Financial Sense Blog

Austerity be damned, at this rate Mr. Bernanke will go down in the history books as one of the greatest money creators ever to have walked this planet! Never mind sky-high deficits and a crushing debt overhang, at its most recent FOMC meeting, the Federal Reserve all but guaranteed another round of quantitative easing. While the American central bank did not officially expand its quantitative easing program last month, it did reiterate its willingness to institute more aggressive monetary policy measures in order to combat the risks of deflation. Furthermore, Mr. Bernanke did officially downgrade the Federal Reserve’s outlook for inflation.

The QE process is conducted via primary broker dealers, not traditional banks. QE will flood the financial markets with freshly printed U.S. dollars by involving global hedge funds and sovereign wealth funds.

By patiently watching events, and through diligent effort, some men are able to learn the difference between true and false. They learn to discriminate between what is harmful and what is helpful. They learn to divide the wolves from the sheep. They learn to distinguish wisdom from foolishness. It is most interesting, in this regard, that the word "discrimination" has come to have a negative connotation. For all right judgment is based upon discrimination, and a recognition of differences.

The world’s oil production capacity may not be sufficient to match growing demand in coming years. The potential for short-falls arises from geological, infrastructure, and political/economic constraints limiting the ability of world oil production capacity to grow while demand continues to rise. If oil supply cannot meet demand a price spike may be triggered, with major detrimental effects on economies, especially those heavily dependent on oil imports like New Zealand.

Copper’s talking up a storm, are you listening?

Judging from the amount of reprints of G. Edward Griffin’s “The Creature from Jekyll Island: A Second Look at the Federal Reserve” (which are 27 as of 2010), more than a few people have taken notice of Griffin’s argument to abolish the Federal Reserve. Griffin depicts the establishment of the Federal Reserve by globalist bankers as an illegal act to wrest away economic freedom from average Americans.

Gold dropped too $1,314.5 before recovering to $1.325. It seems that this was due to the G-20 proposals from the U.S. indicating a possible attempt at calming currency markets. This weekend the G-20 is meeting to discuss the current currency turmoil in the markets. Usually this is a meeting where little happens, but this time the U.S. has proposed that countries in the Group of 20 limit current-account surpluses or deficits to no more than 4% of each nation's gross domestic product by 2015.

It has become increasingly clear, as the Fed-Generated post-September 1 Rally has continued to boost Apparent Equity, and many Commodity, Values, that The Fed will brook no impediment to its recent policy of Inflating Nominal Asset Values.

A pillar in all bullish arguments for the global economy is that China and India will carry the weight of industrialized nations due to their insatiable demand for a better way of life. While they will certainly try, the risk of both nations hitting a wall is increasing as that insatiable demand consumes increasingly more resources.

The recent jawboning between the US and their Chinese counterparts is not only being played out on the diplomatic front (with Treasury Secretary Geithner making a house call) but also in the financial markets. The bump in rates by China, instead of allowing their currency to “freer” float certainly confused investors’; however the reaction to a reduction in liquidity was very certain: sell risk assets.