Fed Heads Print More Money

 This is taken from Kitco.com  Daily Pfennig
By Chuck Butler
President
EverBank World Markets
"So. why did the overnight markets take Gold lower?  Well, it appears that its becoming less likely with every day that passes by that we'll have an agreement on how to avoid the Fiscal Cliff, and while in my mind, I think this would be cause to rush to Gold, because of the uncertainty of what will happen should the lawmakers push us over the cliff. But Nooooooooo! The markets have a different view of this, and believe that going over the Fiscal Cliff will put us in the time machine back to 2008. And in 2008, Gold was not bought but sold, as investors took profits and bailed to dollars and Treasuries. And don't act like this is the first time you've heard this. I've been warning you about this going over the Fiscal Cliff for some time now.
I still don't believe the lawmakers have the chutzpah to allow the economy to be subjected to the removal of the Bush tax cuts, and deficit spending cuts at the same time. I read somewhere, and I wish I could find it again, that there are quite a few unemployed Americans  (2.1 million) that will have their unemployment benefits end on 12/31, should we go over the Fiscal Cliff.  I would think that alone would be enough to spur lawmakers into kicking the can down the road.
Personally. I'm all for spending cuts. I'm not for increased taxes. I don't like taxes period. And I can't believe people that get all lathered up about a new cigarette tax or gasoline tax, it doesn't matter what it is you're taxing, it's still a TAX!  I would settle for a flat tax. that's it, no more, no less. But that's not going to happen in my lifetime, not as long as the promises made to people are kept, and the need for more revenue at the Gov't level is required.
OK. I'll get down from my soapbox now. I have no idea why I went into that tax thing, but there! I did it! And I can expect ½ of the readers to disagree with me. but that's OK, as long as you cuss me out while reading the letter, and not fire off a nasty email to me. Hey! It's just my opinion!
Alrighty then. enough on the Fiscal Cliff, and what it's done to the price of Gold this morning. Right now, the currencies are drifting lower, but not taking a ride on the slippery slope while I write this morning.  I think that should we be pushed over the Fiscal Cliff that the currencies will take a ride on the slippery slope, and a bias to buy dollars will be quite strong. But only until investors and traders realize that the fundamentals of the U.S. are not worthy of a stronger dollar.  How long that will take, I have no idea, just taking a ride in the time machine and see how things went in 2008.
Well. The FOMC meeting did yield an announcement of Treasury bond buying by the Fed to the tune of $45 Billion per month.  And. they announced that the Fed Heads are going to tie unemployment and inflation to interest rates.  That's right, they said that as long as unemployment is above 6.5%, and inflation is below 2.5%, interest rates will remain near zero. They also projected that it would be 2015 before they see a major firming of interest rates.
Now. what does this tell you about what the Fed Heads feel about the U.S. economy?  The Fed is buying so many bonds, Treasuries and mortgage backed, and keeping rates unchanged for a reason folks. and that is they believe this is what will spark the economy.  I say hogwash!  Has it worked before, I mean we've been on this path of buying bonds now for almost 4 years. I suppose it has helped some to keep interest rates this low. Housing has shown signs of recovery, but I doubt Housing will be the game changer in 2013, like many think.
So, if the Fed Heads believe that the unemployment problem in the U.S. is going to remain a problem until 2015, why then are people buying dollars?  Stranger than fiction, folks. I read a story that quoted an economist you believes the Fed is doing what they can to avoid making the mistakes of Japan.  Hmmm. I'll need for you to show me how they are taking steps to avoid those mistakes, because from my view in the cheap seats, we've made the same mistakes, inch-by-inch, step-by-step..
It's also been nearly 4 years since the benchmark interest rate was lowered to near zero by Big Ben Bernanke. That's over 31 FOMC meetings if you're keeping score at home!  I have to tell you that right now, the markets are hailing Big Ben's willingness to experiment with things in an attempt to spark the economy. But isn't it ironic that back in 2000, when Big Ben was a professor at Princeton, he wrote a paper on Japanese Monetary Policy. And in it he criticized the Japanese willingness to experiment to try anything that isn't absolutely guaranteed to work."   Oh, and today is Big Ben's Birthday!
Let's list the things that have been done to spark the economy. no wait, let's not! It would be too darn long, and depressing!  But more than $2 Trillion in emergency loans, tripled the size of the Fed's balance sheet, and three rounds of Quantitative Easing, top that list of things.
OK. now what makes the Fed Heads believe that unemployment is going to gradually get better by 2015?  I would think that unemployment would go the other way, given the debt in the U.S. and the plans for continued budget deficits for the next decade. I mean Spain and Greece have 25% unemployment rates because of their debt, and how the markets made them stop adding to it. Why can't that happen here?  Now, I'm not saying we'll eventually have 25% unemployment here in the U.S. but why not higher than the questionable 7.7% right now?   In fact, if you really counted unemployment the way we used to in this country, and like John Williams at Shadowstats.com does, we would already be at 23%..
Well, aren't I just a bundle of happy thoughts this morning! NOT!  It's not easy being me! Mr. I want to be happy, but have to write about this stuff because not many people do. And while I'm at all this "happy news". we're only $68 Billion from hitting the debt limit ceiling.  I know I make a big deal out of this debt ceiling, while the it flies under the markets' radar right now. But what will be done here?  And. just for the record, we printed a $172 Billion Budget Deficit in November. Annualized that's over $2 Trillion!"