It took Jon Stewart from Comedy Central to make the former Federal Reserve Board Chairman admit there is no free market in America because the Fed regulates the market for money! Notice how Mr. Greenspan also admits implicitly that only under a gold standard and without a central bank can there be a true free market.

Watch Mr. Greenspan admit it:

By Peter Schiff

Coming at a time when rate increases were needed to combat the sinking dollar and surging gold, oil and other commodity prices, Ben Bernanke’s 50 basis point cuts in the Fed funds and discount rates this week may go down as the most irresponsible move in Fed history.

To America’s creditors around the world, whose mountains of dollar reserves will be debased by lower rates in the U.S., this action amounts to the monetary equivalent of “let them eat cake.” My prediction is that rather than doing so, they will just throw it back in our faces, and refuse to continue funding our deficits.

Wall Street bulls have heaped praise on the Fed, at times calling the rate cuts courageous and brilliant. From their response, you would have thought that Bernanke’s solution was akin to Einstein’s breakthroughs on relativity. In the first place, what is so brilliant about cutting rates? My five year old could do it and would gladly accept payment for his service in popsicles.

Furthermore, a fifty basis point cut was not an act of bravery but one of cowardice. The brave thing to do would have been to raise rates and allow market forces to purge the economy of the imbalances built up during the Greenspan bubbles. It would have taken some real courage to level with the American public and let them know that our profligacy has consequences, rather than pretending it can ride to the rescue with a wave of its magic wand and a crank of the printing press.
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Yesterday (Friday, September 21st, 2007) the gold price for physical purchase was fixed at $737.00 per troy ounce in the London P.M. session. The gold price is fixed twice a day in London. The A.M. fixing is done from 10:30 onwards and the P.M. fixing is done from 15:00 onwards. The reason why we are looking at the P.M. fixing is that during this period the major financial markets of Europe and the United States are open so this fixing price is very representative of physical demand for gold bullion.

Prior to yesterday the second highest weekly P.M. fixing ever had been last year on May 12th when gold was fixed at $725.00. One needs to go back to January 18th, 1980 to find the highest weekly P.M. fixing ever at $835.00. It is not surprising that the second highest ever weekly fixing for gold came on the week that the Federal Reserve Board decided to slash the the Fed Funds and Discount rates by 1/2 of a percent. The Fed’s aggressive rate cut came despite the fact that the Dow Industrial average is near its all time peak of 14′000, the unemployment rate is at a relatively low 4.6% and when U.S. G.D.P. growth is growing at a 4% rate according to the preliminary second quarter data reported by the U.S. government.

We think the gold price is telling us the international money market does not trust Ben Bernanke, the Federal Reserve Board chairman, to maintain the integrity of the United States’ currency.

The Gold Weekly P.M. fixing chart courtesy of Bloomberg.