U.S. Quantitative Easing, The Sharks Are Circling, and Gold Backed Eurobonds?
Why Read: More to focus on possible further U.S. (and other Central Bank) quantitative easing, than on the possibility of gold backed Eurobonds - but to be aware of at least some 'talk' with respect to the latter.
Featured Article: For reference to possibility of gold backed Eurobonds, see King World interview with Don Coxe of Chicago based Coxe Advisors.
Commentary: As you likely are well aware, U.S. Federal Reserve Chairman Ben Bernanke, and the Federal Reserve Governors generally, have for many months advocated and adopted a policy of low interest rates and have resisted further U.S. quantitative easing measures.
As you also know if you read these Newsletters regularly, I have been of the consistent view for some months that President Obama will be re-elected on November 6 - baring unforeseen evident U.S. increased economic turmoil.
Both these things have clearly come to the fore with what is ongoing in the Eurozone economies (particularly, at the moment, Spain's - where the relevant phrase is 'at the moment'), last Friday's U.S. Jobs Report announcement, and Mr. Romney's immediate political protestations over what that Jobs Report means to Mr. Obama's leadership:
in the first instance:
the escalating financial crisis (or about to be crisis) in the Eurozone, in combination with
the U.S. Jobs report and the immediate affect the latter had last Friday on both the U.S. equity markets (significantly down) and the price of physical gold (significantly up), and possibly in further combination with
increasing reports from China on a slowdown in China exports and manufacturing
seem likely to bring the U.S. Federal Reserve back to the 'quantitative easing table'. The Federal Reserve likely will get there on their own, but will also likely be the recipient of 'moral suasion' or whatever Obama Administration 'nudges and pushes' can be brought to bear to get them there. This will become ever more the case if the U.S. equity markets continue to fall over the next few days and weeks. This is because, aside from the Obama Administration's interest in President Obama being re-elected, the Federal Reserve will not want to raise interest rates in what has to be seen as, at best, a very fragile ongoing U.S. technical (economist-speak) economic recovery;
in the second instance:
fair or unfair, the media plays a very large part in 'who gets elected', particularly in the U.S. where the oft-quoted 1st Amendment (Freedom of Speech) enables anyone to say almost anything - whether or not it is correct or makes sense,
trust that the Republicans will make 'sensationalist hay' out of things like last Friday's Jobs Report in order to discredit President Obama and the Democrats,
trust that Mr. Romney and his fellow Republicans blow as much smoke as is being generated from the current huge and ongoing forest fire in New Mexico when he and they proclaim 'all the great things they will do to quickly create jobs in America', and quickly right the 'American economic ship'. It is always easy to pontificate - actually doing what Mr. Romney professes he will do if given the opportunity is quite another thing. When the 'rubber hits the road' the person driving the car usually experiences potholes in the road he didn't previously see or expect - and a lot of bad drivers that constantly endanger him/her on his/her journey,
- trust that the Democrats will do everything they can to convince the American voters that between now and November 6 they can deliver jobs, and continue to improve the U.S. economy. There are 154 days between today and November 6, and that period includes summer months when Congressmen and Senators (and political staff members) typically take holidays. Washington is politically paralyzed as it is; and,
in the third instance, what could be done to create U.S. jobs quickly? Announcement of large infrastructure projects would be one avenue. Is that likely to happen? Unlikely, unless the Obama Administration could unilaterally announce such things - which is almost certainly not going to happen if for no reason other than the U.S. is already bumping against its debt ceiling. Other 'quick job fixes' are neither obvious or likely.
So what does all this leave - more, and perhaps substantially more, Federal Reserve announced quantitative easing. Watch for it in the 'theatre nearest you' - your computer screen or your television screen.
With respect to the Obama Administration, there is blood in the water and the sharks are circling. President Obama grew up in Hawaii, and he looks to be in quite good physical shape. Democrats everywhere have to be hoping he is a very fast and proficient swimmer.
Consider the high probability that the U.S. and the rest of us (given the current ongoing importance of the U.S. and its economy to what transpires in the rest of the developed and developing world) are in for a 'very long and very hot summer'.
Coxe - Emergency Fed Meeting & Gold Backed Bonds
Source: King World News, Don Coxe, June 2, 2012
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