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Sunday, 22 January 2012

US $1 trillion QE money printing probable

The US is likely to print a further $1 trillion in a new quantitative easing (QE) program.  The first four QE programs failed to stimulate the US economy, so this time the cure will be applied a little more heavily.  A stock market rally might result.

Gold is a refuge from inflation.  Forecast QE would be gold positive, and US dollar negative.  Whenever money is printed into an economy, much of it often ends up in the stock market.  When inflation sets in, earnings and stock prices mostly adjust themselves upwards with prices.  The reasons are detailed in "Gold price fundamentals viewed from a currency perspective".

Usually the first stimulus needs to be the sharpest to stimulate an economy.  Subsequent stimuli have decreasing effect.  No other tools remain to "repair" the excessively indebted US economy, other than to repay debt and spend less than is earned, at all levels.
I acknowledge CNBC's "Fed's latest easing could cost $1 trillion: economists" and Jim Sinclair.

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