John R Ing's Contributions

Although this is the first time in the Fed’s 100 year history to use Quantitative Easing (QE), it is not the first time the Fed used the printing presses as fiscal policy.

Gold collapsed over 14 percent in two days in the sharpest tumble since 1983 raising fears that the twelve year bull market is over. Some blame the collapse on the fear that Cyprus and other weaker European countries would have to dump their gold reserves. Wrong.

Monetary policy has failed to engineer a strong recovery. Worse for the past four years, the White House and Congress have been locked in a political fight proving them incapable at handling economic problems. Round one, Obamacare, States are opting out.

America is more bankrupt, leveraged and vulnerable than Europe. And to finance its debt, one branch of the state (Treasury) borrows money from another branch of the state (the Federal Reserve) and everybody thinks this is the norm – they call it quantitative easing (QE) as the Fed embarks on a third round which could eclipse the first one’s trillion dollar cost pushing America closer to the fiscal cliff on their mountain of debt.

Despite the $340 million settlement by Standard Chartered or MF Global’s disappearance of $1 billion of customer funds that were somehow co-mingled with MF’s proprietary position, economic interests have blurred the lines between the regulators and the regulated.

Two forces collided head-on. Hundreds of people spent more than 30 years looking for the answer. The Higgs boson discovery? No, gold. After experimenting with fiat currencies, this flawed premise has collided with an equally bigger truth: Gold is finite, paper isn’t.

Despite the possible breakup of the EU, there’s a certain degree of complacency and denial over the political gridlock and lack of leadership on both sides of the ocean. The respite in the euro-crisis lasted only a few months and Europe sits on the edge of collapse after almost two years of political rhetoric and last minute summits.

Last month gold plunged more than $200 in less than a week and the dollar soared, trumping even gold. The move caused a catfight among letter writers with investors and central bankers questioning gold’s safe haven status.

Once again gold has made fresh highs as the Fed prepares its second or is it the third round of quantitative easing (a.k.a. money printing) which involves buying assets (a.k.a debt) to drive down yields and hopefully stimulate more borrowing and spending. Two years after the Lehman collapse and implosion of the housing sector, the financial system is still on life support.

The world is afraid of a repeat of the deflation of the Great Depression. Deflation is a negative drop in prices caused by the contraction of money supply, the opposite of inflation. In 1932, US consumer prices fell 10 percent and between 1929 and 1933 fell 27 percent in total. Today despite inflation at 40 year lows, prices are still going up, not down. In the 12 months ended in August, prices rose 1.1 percent.

President Obama is turning into one of the main political casualties of the oil spill. Like his predecessor, he has become adept at the “politics of blame”. By personalizing, vilifying and threatening to take the boots to BP and its CEO Tony Hayward, Obama did not of course stifle the spewing oil well...