The Phaserl


FOMC, taper talk and the gold price

by Alasdair Macleod, Gold Money:

There is inevitable speculation that tapering might be announced at the FOMC meeting this Wednesday. It should be noted that this is Ben Bernanke’s swansong, and if tapering is to be announced he would probably go out with falling bond markets, falling equities and a soaring dollar, not to mention disruption of emerging market currencies such as the Indian rupee. For this reason perhaps opinion is odds-against tapering, but it doesn’t stop markets being nervous ahead of the event.

Those that think tapering is on the cards in the coming months have to produce a convincing argument as to how tapering is consistent with the overriding policy objective of no increase in interest rates for an extended period. Their assumption must be that zero interest rate policy sticks with us because there is little demand for money, so a reduction in its supply won’t affect rates unduly. This belief is at variance with the facts: interest rates are where they are because the Fed is keeping them suppressed with floods of extra money, and if the flood is made to recede, rates will simply tend to rise.

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4 comments to FOMC, taper talk and the gold price

  • rich

    Jim Grant..”The Fed can change how things look, it cannot change what things are,”

    “I got up this early to talk, not to listen,” Jim Grant berates Fed-apologist Steve Liesman as the two go head-to-head over the fallacy that QE has been a success. “The Fed can change how things look, it cannot change what things are,” is the single-sentence summation of the mirage that the Fed’s “dangerous monetary manipulation” has created.

    Arguing that Grant is wrong because, as we saw this morning with CPI, there is no inflation, Grant blasts back pointing to the massive inflation in asset prices, art, farmland, ferraris as indicative of who the Fed’s policies have helped. Grant adds to the list of obvious bubbles and even Joe Kiernan jumps in on his side against Liesman’s insistence that the Fed is omnipotent (because the currency hasn’t crashed… yet).
    150 seconds of perfect disequilibrium at the pretense of central planning…

  • Frank Zak

    Good time to cost average down into
    gold and silver.

    Buy low….. sell high.
    Jim Rogers

    You want extremely negative sentiment.
    The fundamentals on gold are sensational.
    The mathematical fundmentals on silver
    are also good, even though its supply demand
    fundamentals are poor.

  • Frank Zak

    Gold owners don’t care about taper now.
    They only care about the debt.

    All this taper news is noise to gold.

    The best thing that could happen to gold
    is that they end taper. It would only
    cause a short blip down and the pros would come in
    like vultures to buy.

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