The price of gold bullion will continue effortlessly breaking through so-called barriers.
July 18, 2011 – Another day and another barrier to the gold bullion price falls without a whimper. By midday in Europe, before stateside markets even got going, the price topped $1,600. Makes you wonder what the next knee-jerk reaction will be over here.
Bernanke, fortunately, has backed of talk of QE3, perhaps heeding the remarks of Richard Fisher, president of the Dallas FRB, that the Fed had “pressed the limits of monetary policy.” But he hasn’t stopped “QE Lite,” which has given equities the only oomph they have found since the end of QE2.
It appears the markets got hooked on the Fed’s dropping by in the morning to dump buckets of bucks picking up its own debt. Flush with new cash, banks would then buy equities and jumpstart to the day’s trading. Left to its own devices the markets have struggled, and for good reason – they are trying to correct.
Corporations have been steadily stockpiling cash for nearly ten years now, but rather than seeing that as a warning, Wall Street takes it as a sign of a strong bull market. While companies are buying up their own stock the execs are dumping theirs, and traders keep jacking up prices as profits soar. Think about that.
Record cash supplies should be cause for concern. They are a life raft for when the ship goes down. If companies were optimistic about the future they would be investing in it. Instead they are bracing for the storm.
Any new action by the Fed is guaranteed to do nothing but prolong the inevitable. The government has to step back and let the markets sweat out withdrawal from its meddling. But Wall Street has been operating without fear of consequences for so long, I doubt it remembers much about the fundamentals and traders stand to get pretty banged up. When they do you can bet they’ll run crying to Uncle Ben to do something to make it all better.
It will take a long time for the markets to completely heal, even without any further interference from the Fed. Our economy will take decades to fully recover from the damage done by reckless fiscal policy.
