Federal Reserve Chairman Ben S. Bernanke said that he expects inflation to be “quite low for some time,” but that the Federal Open Market Committee will begin publishing its long-term inflation forecasts to promote transparency.
Fears of deflation are overblown, says Ed Bugos. He refutes the use of the ‘velocity of money’ theory as a reason why prices are ‘destined’ to fall. While a bout of deflation is possible, we know that the Fed will do what it takes to re-inflate. And the real worry should be that it will probably succeed.
Responding to growing concern about the quality of the Federal Reserve System’s assets, former Federal Reserve Governor Lyle Gramley told reporters last week that “You have to reckon with the fact that one of the Fed’s assets is gold certificates, which are priced, as I remember, at US$42 an ounce, and if we were to price them at market prices, the Fed’s leverage would look a lot less than it is now.”
Humor me. Let’s crunch those numbers.
Those gold certificates have a book value of about US$14 billion, if you include special drawing rights and coin holdings ($1.7 billion). Even if you revalued this inventory, it would still total less than $300 billion, or 12% ofthe Fed’s total assets. So far,…
Commodities will rebound in the New Year, says Martin Hutchinson. Supply and demand fundamentals remain bullish for natural resources. Even more importantly, massive increases in the money supply will create inflation, against which hard assets are an important hedge. Martin gives five ways to play this trend in 2009.
But yet this huge reduction of $85 billion in a week is, somehow, a non-event, even when considering that the Fed has doubled the stock of fabled High Powered Money to over $2 trillion in just the last couple of months! Beyond astonishing!
We are all being deceived by the nature of our banking system, says Matthew Collins. Fractional reserve banking is corrupt. And with the Fed at the heart of the scam, it’s no wonder things are so messed up. Matthew says it’s time we stand up and demand answers.
The incoming Obama administration is expected to launch a stimulus package that could reach up to $1 trillion. Martin Hutchinson says this is a popular – yet high-risk – strategy. In so far as the plan increases the budget deficit and national debt, while crowding out private-sector investment, the long-term damage to the economy could outweigh the stimulus benefits.
Nations do not purchase their prosperity, says Eric Fry. Since this crisis started last year, the government has thrown around $8 trillion at the problem. But these are banknotes that it has manufactured for itself. And that’s why we may soon face a severe threat from inflation.
The finger of blame for this crisis should be pointed at the Fed, says Ed Bugos. Its interventionist activities created an unsustainable bubble. A recession is just the process of correcting these mistakes. Worse still, Ed says the Fed’s current actions are proof that it is not about to change this approach. Expect more inflation, and a bull run in gold.
Forget talk of a slump in gold, says Justice Litle. The precious metal is still on a long-term uptrend that started in 2001. And the “reflate at all costs” strategy of the Fed will eventually send gold soaring again as the world wakes up awash with dollars that it doesn’t want.