Why Gold is at $700 instead of $2000

[gobears]

In this CNBC interview this morning, Steve Forbes explains why gold is still at $700 instead of $2000 where it ought to be:

http://www.cnbc.com/id/15840232?video=926299862&play=1

For every dollar the Fed is giving, it takes another away through the back door, actually clamping down on liquidity.

Picked this up ultimately from here:
http://www.kitco.com/ind/nadler/nov122008B.html

where they mention the playbook the Fed is using is similar to Japan. If that is the case, don't count on either deflation or inflation, just stagnation! Maybe that is a 3rd way, a very boring mid-way between the inflationists & deflationists!

[tsetsefly]

Re: Why Gold is at $700 instead of $2000

He didn't say how the fed is taking one dollar out for every dollar it creates. Could be the explanation but I don't see how a FED hell bent on not letting deflation happen would be doing that...

[*T*]

Re: Why Gold is at $700 instead of $2000

It has been, but has started to implement quantitative easing (& follow links).

[Charles Mackay]

Re: Why Gold is at $700 instead of $2000



This chart suggests the Fed is not fully sterilising its bailout — at least not yet. Unless bill issuance picks up, we’re looking at what appears to be, Japanese-style quantitative easing.

[bradzepfan]

Re: Why Gold is at $700 instead of $2000

for the newbies on the board, does QE mean monetization of debt?

[gobears]

Re: Why Gold is at $700 instead of $2000

Great link. Thanks!

While I am 95% sold on Ka-Poom, and 99.9999% sold on a full-blown deflation not happening, I am not convinced that the FED could not find a way to produce a result like Japan. I know of course the differences, that Japan has a trade surplus and is a net creditor. HOWEVER, maybe that difference is offset by the advantages the USA has of issuing its debt in its own currency. Is that not an equivalent advantage to being a net creditor + trade surplus? In another words, for any other country in the world to enjoy the advantage of a broad flexibility in financial policy (the USA naturally has this advantage being the reserve currency), they would need to have a situation like Japan? Of course, you could argue, the USA will lose this advantage because other countries will dump us. But, what if the major central banks work together? This, I feel, could be a major point that would still lead to ka-poom, but the poom would be very muted and spread out?

This chart suggests the Fed is not fully sterilising its bailout — at least not yet. Unless bill issuance picks up, we’re looking at what appears to be, Japanese-style quantitative easing.