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Fed Policy - Will it change in 2013? Is Q3 Enough ?

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Don't Expect 2013 To Be The Year Bernanke Backs Off

Forbes.com - 79 Minutes ago

 

Barack Obama's decisive victory over Mitt Romney in the presidential elections has cemented the future path of monetary policy under Ben Bernanke. After unveiling a fourth round of long-term asset purchases,

 

"The Fed should act Crazy" ... says Economix

 

economix_p124_detail_700wide.jpg

 

Which part of "CRAZY" do they not understand well ?

 

 

PHM / PulteGroup Inc (Home Builders) ... update

 

phm.gif

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I expect quite the opposite to happen- a new bear market, and Bernanke stepping on the gas pedal which will ultimately stoke an inflationary recession. 200bn/month, 300... 400... There is literally no upper limit to how many zeros that guy can choose to add on.

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I think that 2013 will be a year of at least one major currency being "disrupted",

and maybe as many as three

 

Dollar? Euro? Yen?

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Historically, the presidential second term see's far higher deficit spending than the first.

 

Given the technicals of the S&P and DOW, and the lack of market enthusiasm from QE3, the market looks decidedly toppish.

 

I see a downtrend ahead, but nothing like the previous bear markets.

 

I am of the belief that asset prices can drive the economy, directly, and indirectly (the psycological factor).

 

Given the above, a downtrend only paves the way for huge money printing.

 

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Historically, the presidential second term see's far higher deficit spending than the first.

 

Given the technicals of the S&P and DOW, and the lack of market enthusiasm from QE3, the market looks decidedly toppish.

 

I see a downtrend ahead, but nothing like the previous bear markets.

 

Tony C, has now shift to a 50/50 probability of a Bear Market.

See DrB"s Diary

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ScotiaBank expects more QE, & higher Gold in 2013

 

 

Given we saw

further broad based quantitative easing (QE) in September and that no solution has

been found to either the EU debt problem, or the US budget deficit, we feel that there

will be more QE ahead as policymakers continue to buy time. As money is created at

will to keep the economic plates spinning we can not help but feel the value of paper

money is being debased. As QE is happening in differing forms in the US, Europe,

Japan, Switzerland and UK, the currency debasement is difficult to spot as the

currencies of the economies doing QE are weakening in parallel.

 

Given the situation

the world’s financial system is in, we feel there is still a strong reason to continue

holding Gold. The other noticeable development in the latest rounds of QE was that

they were unlimited – although this may provide confidence to the market and may

dissuade traders from betting against the central banks, it suggests the practice could

gather momentum. The debt problems are now so big that the only entity capable of

paying off the debt is the global pool of wealth. One way or another, we feel the value

of the debt will be reduced by devaluing the currencies the debt is priced in. As such,

investors and creditors are likely to continue to diversify away from fiat currencies

and that is likely to see further monetarisation of Gold as investors seek to preserve

===

 

/more: http://www.scotiamoc...orecast2013.pdf

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ScotiaBank expects more QE, & higher Gold in 2013

/more: http://www.scotiamoc...orecast2013.pdf

 

Not much NEW there, I will grant. But the thing to keep in mind is:

... that Inflation SEEMS tame, but it can come back quickly. And it does seem that QE will come back again and again, until inflation revives.

 

Here's a reminder from Weimar Germany:

 

Wholesale Price Index

=========

July 1914 : 1.0

Jan 1919 : 2.6

July 1919 : 3.4

Jan 1920 : 12.6

Jan 1921 : 14.4 : +14%, and then stability

July 1921 : 14.3 : stability ends

Jan 1922 : 36.7

July 1922 : 100.6

Jan 1923 : 2,785.0

July 1923 : 194,000.0

Nov 1923 : 726,000,000,000.0

 

Look at the WW1 price shock, and then that "island of stability" from Jan. - July 1921, when prices fell slightly.

 

"the ebb and flow of confidence can play a big role in the short-term trend of prices. Confidence in the mark had weakened. At the same time, and as a consequence, billions of hoarded marks came out of hiding and entered the marketplace. The accumulated fuel was burning.

 

By February 1920 this inflationary episode had run its course. For the next fifteen months the price index held stable. The mark actually gained in value against foreign currencies, so that prices of imported goods fell by some 50%. Here was a golden opportunity to establish a stable currency. However, during these fifteen months the government kept issuing new money. The currency in circulation increased by 50% and the floating debt of the Reichsbank by 100%, providing fuel for a new outbreak.

 

In May 1921, price inflation started again and by July 1922 prices had risen 700%. The Reichsbank continued printing new currency, although more slowly than the rate at which prices were rising. In fact, all through this period the issue of currency proceeded at a fairly smooth steady rate, while the price index moved up in great surges, interspersed by periods of stability.

After July 1922 the phase of hyperinflation began. All confidence in money vanished and the price index rose faster and faster for fifteen months, outpacing the printing presses which could not run out money as fast as it was depreciating.

 

The Years 1922-1923 -- Hyperinflation!

From Mid-1922 to November 1923 hyperinflation raged. The table above tells the story. Seemingly Reichsbank officials believed that the basic trouble was the depreciation of the mark in terms of foreign currencies. In late 1922 they tried to support the mark by purchasing it in the foreign exchange markets. However, since they continued printing new currency at a feverish rate, the attempt failed. They merely succeeded in buying worthless marks in return for valuable gold and foreign exchange.

 

All hope of checking the collapse of the mark vanished in January 1923 when the French--alleging treaty violations--occupied Germany's key industrial district, the Ruhr. Germany subsidized the occupied companies and financed an expensive program of "passive resistance." New billions of marks were printing to finance these heavy new costs. By late 1923, 300 paper mills were working top speed and 150 printing companies had 2000 presses going day and night turning out currency.

 

Under the forced draft of inflation, business was now operating at feverish speed and unemployment had disappeared. However, the real wages of workers dropped badly. Unions obtained frequent increases, but these could not keep pace. Workers --domestics, farm workers and various white collar groups-- fared especially badly. They had no unions to fight for pay boosts for them, and often they were reduced to hunger. Many people showed visible signs of malnutrition. Skilled workers, writers, artisans and professionals found their wages lagging until they reached the unskilled worker level, which often meant the bare minimum needed to support life.

german-breadline.jpg

 

Lining up at the bakery early before prices went up

Businessmen began to abandon their legitimate occupations to speculate in stocks and in goods. Thousands of small businessmen tried to eke out a living by speculating in fabrics, shoes, meat, soap, clothing--in any produce they could obtain. Each fall in the mark brought a rush to the shops. People bought dozens of hats or sweaters.

 

By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods. However, by this time, more and more often, shops were empty. Storekeepers could not obtain goods or could not do business fast enough to protect their cash receipts. Farmers refused to bring produce into the city in return for worthless paper. Food riots broke out. Parties of workers marched into the countryside to dig up vegetables and to loot the farms. Businesses started to close down and unemployment suddenly soared. The economy was collapsing."

 

===

/more: http://www.usagold.c...nnightmare.html

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