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Gold/Mining/Energy : Gold & Gold Stock Analysis
GLD 368.18-0.5%Oct 31 5:00 PM EST
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To: JimisJim who wrote (25104)8/4/2011 2:07:25 PM
From: GST8 Recommendations  Read Replies (1) of 29622
 
It is not off topic -- it goes to the heart of asset pricing and the logic behind the ballooning of the Fed balance sheet -- which in one form or another is likely to continue. Printing money in the trillions is not intended to create jobs and it does not create jobs. What it does is allow the conjuring of a fictional source of funding for a economy that cannot finance its current account deficit via legitimate channels. The 'risk' is that it debases the currency -- and that is the risk that in many ways drives the price of gold up and up. We have not had deflation, and the fed did not act to prevent deflation. The Fed acted to maintain the 'liquidity' of the 'banking system' not merely by bailing out the private sector but by bailing out the US government at the expense of debasing the currency. This is what drives all market players to offset the resulting risk by buying gold. The farce of a debate we just saw about the federal deficit papers over the fact that whatever we do with the debt ceiling assumes we have people standing ready to provide us with endless trillions to finance our national debt -- and to do it on our terms. The reality is that we have he fed on standby to print trillions of dollars when those generous foreign creditors fail to RSVP to our little debt party -- it is not a matter of staving off deflation -- it is a matter of defaulting on our obligations via inflation.
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