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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (19273)	6/19/2016 3:56:32 PM
From: Goose94	Read Replies (1) \| Respond to of 202423

Gold: Free Cash - Will Helicopter Money Be Falling From A Sky Near You? Global money managers whipped funds around this week, sending German bond yields into negative territory for the first time ever. Gold prices surged to a three-year high and U.S. stocks tumbled, but then reversed. A storm of anxiety has whipped up global waters and sent investors running for cover into safe-haven investments like gold. Is this week's push to a new three-year high in gold just the start of the new bull cycle in the metal? Maybe yes. There are a number of fundamental undercurrents stirring up the rough and choppy seas in the macroeconomic outlook right now. Let's take a look and connect the dots. The Brexit vote has the world on edge. Could a "Leave" vote win on June 23 tilt the Euro-area and the UK back into recession? Maybe. More monetary policy cuts would most certainly be forthcoming. "A UK vote to leave the EU would prompt greater market disruption and force the European Central Bank to take action," according to a Capital Economics research note. The economists also suggest the Swiss National Bank and Norges Bank would also likely cut interest rates if the Brexit vote wins. The Federal Reserve has sharply dialed back its tightening cycle. Fed Chair Janet Yellen this week surprised traders this week with news that future rate hikes have been sharply curtailed. In March, the Fed forecasts targeted a 1.9% Fed funds rate in 2017 and 3.0% in 2018. This week, they suggested a 1.6% rate for 2017 and 2.4% rate in 2018. Key takeaway: "Net net the Fed is telling us that the economy is not strong enough for rates to be raised at even a gradual pace. They now look to raise rates only cautiously and gradually. The markets are right to ask what does the Fed see that you don't see. They see a world of increasing risk make no mistake about it. They are more worried than their words can say. Bet on it," said Chris Rupkey, managing director at MUFG Union Bank in a research note to clients. Global growth is slowing. With or without Brexit, global GDP forecasts are turning lower. If a Leave vote wins for Brexit, all bets are off and these numbers could look even worse. In the U.S: BNP Paribas believes Fed rate hikes are completely off the table in 2016. "A more serious issue is how the Fed might ease if recession does come," wrote BNP Paribas econoimsts in a research note. With the Fed funds rate still below the 1.00% level (well below the 3.5-4.0% "normal" historical rate) –what options would the central bank have if a recession were to hit? Could the answer be "helicopter money" currently under discussion in Japan and the European Central Bank? The fact that this is being taken seriously reveals how global central banks are truly out of bullets. Monetary policy (at zero or negative interest rate levels) has failed to stimulate the economic growth and inflation levels desired around the globe. A quick primer: The origin of the term: "helicopter money" is credited to Milton Friedman in an academic paper "The Optimum Quantity of Money," in which he referred to a helicopter scattering money from the sky. This would blur the lines between monetary and fiscal policy as it would most likely take the form of governments mailing citizens a check. The fact that helicopter money is seriously being discussed in policy circles is a disturbing issue. If recession hits in the U.S., with rates still at 1.00% are below, what option would the Fed have but to consider helicopter money? Global growth risks abound. Global central banks are struggling. Their conventional and unconventional policy tools aren't working. If growth tips into recession, it is only a matter of time before the helicopters start humming. Continued debasement of paper money will continue. Gold remains a hard asset. A currency that can't be printed or mass-created. In this environment, gold finds strong support and investor interest. And, those global macroeconomic conditions aren't going away anytime soon. How high could gold rise? What do you think? By Kira Brecht,