Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2022 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