Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

Why central banks need to hold gold way down or get it up to $10,000

IMG Auteur
Published : February 25th, 2013
486 words - Reading time : 1 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : GoldWire

Trade Protectionism Looms Next as Central Banks Exhaust QE

By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, February 24, 2013

Officials at the US Federal Reserve may be more worried than they have let on about the treacherous task of extricating America from quantitative easing. This is an unsettling twist, with global implications.

A new paper for the US Monetary Policy Forum and published by the Fed warns that the institution's capital base could be wiped out "several times" once borrowing costs start to rise in earnest.

A mere whiff of inflation or more likely stagflation would cause a bond market rout, leaving the Fed nursing escalating losses on its $2.9 trillion holdings. This portfolio is rising by $85 billion each month under QE3. The longer it goes on, the greater the risk. Exit will become much harder by 2014.


Such losses would lead to a political storm on Capitol Hill and risk a crisis of confidence. The paper -- "Crunch Time: Fiscal Crises and the Role of Monetary Policy" -- is co-written by former Fed governor Frederic Mishkin, Ben Bernanke's former right-hand man:

http://research.chicagobooth.edu/igm/usmpf/download2.aspx

It argues the Fed is acutely vulnerable because it has stretched the average maturity of its bond holdings to 11 years, and the longer the date, the bigger the losses when yields rise. The Bank of Japan has kept below three years.

Trouble could start by mid-decade and then compound at an alarming pace, with yields spiking up to double-digit rates by the late 2020s. By then Fed will be forced to finance spending to avert the greater evil of default.

"Sovereign risk remains alive and well in the U.S, and could intensify. Feedback effects of higher rates can lead to a more dramatic deterioration in long-run debt sustainability in the US than is captured in official estimates," it said.

Europe has its own "QE" travails. The paper said the ECB's purchase of Club Med bond amounts to "monetisation" of public debt in countries shut out of global markets, whatever the claims of Mario Draghi.

"We see at least a risk that the eurozone is on a path to become more like Argentina (which of course is why German central bankers are most concerned). The provinces overspend and are always bailed out by the central government. The result is a permanent fiscal imbalance for the central government, which then results in monetization of the debt by the central bank and high inflation," it said.

In America, the Fed would face huge pressure to hold onto its bonds rather than crystalize losses as yields rise -- in other words, to recoil from unwinding QE at the proper moment. The authors argue that it would be tantamount to throwing in the towel on inflation, the start of debt monetisation, or "fiscal dominance." Markets would be merciless. Bond vigilantes would soon price in a very different world.

Read the rest here

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/989108...



* * *


Data and Statistics for these countries : Argentina | Japan | All
Gold and Silver Prices for these countries : Argentina | Japan | All
<< Previous article
Rate :Average :0 (0 vote)
>> Next article
Chris Powell is the secretary of the Gold Anti-Trust Action Committee (GATA) which has been organized to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Here's What Will Send Oil Prices...
05 Marovertheedge
"Admittedly there has been a production surplus since the beginning of 2014 but that is nothing new and is forecast to be back in balance by the en...
Another Clinton Scandal
05 Marovertheedge
O, Mr Hoye you must have really infuriated the Clintonistas. Before I voted, you only had 1 vote that was a one star. I tend to think ...
Apple's iWatch and Some Crazy Go...
05 Marovertheedge
Oooo, let me think about this. I have forward guidance about gold-bearing Timex® equivalents that are supposedly gonna be made by Apple/Foxconn...
Financial Repression Authority w...
03 Marovertheedge
"The US is only about 50% of global market cap but most US investors have a 'hometown bias" of having 70% of their portfolio in US securities. Fabe...
Bondholders “Bailed In” In Austr...
03 Marovertheedge
"“Bail-in is now the rule” as Irish finance Minister Michael Noonan warned in June 2013. Noonan admitted that the move to not maintain deposits as ...
Bondholders “Bailed In” In Austr...
03 MarArgus
Shortly after the Cyprus test run, Canada's budget document made provision for bail-ins in the event of significant 'systemic risk' to the banking ...
Illinois Pension Plans 39% Funde...
02 Marovertheedge
And it gets even worse. The unfunded pension liability monies aren't invested and never will be. You can't pay pensions out of an unfunded ...
China is about to overthrow Lond...
28 Febneville
This a good slap in the face for the downright crooked bullion banks,traders that have been front running ie algorythm trading etc It had to ta...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
TristarTOG.TO
TORC Oil & Gas Ltd. Announces 2014 Fourth Quarter and Year-End Financial & Operating Results
CA$ 10.17+2.52%Trend Power :
Financials
Altius Min.(Ag-Au-Co)ALS.TO
and Callinan combination to create a diversified mining royalty company leader
CA$ 12.05-4.89%Trend Power :
Corporate news
Tahoe ResourcesTHO.TO
Declares Third Monthly Dividend For 2015
CA$ 16.23+1.37%Trend Power :
Corporate news
Sprott Resources(Ag-Au-Co)SCP.TO
Resource Corp. Announces 2014 Annual Results
CA$ 1.28+2.40%Trend Power :
Corporate news
Vista Gold(Cu-Le-Zn)VGZ.TO
. Announces 2014 Results and Provides Update on Recent Activities
CA$ 0.47+11.90%Trend Power :
Corporate news
Major DrillingMDI.TO
Announces Third Quarter Results and Declares Dividend
CA$ 6.43-0.16%Trend Power :
Corporate news
UR-Energy(Ur)URE.TO
Releases 2014 Year End Results
CA$ 1.32+14.78%Trend Power :
Financials
Rockwell(Cu-Gems-Ni)RDI.TO
Announces Filing of Preliminary Short Form Prospectus
CA$ 0.22-13.46%Trend Power :
Corporate news
Cardero Res.(Ag-Au-Cu)CDU.TO
Announces Proposed Reverse Takeover of Artha Resources
CA$ 0.03-14.29%Trend Power :
Corporate news
Goldcorp(Cu-Le-Zn)G.TO
declares third monthly dividend payment for 2015
CA$ 25.88+1.69%Trend Power :
Corporate news
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.