Thursday, September 29, 2011
Under the cover of that continuous ping pong game of "will Greece default or will it not default," the Fed has slipped in its first real pre-QE3 trial balloon: "If inflation falls too low or inflation expectations fall too low, that would be something we have to respond to [with more QE] because we do not want deflation"
Here's the LINK
THAT is why our interventionist Government/Fed has taken a wrecking-ball to the prices of commodities and gold/silver. Now we can expect to see "reduced" indications of inflation in the next Government-manipulated Producer Price and Consumer Price Index releases.
Make no mistake about it, although the current fundamental underpinnings are much worse than in 2008, the appearance of a financial and economic crisis - and subsequent policy response - is nearly identical. In order to make a big expansion in money supply politically palatable in 2008, the markets had to be set up so that Hank Paulson could scare the shit out of Congress, which left them begging for Fed stimulus. Per Mark Twain, history doesn't repeat but often rhymes, right? Expect another massive attempt to "shock and awe" the economy back to life.
Where this is "rhyming" with 2008 is that they took a serious wrecking ball to commodities and metals - especially gold and silver - back then, which was succeeded a few months later by the shock and awe monetary and fiscal stimulus that helped drive the metals back to their recent peak this year. Don't make the mistake of thinking that the Fed will do the right thing and let the system very painfully start self-correcting. Once inflation "expectations" have manipulated lower now that another wrecking ball was applied to gold and silver, the Fed will soon be begged by Congress and Geithner to crank the printing presses back up to full speed.
In case you missed these, here's a couple articles on data points that should help along the Fed's next move: In the latest poll, CEO's are less confident about hiring and the economy: LINK; and consumer confidence is near an all-time low: LINK. So the "expectations about a much weaker economy ahead are already in place.
And make no mistake about this, the Asian/Indian/Middle Eastern physical metal buyers are treating this latest price hit as a gift from the gods:
Physical demand right now is not just decent, it is exceptionally strong, said UBS in a research note, after observing strong buying from India and elsewhere in Asia, as well as robust retail demand for coins in EuropeHere's the LINK The one mistake you can make right now is to assume that the bull market in the metals is over. In fact, based on the variables that are driving this bull market, it has long way to go. Source
