What should we expect from the FOMC this week? Speculation abounds, especially on the heels of the QE3 announcement coupled with a recent correction in the market.
Furthermore, as we mentioned a few weeks ago, the FED has yet to clarify what its specific goals are. Will they provide unemployment numbers, market levels, housing goals and/or income expectations?
Many are expecting an increase in the size of the bond purchases as well. Of course, all measures are highly inflationary. But, if they intend to continue manipulating our monetary system, what choice do they have?
FED officials seem somewhat split on specifics, though all seem to be in favor of continuing along the current basic course. Buying more securities will certainly be part of the FED’s future action.
For tomorrow, at the very least, we should hear something about how positive their decisions are for the economy. And goals should be forthcoming, offering some semblance of hope for the markets.
As long as they can keep their doctored inflation rate below 2.5%, interest rates will be held down. Of course, that seems bullish to markets as well.
What does all this mean? Probably very little, in the long run. We hear so much about how the FED does this and that for the economy. But most investors today fail to recognize that it would have been impossible for us to be in our current predicament without the FED’s intervention and the highly leveraged fractional reserve system that they’ve built into our banking industry.
The good news is that we can prepare. Every step towards destroying the dollar through printing more is another step toward gold skyrocketing. Will it happen this year, next, 2015 or ??? We don’t know for sure. But, at this point, due to the central banks of the world continuing to accumulate gold, we know that we are not yet in a gold bubble.
How will we know when a gold bubble hits? When news announcers are advising you to buy. When it becomes mainstream. When even your mother and grandmother are talking to you about buying some gold. When that happens, then it’s time for you to consider what might be the best exit strategy, at lease for your speculative position (if you have one).
If you’ve taken a foundational position in metals, as we’ve consistently advised, then your approach is different. Such a position should be kept for catastrophe insurance, along with other goods that can be traded in the event of massive economic hardship.
For your prosperity,
J. Keith Johnson
The Gold Informant