So here’s the million-dollar question – Will the Fed continue to cut back on Quantitative Easing? So far they have cut back by $20 billion a month to the current level of a huge $65 billion. I believe that “if” the markets start to implode (bond, stock market and interest rate markets, plus the emerging global economies) then the Fed will REVERSE course and start to increase QE from the current level. Is this latest cut in QE “the pin that will prick the bond market bubble?” Here is an article from Greg Hunter:
Bond Market Bubble in Search of a Pin-Doug Casey (www.uswatchdog.com)
By Greg Hunter on January 29, 2014
Author/investor Doug Casey says, “We’re in a bond bubble. This is much more serious than the other bubbles because the bond market is much larger than either the real estate market or the stock market.” Casey explains, “What the government has been doing in an attempt to prop up the failing economy and prop up failing banks and brokerage firms is keep interest rates at very low levels, and that has taken bonds to very high levels. That bubble is in search of a pin at this point, and when it blows up, it will be much worse than what we saw when the recession started in 2007. “
On the subject of the Federal Reserve, which just passed its 100 year anniversary, Casey says, “The Fed has destroyed, by their own statistics, about 95% of the value of the dollar, and at this point, the Fed has created trillions of new currency units in a desperate attempt to prop up the structure of the economy which is resting on quick sand. They’re going to destroy the rest of the value of the dollar. I have to compliment Bernanke of having gotten in and gotten out when he did . . . but Yellen is not going to be so lucky. I think we are going back into the hurricane late this year, certainly no later than next year. It is going to be much worse and last much longer and be much different than what we experienced in 2008 and 2009.”
Continue reading on USAwatchdog.com.
Here is another short article from Money and Markets that discusses ramifications of the Fed’s cut in QE… (Remember, Jim Sinclair said that the Fed couldn’t exist from QE and that it was QE to Infinity. But he also said if they tried to cut back the bond market would start to tumble and force the Fed back into more QE, this time with a vengeance.)
Fed Signals End of Easy Money — Are You Ready for Massive Shift in Rates? (www.moneyandmarkets.com)
Mike Larson | Wednesday, January 29, 2014 at 5:06 pm
Earlier in 2013, I made a shocking prediction. I said the era of cheap, easy Federal Reserve money was going to come to a long, drawn out end. I predicted that the Fed would start tapering its mammoth quantitative easing (QE) program late last year, and would eventually whittle it down to nothing.
My timing was off by a few weeks. They didn’t taper in September. But when all of Wall Street said that meant they wouldn’t pull the trigger until much later in 2014, I stuck to my guns and called for a shocking December move. Sure enough, they agreed to slash $10 billion from the QE program last month — and at their policy meeting today, they did it again.
Today, the Fed announced it would shrink its QE program by another $10 billion, to $65 billion.
Specifically, the Fed said it would shrink its QE program by another $10 billion, to $65 billion. Policymakers also strongly implied they will continue reducing their bond buys going forward. That means QE could be whittled down to nothing at the coming handful of meetings. And that, in turn, sets the stage for actual short-term interest rate hikes.
Continue reading on MoneyandMarkets.com.
And just how will this affect the price of gold? Here is an article from Arabian Money:
Chinese a far more important factor in gold prices going forward than Fed QE tapering (www.arabianmoney.net)
January 29, 2014
US investors went cold on gold last year because the specter of Fed QE tapering promised higher interest rates that make gold investments less attractive. But this narrow viewpoint missed the bigger picture entirely as the Chinese used this opportunity to corner the gold market like the Hunt Brothers did with silver in 1980 (click here).
Chinese demand is a far more important determinant of gold prices going forward than QE tapering by the Federal Reserve. Just look at other markets.
Last year China overtook France as the world’s biggest consumer of red wine. Think what that has meant for wine prices over the past decade. First growths went to being affordable by the Western middle classes to being for the one-per cent only.
Continue reading on Arabianmoney.net.