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QE To Infinity & The Affects
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QE To Infinity & The Affects

As the crisis in Syria continues to unfold in the background, the U.S. economy is on the edge of once again collapsing into a severe recession. It’s hard to say exactly when this will happen, but since Federal Reserve Chairman Ben Bernanke has recently announced that quantitative easing, or QE as it is commonly referred, will continue to be the monetary policy of choice, economic calamity may be just around the corner.

QE to Continue Indefinitely

In a recent press statement, Bernanke postulated that the diminishing risk to growth initially caused by QE that we have seen over the past year has led to improved European financial and economic conditions as well as an increased confidence in the continuing U.S. recovery. Therefore, the Bernanke-led Federal Reserve Bank will continue its fairly recent and controversial policy of purchasing $85 billion in assets, especially since economic forecasts suggest that the economy may be heading toward a downturn.

As a result, the Federal Reserve Bank has yet to decide when they will taper quantitative easing, but the decision will likely be based upon the close monitoring of future US economic reports. The decision, whenever it is made, will have a significant impact on the entire global economy. According to the projected forecast of the Federal Reserve, the economy will actually contract and decline throughout 2014 and the rest of 2013. As is usually the case, the Federal Reserve’s fiscal policy only benefits those at the top, and the greatest victims of impending economic doom are average people who regularly depend upon inflated commodities, such as food and gas.

Mark Faber, a financial commentator and notable Swiss investor, believes that Bernanke and the rest of the Federal Reserve Board would have tapered off QE by up to $15 billion, but since they are in a state of “QE unlimited,” he is not surprised the taper did not occur. According to Faber and countless others, the Federal Reserve does not understand that only a handful of people benefit from money printing.

What Will Happen if the Federal Reserve Slows Down or Stops QE?

Bernanke described his decision not to reduce the Fed’s bond purchases to $65 billion as a precautionary step. He continued to state that QE will only be tapered when they see a noticeable improvement in the US economy. This stance is largely due to the fact that an end to quantitative easing would result in a sharp rise in home mortgage rates, which would lead to yet another housing market crash. Bernanake admitted that he did not want to raise home interest rates, because it would lead to an increase in home foreclosures and put added stress on a fragile market.

The Continued Decline of the Dollar

The US dollar is declining as fast as the economy. According to Bloomberg, the dollar recently fell to nearly a seven-month low as the Federal Reserve decided to keep money flowing into the economy and refrain from reducing its bond purchases. Shortly after the Fed policy makers concluded that they should “await more evidence,” of improved economic conditions before they raise the rock-bottom interest rates, the U.S. dollar fell markedly against Turkey’s lira and Brazil’s real. The dollar also weakened against the pound after the Bank of England decided there was no need for added stimulus.

Thanks to continued QE and a devalued dollar, the price of gold, silver, and other precious metals will continue to climb along with their demand. Time has proven time and time again that incessant money printing only devalues a currency. This currency manipulation is the only way the Fed knows how to keep inflation in check and avoid rapid price increases across the board.

Precious metals, such as gold, silver, platinum, and palladium, are the only time-tested safe haven assets to hold and protect your money during a recession. Whenever the value of the dollar declines, the prices of precious metals skyrocket, and vice versa. In fact, precious metals act as a protection vehicle for an extremely fragile dollar.

Currently, many nations throughout the world, especially China and Russia, are decreasing their U.S. dollar investments and increasing their gold purchases. For individual investors throughout the land, precious metals are the only safe bet in a volatile market full of uncertainty.

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