Financial Sense Blog

For the past thirteen years Venezuela has been moving away from a market economy towards a socialist economy under the leadership of Hugo Chavez. And now the future of Venezuelan socialism hangs in the balance.

This week saw the third central bank step on the gas in an attempt to reflate their economy. We had the ECB and the Fed which announced open-ended QE (quantitative easing) programs, followed this week by Japan which extended its current QE program into 2013. In effect, global QE has now begun, stoking a reflationary fire as stocks, commodities, and other asset markets react to the fire being kindled by central banks around the globe.

The market rallied at the end of trading yesterday as rumors regarding Spain started to hit trading desks. Those rumors continued to spread as Europe opened for trading. Reuters printed an article saying the government in Spain is working with European leaders to structure an economic reform package.

I'm convinced that Bernanke wants to bull the Dow higher to ensure that it's up two months prior to the election (this on the basis that if the Dow is up during the two months prior to the election, the incumbent almost always wins).

Jim Rickards, starring as guest co-host for Capital Account, discusses with John Mauldin and Lauren Lyster a wide range of issues affecting today's markets.

If the Fed wanted to "save" housing and not the banks, why not buy mortgages directly from homeowners? Instead of buying underwater mortgages from the banks, why not just buy the entire $10 trillion of residential mortgages outstanding and charge the homeowners the same rate the Fed charges banks, i.e. zero?

Wow! The hyperventilating hyperbole on hyperinflation to be brought about by QE-3 was near overwhelming. From some of what we read, QE-3 is to cure all the economic woes of the U.S., cause hyperinflation, crash the U.S. dollar, prevent male patten baldness, push $Gold to $2,400, and cause the death of our favorite pet.

Few retail investors today have the historical perspective to understand what happens when credit markets grow too large or too fast.

Negative economic releases and poor earnings guidance from companies in several areas had little impact on the market today, with the S&P 500 down less than 1 point.

As a result of the rather gloomy future look, bonds once again look like a safe-haven investment until the equities better reflect the economic environment.