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Thursday, May 17, 2012

Several on FOMC Said Easing May Be Needed on Faltering

The Federal Reserve signaled further monetary easing remains an option to protect the U.S. economy from the danger that lawmakers will fail to reach agreement on the budget or Europe’s debt woes worsen.
Several members of the Federal Open Market Committee said new actions could be necessary if the economy loses momentum or “downside risks to the forecast became great enough,” according to minutes of the Federal Open Market Committee’s April meeting released yesterday in Washington.

Gold spiked on the news.  We'll see for how long.

Let's be clear.

Easing is the ongoing state of Fed Money Creation.  Any Member Bank can "borrow" Billions at Zero Percent, any time for any duration for any purpose.

The usual purpose is to gamble the money in the risk markets.  When they win they keep the profits.  When they lose, they go get more from the Fed to cover the losses.  (See JP Morgan and their latest 2 billion dollar loss.)

What other definition of "EASY MONEY POLICY" do you need?

So why have the risk markets been falling?  And why in the world is gold a risk asset?

Because the latest OFFICIAL EASING 'Operation Twist' is expiring.  And the sheer numbers of freshly created cash in these programs overwhelms all other fund flows in the trading arena.

When the newest round of Easing is announced the risk markets will stabilize.

At some point the very fact that all markets are dependent on freshly injected Fed (TAX PAYER) money will create a massive loss of TAX PAYER confidence. 

Then the game will change.

Then the risk markets will become impossible to prop up.

Then gold will become a safety hedge against the risk markets.

When will this happen.

Who knows.  But it will happen.

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