Governments Reflate and Gold Will Rise!

By: Julian D. W. Phillips | Fri, Nov 14, 2008
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A long and deep recession, possibly a depression is being forecast across a broad front. But the real picture is different. Governments and central banks are not only committed to doing all in their power to resurrect growth and give their different economies 'traction' but have begun the vigorous implementation of reflation. They will do "whatever it takes" to get growth and confidence re-established globally. In essence, the crisis appeared quickly and devastatingly out of greedy lending by banks loaning to uncreditworthy individuals on a broad front. It has to be rectified just as quickly because banks control the lifeblood of liquidity in the economy and they will place their financial health well before that of the broad economy and their customers. They have been saved by central banks to date, but it is resumption of growth and confidence, not healthy banks, that must be achieved first. In the major economic blocs of the world actions are underway, to differing degrees, to force the banks to lend or be bypassed, so that the damage they can inflict on growth, through congealed debt and their instruments, is neutralized. The banks have made it opaquely clear, that they will not lend in such a way as to rectify the underlying crises of a dropping housing market and its 'ripple' effects on consumer spending. Governments do see banks as an obstacle to the resuscitation of growth and confidence, so their powerful influence over the state of the economy has to be reduced considerably before this can be done. And it has to be done before any semblance of recovery can be achieved again. The longer the process takes the more difficult and lengthy the solution will be.

Just take a look at the world's three main economic bloc's efforts at stimulating growth again:-

The importance of growth

Mr. Ben Bernanke and the governments of the U.S., the Eurozone and China have recognized in no uncertain way that confidence must be regained before growth gains traction and becomes self-sustaining. It appears that they have got the message now and will do whatever it takes to ensure the credit crisis is replaced by confidence in credit. That the banks should suffer for their indiscreet past behavior is just, for a lender should carry the same risk as a borrower.

Inflation and gold and silver prices.

Let's be clear though, there is no historic precedent to what we are about to see.

We expect gold to thrive in an atmosphere of hope, against a threatening backdrop, with the gold price realistically discounting the diminishing buying power of paper currencies.

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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.
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