It’s Official! Fed Turns On QE3 Printing Presses. Got Gold?

Friday, 14 September 2012
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Published in United States Economy

Many expected it would happen.  Others swore it wouldn’t.  Stock market gurus hoped for it.  Hard asset traders warned against it.  But now its here.  It goes by different names:  QE3, Quantitative Easing, Monetary Easing …. Economic Stimulus.  Now we’re stuck with it.

Slice it any way you’d like, or continue to argue the issue. But The Fed Printing Presses are officially turned on and cranking.  And, according to all reports, they’ll be moving along at quite a clip … until at least 2015.


Here’s The Nifty Plan

In its announcement, The Fed made it very clear that what it’s targeting with its third round of Monetary Easing is the sluggish economy at large, the country’s abysmal employment picture, as well as its anemic business investment figures.  To turn all this around, the Central Bank will be purchasing mortgage-backed securities at a rate of $40 billion per month. It will be doing this at will at least until “the labor market improves substantially.”

Here’s The Problem With The Nifty Plan

Not all economists agree with this course of action.  Even within the Fed itself there remains disagreement about the plan’s effectiveness. Jeffrey M. Lacker, economist and president of The Federal Reserve Bank of Richmond voted against it.  He doesn’t like the idea of paper asset purchases.  Nor does he like the idea of the Fed’s publishing an open-ended time table for the program.
And who can blame Lacker? Like all the stages of monetary easing that precede it, QE3 is all about printing paper money.  It feels good at first; but when the chickens come home to roost, what the economy will be stuck with is a lot of paper, and no visible change in productivity.

And there’s a word for it when too much paper floats through the economy without an increase in productivity.  That word is “inflation.” 

What Inflation Means To You

With too much paper money in circulation, the value of that paper declines.  And prices rise to keep up with the rate at which paper money is printed.  So try as you may to save more, you wind up with less.  And try as you may to keep up with an increase in prices, you fall flat on your face.

Your Way Out of The Quagmire – Got Gold?

Have you checked the price of gold lately?  After the Feds announcement, the yellow metal made a surge of $33.40 per ounce. It now sits at $1,773.00 per ounce.  Just a few short weeks ago, investors were waiting on the sidelines wondering whether gold would budge from the mid-$1,600 per ounce mark.  You wait, you wonder, you miss the train. 

Since the year 2000, gold has been experiencing the greatest bull market in history.  Had you invested in gold on January 4, 1999, you would have paid approximately $287.00 per ounce.  Today your gold would be worth over 6 times the amount you paid for it. 

Talk about inflation.  The cost of housing is now 33% higher than it was that same year, transportation 42.1% higher, education 29.6% higher and medical care a whopping 59.7% higher. 

Now just imagine that all your dollars were gold back then… well, let’s not go there.  Woulda, shoulda, coulda is not a promising investment strategy, is it?  Let’s look to the future instead.

Now For The Good News

According to Reuters, gold is up 13 percent year-to-date after its 10 percent rally in August since world central banks stimulus initiatives.  With the the Fed’s third round of monetary easing in place until 2015, and the European Central Bank’s own stimulus in place, do you really doubt that the price of gold will reach $2,000 or beyond by the end of the year?
You may not be able to change the rate of inflation we’re likely to see from the Fed printing presses, but you can do something very sage and sensible with your dollars before it’s too late.

Call GoldcoDirect at 855-848-GOLD or Click Here to find out more information.

  Still have any doubts?  When the world’s bond king, Bill Gross of PMCO, recommends buying gold over bonds, maybe it’s time for you to ask yourself how much gold you need in your portfolio. 

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The Gold Informant

J. Keith Johnson is head writer for The Gold Informant, one of the most comprehensive news sources for all things gold and silver related. The Gold Informant is sponsored exclusively by Goldco Direct and his articles can be found regularly on our website.