Quantitative Easing aims to stimulate the economy by injecting the financial system full of liquidity via asset purchases that push down interest rates to encourage investing and job demand.
Side effects include a weaker USD and fears inflation rates will soar once the economy gains steam, a recipe for rising Gold prices.
With President Obama facing another term in office, expect the Fed to keep its foot on the gas and keep pumping the economy full of liquidity until the labor market shows marked improvement.
A lack of political will to narrow deficits and pay down debts will keep the USD weak, a weaker USD leads to rising Gold prices.
Most Americans are not ready for belt-tightening fiscal reforms. Folks in the USA are concerned with just simply getting by. Just looking at the huge US food-stamp program signals Bullish for precious metals.
When the going gets tough, people are going to want to have things in their possession that they can touch and feel. Gold is in that category, and it has been in that category for thousands of years.
Fiscal issues are on center stage thanks to the fast-approaching F–Cliff, 33 day to the deadline, a combo of tax hikes and deep government spending cuts due to take affect at the same time at the end of this year.
The US Congress must work to steer the country away from the Black Danger Zone though longer-term fiscal reforms that are direly needed.
Many market watchers are expecting Congress and the White House to succeed in keeping the economy away from disaster, though the likely solution will include temporary and stop-gap measures such as extending deadlines.
That leaves the US Fed, the only resort when it comes to fueling a recovery, as the business community will put off expanding and hiring and remain in standby mode since they do not know what they will be paying in taxes next year.
Republicans and Democrats remain at odds over taxes, with Democrats calling for the Bush-era tax cuts to expire for the wealthy to drum up new revenue.
Republicans have said such a move would punish many small business owners, who would subsequently put off hiring, which the economy needs for both growth and to create new taxpayers.
A handshake Compromise will be well received by the market, even if policymakers put off making tough decisions today and kick the can down the road as Warren Buffet believes.
Longer-term reforms have to look out for small businesses, they are backbone of the US economy.
When we look at job creation and when we understand that the vast majority of jobs in the USA are created by small businesses, the tax structure has to be beneficial for them so that they can grow and hire more people.
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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