So I was dead wrong about what the Fed would do in the video blog that I put out last night. I did not expect them to expand their balance sheet with asset prices as high as they are and the economy supposedly growing. This is THE signal I have been waiting for (and the spark that I mentioned in my recent GoldMoney interview) to be sure that this latest rally in the precious metals is the real deal and that new highs are in the cards.
It doesn’t take long to realize how bullish this is for gold and silver. Everyone I know has been waiting for new QE to really make serious changes and now we have it. This action will lead to two questions being asked by investors. First, if the economy is recovering why do this? Second, if they are doing this now what do you think they will be forced to do when things get worse?
The elephants of capital will now move and the ground will start to shake. The one asset class I think should suffer the most from this is credit. Yield will not be en vogue in the inflation that is coming.
From the Fed statement:
If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.
I always wondered what it would be like to trade in Zimbabwe.