War on Precious Metals: The Rationalization Process For QE 3.0

I have been saying here that the US government’s indirect interventions in the commodity markets, particularly in silver, represents a ratchet effect or rationalizing the effects of past policies by the US government with the intention to apply more of the same policies.

Ratchet effect is technically defined as “A tendency for a variable to be influenced by its own largest previous value.”

Here is what I recently wrote,

First is to apply the necessary interventions on the market to create a scenario that would justify further interventions.

Second is to produce papers to help convince the public of the necessity of interventions.

Then lastly, when the 'dire' scenario happens, apply the next intervention tools.

The rationalization process has been happening. The conditioning (brainwashing) of the public is such that Fed policies have not been inflationary and that market prices have been validating their outlook which should justify further actions.

Proof?

The Wall Street Journal blog has this article, “Commodity Rout Lends Credence to Bernanke’s Inflation Outlook”

All in all, it looks as if Bernanke’s oft-repeated view that the commodities surge, driven by supply shocks, political forces and overseas growth, may indeed be “transitory.” Of course, the issue goes beyond inflation, in that lower oil and food prices may help increase consumers’ spending power, which should help the recovery regain its step.

If you think I am talking conspiracy theory here, I’m not.

The manipulation of the public’s mindset (or mind control) is part of the technical tools used by central banks to influence expectations. This is called the signaling channel.

Writes Shogo Ishii of the International Monetary Fund on his book Official foreign exchange intervention (bold highlights mine)

Under the signaling channel, intervention can be effective if it is perceived as a signal of the future stance of monetary policy...

A central bank has an incentive to follow through with policy actions that justify intervention ex-post to safeguard its credibility and avoid financial losses....

The signaling channel depends in part on the institutional and policy credibility of the central bank. The effectiveness of intervention through signaling relies on influencing market expectations by transmitting information on fundamentals or future policy actions. Intervention must be perceived as credible signals (or threats) of future monetary policies to influence expectations.

So far, pieces of the puzzle fits.