open market committee

Emerging Signs of A New Global Crisis

A more than one trillion dollar debasement in 2013 is now apparent.

Last week, the Federal Reserve announced an expansion of its bond-buying program consisting in large scale purchases of long-term treasury securities.

These purchases come in addition to the monthly $ 40 billion in mortgage-backed securities (MBS), the so called QE3, launched in September of this year. This means that now, monetary expansion will be equivalent to a total of $85 billion a month. Simply put, this is an unprecedented rate of currency creation for the FED.
Thus, a more fitting name for this latest round of easing would be QE4Ever (QE forever).

The novelty in the Fed’s most recent statement is that for the first time it has linked its bond purchases to specific economic parameters.

The FED stated it would hold its target interest rate (currently between 0 and 0.25%) and continue easing for as long as unemployment remained above 6.5% and inflationary expectations did not exceed 2.5%.

How did the FED select the given unemployment rate parameter?

Perhaps it is associated with the fact that unemployment sat at 6.5% at the cusp of the financial crisis in October of 2008.

If the labor market does not improve substantially (hint, hint… it won’t) the FED’s Open Market Committee will continue its purchases of Treasuries and MBS indefinitely with a likely possibility of increasing these purchases in the future.

The central point for stock markets is that this ultimately leads to a trap. In the future, positive employment data could be judged as negative, by signaling an end or a reduction to the FED’s stimulus to an economy that has become dependent on it. This would be negative for stock markets, as it is no secret that there exists a direct correlation between monetary stimulus and rising stocks.

However, we must realize that Ben Bernanke, FED chairman, is not willing to tolerate high unemployment nor is he willing to tolerate falling stock markets. This exposes an already evident problem: QE dollar debasement will remain the essential wonder drug to sustain this ficticious notion of a “recovery”.

A simple reminder that in order to lower the unemployment rate from its peak of 10% in October of 2009 to 7.7% in November of 2012, the FED added $ 1.8 trillion to the currency supply, today closer to $ 2.7 trillion (see chart). A high price.

At the advertised rate, in less than a year, the FED’s balance sheet could be approaching $ 4 trillion or beyond.

Continue reading QE4 Ever: Emerging Signs of A New Global Crisis at GoldSilver.com

Gold Bounces Back on Iran Fears and Weak Dollar

Following Iran’s announcement that it had inserted a domestically produced nuclear fuel rod into its atomic research reactor, gold and silver prices spiked significantly.

On Tuesday, gold prices reached $1,600 an ounce at the Comex division of the New York Mercantile Exchange, a ten week high. Silver also moved upward to a five month high as a continuing decline of the dollar inspired a commodity rally.

Adam Klopfenstein, a market strategist at Archer Financial Services Inc. in Chicago, told Bloomberg the “fear trade” is back because of events in Iran. “Also, we are seeing buying across commodities because of the weaker dollar,” he said.

“Iran’s nuclear plans have raised fears that it is getting desperate and will take some drastic step,” Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services Pvt., said in Mumbai. “More sanctions are expected from the US and other nations. This will have a positive impact on gold prices as ideally people would try to buy gold.”

The new year rise in precious metal also follows the most recent Federal Reserve announcement. The Fed indicated it will begin to publish policymakers’ projections for its benchmark interest rate on overnight loans.

“Accommodating monetary policies throughout the developed world cause a renewed migration to hard assets by individual investors and sovereign-wealth funds,” Byron Wien of Blackstone explained.

According to minutes from the last Federal Open Market Committee meeting, a significant number of Fed officials agree economic conditions warrant a further “easing” of monetary policy.

Stubborn interest rates at or near zero are bullish for the gold market.

Article written by Kurt Nimmo
Infowars.com
January 4, 2012

Gold Leaps to New High

Gold prices shot to their highest level in history today touching a high of $1,297.40.

As you may well be aware of, the gold prices that you are quoted is heavily dependent on the fluctuations in the demand for this precious commodity and the future seems rosy because there are increasing numbers of people investing their money into buying gold. The reason why you should also consider putting your money into buying gold is that it becomes an asset that is solid, and which has bright chances of appreciating which will make your money grow for you.

Effect Of Weakened Dollar

What’s more, things are even more interesting with the gold prices as the relative weakness of the US dollar has impacted these prices. That means that investors are turning to buying gold in order to offset the weakened dollar’s impact on gold prices which has only pushed these prices northwards.

The U.S. dollar has been hit hard by Tuesday’s Federal Open Market Committee meeting statement from the Federal Reserve. While the Fed did not specifically detail quantitative easing measures, most analysts said the statement strongly suggests such due to the very accommodative stance of the Fed, amid a still-anemic U.S. economy. Fresh quantitative stimulus from the Fed, which basically means increasing the U.S. money supply by buying of U.S. securities by the Fed, is significantly dollar-bearish.

And, given that oil prices too are heading north, the fear that inflation will also show no signs of abating which will have the effect of eroding the value of your money; it means that buying gold is a good safeguard for the future.

As we’ve seen in recent weeks, gold prices have been soaring, and with the ever looming threat of a currency crisis, investors are finding it expedient to put their money into assets such as gold that are solid and good value for the future as well. A reason for such thinking is that gold prices will ride over any turmoil in the US economy which may come about as a result of a war in Iran which could otherwise bring stock and property prices crashing down.

Silver prices also hit another fresh 30-month high of $21.26 an ounce. The sinking U.S. dollar and the record-high gold prices have boosted silver. Prices are still in a steep four-week-old uptrend on the daily bar chart and there are still no early technical clues to suggest a market top is close at hand.

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