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Gold/Mining/Energy : Blue Chip Gold Stocks HM, NEM, ASA, ABX, PDG
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To: Wade who wrote (22868)10/15/2010 7:40:34 AM
From: Wade  Read Replies (1) of 48092
 
"If the Fed believes quantitative easing may not be the silver bullet, why may it be pursued anyway? To just try printing another $1 trillion, hit blindly and hope that it stimulates something? Worry about the inflationary fallout later? No. In our analysis, Bernanke may have a different agenda: to intentionally weaken the U.S. dollar. When the Fed prints dollars to buy government bonds, two things happen:"

- Everything else equal, the supply of U.S. dollars increases, making the U.S. dollar less valuable versus other currencies;

- Government bonds are intentionally over-valued as the Fed intervenes, making them less attractive to rational buyers. Rational buyers, domestic or foreign, are likely to look overseas for less manipulated returns.

Bernanke, unlike his predecessors, seeks the currency discussion. There are two dimensions he openly talks about:

Bernanke has testified in Congress that countries going off the gold standard during the Great Depression recovered from the Great Depression faster than those countries that held on to the gold standard longer. This is in line with discussions by economists surrounding trading purchasing power for employment. It's not the mandate of the Fed to intentionally destroy purchasing power, but currency devaluation is a tool employed by central banks to spur economic growth.
Bernanke has repeatedly argued that a weaker U.S. dollar is not necessarily inflationary. He points to past decades where a weaker dollar did not necessarily increase inflationary pressures.

gold-eagle.com

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