Tomorrow we expect to hear news of more Treasury buying by the Fed which it will do by raising the amount of Mortgage bonds it buys from $40 billion a month to $45 billion a month. They view this stimulus as what’s needed to sustain the economy and reinforce improvements in industries such as autos and housing, which appear to have picked up.
The Fed’s latest round of quantitative easing will total $1.1 trillion, with about $620 billion in mortgage-backed securities and $500 billion in Treasuries. They have to get the economy up to a speed where the momentum will carry it forward without this support. If they fail and momentum slows then the whole QE program will turn toxic and create accelerating monetary inflation. That’s why so many worry about quantitative easing so much.
Nevertheless it will undermine the value of the dollar anyway and in the process and over the longer term, boost precious metal prices. Any sign of runaway monetary inflation and precious metal prices will take off never to look back.
The most sensible aspect of Q.E. is that it helps the consumer at ground level. It will raise house prices as mortgages become cheaper, leaving more disposable income in consumer’s pocket and hopefully improve the jobs market as 70% of the U.S. economy is driven by the consumer. But as we said, it will benefit precious metal prices as the dollar’s buying power is reduced.
The concept of looking for a quiet peaceful untroubled world on the path to economic recovery is to become less likely, according to U.S. Intelligence agencies. The scope and likelihood of change in the next 17 years is enormous on all fronts including the political, economic and monetary fronts.
If we accept this report, then investors will have to re-evaluate their strategies for the long-term. Particularly Pension Funds whose view has to be up to 30 years or more to cover the working life of the average worker. This is gold and silver positive!