Using Gold to Monitor Market s Reaction to QE2: Eldora Gold Resources News
Eldora Gold Resources Canada News- A Wall Street Journal article today on quantitative easing (QE)
hints the Fed will take a middle of the road approach in terms of the size and...
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Using Gold to Monitor Market s Reaction to QE2: Eldora Gold Resources News
Eldora Gold Resources Canada News- A Wall Street Journal article today on quantitative easing (QE)
hints the Fed will take a middle of the road approach in terms of the size and duration of QE2.
As we
would expect, the stock and commodity markets’ initial reaction is negative.
A middle of the road
approach to QE seems counter intuitive to the Fed’s own historical analysis of why quantitative easing
was ineffective in Japan.
In CCM’s July 2010 review of James Bullard’s Seven Faces of “The Peril,” our
read between the lines interpretation of Bullard’s take on QE included:
In order for quantitative easing to sufficiently increase future inflation expectations, market participants
must believe the Fed will do “whatever it takes for as long as necessary” to obtain the objective of
sufficiently positive inflation.
This means the Fed must be willing to leave balance sheet expansion in
place for as long as necessary
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