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Quantitative easing; everybody is doing it like the Bank of England, Japan and even Switzerland. Quantitative easing is a tool of monetary
policy. The effect is an increase in the quantity of
currency without regard to maintaining its quality.
Quantitative is relating to, measuring, or measured by the quantity of
something rather than its quality.
On 18 March 2009 Bloomberg reported that the Federal Reserve announced the
intent to purchase $300B of longer-term Treasuries. Predictably, the
Federal Reserve has decided to exacerbate the quantitative easing party.
This has an effective on quantitative finance.
What is really going on is the great credit contraction.
The system
does not collapse but evaporate. As the evaporation has
continued and intensified capital, both real and fictitious, has sought
safer and more liquid assets by moving down the liquidity pyramid. A
significant, but still miniscule amount, of capital has already evaporated
over the past year. This is basic
economic law being asserted. A predictable consequence
has been for Treasury rates to near 0% because they are considered among the
safest and most liquid assets.
But the United States Treasury bubble is the biggest of all and there
are reasons how and why the Treasury bubble will burst.
At all times and in all circumstances gold remains
money. Gold is the ultimate form of
payment and is always accepted. Gold is the safest and most liquid
asset. As I surgically explained, the ETFs GLD and SLV are NOT gold or silver. The question
then becomes: Will
capital move up or down the liquidity pyramid?
How did gold perform in reaction to Bernanke’s
announcement? A monstrous and almost immediate rise of about $60
per ounce. The gold cartel GATA
has shined a light on must of had its hands full today. This is all the
more ominous because gold is not just a commodity or portfolio
asset but a currency which, through tools like GoldMoney, can
be used in ordinary daily transactions. Because silver is also money;
the chronic silver backwardation is equally if not more ominous.
I have long asserted that the FRN$ will be the last major fiat
currency to evaporate in the great credit contraction and that gold will still be there when
the next credit expansion begins. This misguided action by Mr. Bernanke
will only hasten the rate of evaporation. The great credit
contraction has just begun and in the aggregate capital will continue
moving down, not up, the liquidity pyramid.
Trace Mayer
RuntoGold.com
Trace Mayer, J.D., holds a degree in Accounting from Brigham Young
University, a law degree from California Western School of Law and studies
the Austrian school of economics. He works as an entrepreneur, investor,
journalist and monetary scientist. He is a strong advocate of the freedom of
speech, a member of the Society of Professional Journalists and the San Diego
County Bar Association. He has appeared on ABC, NBC, BNN, many radio shows
and presented at many investment conferences throughout the world.
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