic due to the outbreak of bubonic plague and investors failed to show up at tulip auctions.

Bubbles occur all the time, along with financial inventions. The most recent, and controversial, launched in 2009: A virtual currency called bitcoin that enabled holders to trade directly and to hide their assets from governments.

By 2013, bitcoins had gone from zero to US$266 but this week bounced around until they crashed at US$60, causing one of its exchanges to halt trading to cool down for a few hours. The online phenomenon has been plagued by digital manipulators and volatility in pricing but these problems may eventually be ironed out.

If that happens, a virtual currency like bitcoin – free of hackers – will attract millions around the world who have become worried about the fact that governments continue to ruin their currencies by racking up debts, printing money and taking draconian action against taxpayers.

In the past, the fearful have bought gold and driven up bullion prices to nearly US$2,000 an ounce in recent history.

What’s curious is that gold prices have ebbed, the bitcoin is not a viable alternative and yet fears remain. Even worse is that the debt and currency contagion has spread and the world’s four biggest economic entities – the U.S., EU, China and Japan – are printing and piling on debts with frightening speed.

So why isn’t gold at US$4,000 an ounce?

Because the price of gold reflects the real value of the dollar. The price has been temporarily capped by  FED printing presses AND… The Yankee Dollar has become a ‘safe haven’ again.

(But for how long? – ed)