As said countless times before on this site, QE is permanent. There is no way that central banks like the Fed, Bank of England and others can reverse their expansionary policies or engineer a neat “exit” without tipping their economies into an all-mighty deflationary collapse. The money printing will become more brazen, and the authorities more daring in their attempts to fire up an inflationary recovery.
The Bank of Japan is the latest actor to pledge itself to aggressive money printing: the yen falling yesterday as news broke that the BoJ is planning more quantitative and qualitative easing. The Bank is pursuing an inflation target of 2%, and as dailyfx.com reports, it “will now use ‘monetary base control’ in pursuing quantitative monetary easing which involves carrying out market operations that will expand the monetary base by 60-70 trillion Yen per year.”
Hayman Capital’s Kyle Bass puts this in perspective in a new CNBC interview – noting that "the BoJ is monetizing at a rate around 75% of the Fed on an economy that is one-third the size of the US".
Meanwhile in the UK, the head of the (now defunct) Financial Services Authority has stated that “we must tell people that if necessary, QE will turn out to be permanent." He argues that governments must go much further in terms of money printing, and that they should be ready to finance current spending by this means. When the going gets tough, the ultimate monetary taboo isn’t such a taboo after all (at least to those firmly wedded to conventional economist “wisdom”).
Amid these developments and with the dust settling from the Cyprus crisis, it’s scarcely believable how bearish precious metal price action has been in recent days. This can’t last, given the raging bullishness of the case for gold.
