<Interest rates will necessarily go higher> If interest rates are allowed to go higher and find their market rate from this point on, the US economy will at best remain stagnant and at worst will develop into an economic dead zone for as far into the future as the eye can see. The plan instead is to print the dollar into oblivion -- and this is what QE is really all about. Of course this too will end badly -- with rampant inflation. But make no mistake, there is no longer an unanswered question on this matter. The answer is simple enough -- we no longer have a choice when it comes to printing. You can it whatever you like -- QE, loose policy, easing, stimulus -- it makes no difference what label is applied. So long as we have the mother of all current account deficits to finance we are left without any choice but to print. And that is why it makes no sense to speak about the price of gold as if the trend was anything less than set in stone.
Now, if you want to talk about how to lower the current account deficit to a manageable level, or even to create a surplus, then there are plenty of things to discuss. All we need to do is have really high savings, lower spending in all sectors including consumer and government, higher taxes, fewer imports and larger exports. Lay out the path towards these moves and you could in time see a change of trend -- it will only take 10 to 20 years. Until then, the trend is set in stone -- 'QE' forever, a worthless dollar and gold at levels few can comprehend today. |
