By Philippe Herlin -
Researcher in finance / Contributor
to Goldbroker.com
During his campaign, Mitt
Romney had stated that, should he win, he would get rid of the FED’s
Chairman, Ben Bernanke. That strong statement means he was going to address
the U.S. economic problems the right way, by slowing and then stopping the
FED’s debt buy-back program, which is what makes the budget deficit seem
painless. Case in point, why worry about balancing public accounts if the FED
keeps buying most of the State bonds that finance this deficit ?
Bernanke stands behind this
policy of monetizing the public debt, while waiting for an hypothetical
growth rally, and does not seem to understand that this huge flow of money,
combined with very low interest rates, actually hampers productive
investments while, on the contrary, it fosters speculative bubbles on commodities
and keeps the stock market artificially going well. Quantitative easing is,
in fact, a failure. It only buys time. All those debt buy-backs are realized
through newly printed money, which may lead in time to inflation risks. The
wake-up call will then be more painful but, hey, the election is over and
we’ll see what happens later !
Sadly, this easy money policy
will continue with Barack Obama. Nevertheless, we know that, starting January
1st 2013, if no deficit reduction agreement is reached until then between the
President and the Congress, we will see automatic cuts in spending and the
end of the Bush fiscal exemptions : this is what is called the « fiscal cliff
». This drastic accord, negociated in August 2011 at a time the U.S. debt
ceiling had to be raised, would bring about a reduction of the budgetary
deficit but, on Obama’s team, there is talk of reviewing it...
In any case, there will be
much friction between the Democrat President and the mostly Republican
Congress and that won’t help in bringing down the deficit. The printing
presses are going to roll for a long time ! The « Japanization » of the USA
is happening, with the vicious circle of deficit – debts – monetization –
stagnation taking roots progressively, as seen in the numbers.
All this money printing
contributes to the devaluation of the dollar, and Mario Draghi’s BCE is
traveling the same road in Europe. So, of course, all of this is
fundamentally bullish for gold. Its price should continue to rise, and it
will probably be one of the very few assets that will be able to protect our
savings in the years to come. Should we rejoice ? Well, a solid economic
growth and a steady price for gold would be preferable to a period of major
uncertainty and a bloated monetary/financial system that could explose at any
moment... But the choice has been made and, sadly, monetary manipulation will
continue.
Japan has now entered its
ninth QE... this is a record ! In the four years to come, will Ben Bernanke
beat this record ? Well, he just got another mandate, so he’s on his way...
