Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Trading Natural Gas As The Season Changes - 16th Sep 19
Cameco Crash, Uranium Sector Won’t Catch a break - 16th Sep 19
These Indicators Point to an Early 2020 Economic Downturn - 16th Sep 19
Gold When Global Insanity Prevails - 16th Sep 19
Stock Market Looking Toppy - 16th Sep 19
Is the Stocks Bull Market Nearing an End? - 16th Sep 19
US Stock Market Indexes Continue to Rally Within A Defined Range - 16th Sep 19
What If Gold Is NOT In A New Bull Market? - 16th Sep 19
A History Lesson For Pundits Who Don’t Believe Stocks Are Overvalued - 16th Sep 19
The Disconnect Between Millennials and Real Estate - 16th Sep 19
Tech Giants Will Crash in the Next Stock Market Downturn - 15th Sep 19
Will Draghi’s Swan Song Revive the Eurozone? And Gold? - 15th Sep 19
The Race to Depreciate Fiat Currencies Is Accelerating - 15th Sep 19
Can Crypto casino beat Hybrid casino - 15th Sep 19
British Pound GBP vs Brexit Chaos Timeline - 14th Sep 19
Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - 14th Sep 19
War Gaming the US-China Trade War - 14th Sep 19
Buying a Budgie, Parakeet for the First Time from a Pet Shop - Jollyes UK - 14th Sep 19
Crude Oil Price Setting Up For A Downside Price Rotation - 13th Sep 19
A “Looming” Recession Is a Gold Golden Opportunity - 13th Sep 19
Is 2019 Similar to 2007? What Does It Mean For Gold? - 13th Sep 19
How Did the Philippines Establish Itself as a World Leader in Call Centre Outsourcing? - 13th Sep 19
UK General Election Forecast 2019 - Betting Market Odds - 13th Sep 19
Energy Sector Reaches Key Low Point – Start Looking For The Next Move - 13th Sep 19
Weakening Shale Productivity "VERY Bullish" For Oil Prices - 13th Sep 19
Stock Market Dow to 38,000 by 2022 - 13th Sep 19 - readtheticker
Gold under NIRP? | Negative Interest Rates vs Bullion - 12th Sep 19
Land Rover Discovery Sport Brake Pads and Discs's Replace, Dealer Check and Cost - 12th Sep 19
Stock Market Crash Black Swan Event Set Up Sept 12th? - 12th Sep 19
Increased Pension Liabilities During the Coming Stock Market Crash - 12th Sep 19
Gold at Support: the Upcoming Move - 12th Sep 19
Precious Metals, US Dollar, Stocks – How It All Relates – Part II - 12th Sep 19
Boris Johnson's "Do or Die, Dead in a Ditch" Brexit Strategy - 11th Sep 19
Precious Metals, US Dollar: How It All Relates – Part I - 11th Sep 19
Bank of England’s Carney Delivers Dollar Shocker at Jackson Hole meeting - 11th Sep 19
Gold and Silver Wounded Animals, Indeed - 11th Sep 19
Boris Johnson a Crippled Prime Minister - 11th Sep 19
Gold Significant Correction Has Started - 11th Sep 19
Reasons To Follow Experienced Traders In Automated Trading - 11th Sep 19
Silver's Sharp Reaction Back - 11th Sep 19
2020 Will Be the Most Volatile Market Year in History - 11th Sep 19
Westminister BrExit Extreme Chaos Puts Britain into a Pre-Civil War State - 10th Sep 19
Gold to Correct as Stocks Rally - 10th Sep 19
Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - 10th Sep 19
Stock Market Sector Rotation Giving Mixed Signals About The Future - 10th Sep 19
The Online Gaming Industry is Going Up - 10th Sep 19
The Unknown Tech Stock Transforming The Internet - 10th Sep 19
More Wall Street Propaganda - 10th Sep 19
Stock Market Price Structure Still Suggests We Are Within Volatile Rotation - 9th Sep 19
Stock Market Still Treading Water - 9th Sep 19
Buying Pullbacks in Silver & Gold - 9th Sep 19
Government Spending - The High Price of a "Free Lunch" - 9th Sep 19
Don't Worry About a Recession - 9th Sep 19
Large Drop in Stocks, Big Rally in Gold and Silver - 9th Sep 19

Market Oracle FREE Newsletter

The No1 Tech Stock for 2019

To QE or Not to QE, Disinflation May Be In the Cards

Stock-Markets / Quantitative Easing Jul 17, 2012 - 02:23 AM GMT

By: Dr_Jeff_Lewis

Stock-Markets

In its most recent Meeting Minutes for June 19-20, which were released on July 11th, the FOMC gave no indications of another round of stimulus or QEIII. Nevertheless, the monetary policy making committee did reiterate that it would continue its “Operation Twist” program of bond repurchases through the end of this year.

While the immediate reaction to the FOMC Meeting Minutes depressed precious metals prices and drove the U.S. dollar higher, markets corrected afterwards. The price of gold dropped marginally, and the price of silver actually rose by 10 cents per ounce.


The Fed’s monetary policy has exerted considerable influence in all capital markets and will continue to be a driving force in the perceived value of the U.S. dollar that is ultimately reflected in the pricing of consumer goods.

Disinflation and its Possible Benefits

Disinflation is typically defined as a drop in the rate of inflation or a decrease in the general level of the prices of goods and services in an economy over a period of time. Disinflation’s opposite is reflation, where the rate of the increase in the prices of goods and services accelerates.

Disinflation only occurs during recessionary periods and generally when the level of inflation is not very high to begin with. The lower cost of goods and services in a recessionary economic environment could provide some benefits. 

Globally, the economies of Europe and China have been slowing down, which directly affect the prices of goods in the United States. In his most recent press conference following the last FOMC meeting, Fed Chairman Ben Bernanke stated that,

“I do think that the European situation is slowing U.S. economic growth. First of all, Europe is, if not in a recession in every country, certainly many countries are in recession, and that affects our trade with Europe and the demand for our products. More broadly, the effects of European concerns on financial markets have added to volatility, have brought down stock prices, have increased credit spreads, and generally have been a negative for economic growth.”

He continued by saying that,

“So that has been an issue. And more broadly, we’ve seen some slowing in global economic growth more generally, including in Asia, which also has reduced somewhat our ability to export.”

Operation Twist and the Fed’s Treasury Position

Due to the Fed’s Operation Twist debt repurchase program, the Fed’s debt holdings have been converted into mostly long-dated treasuries. At some point, the Fed will have to deleverage their position, since they most likely do not wish to continue buying U.S. debt in perpetuity.

When they eventually do begin to unwind their position, they will have to sell long-dated treasuries, thereby putting upward pressure on long term yields. As those yields begin to increase, the rising differential between near and long term rates would cause the yield curve to steepen.

With a wider differential between short and long term interest rates, demand for capital would increase, and this should consequently benefit precious metals prices. Silver prices would rise considerably as growing demand for products would increase the demand for silver in industrial applications.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2012 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules