I thought I would do this is a question and answer format, rather than a regular post style.
1) What is quantitative easing?
Purchase of long term bonds by central banks to lower interest rates.
2) Is it "money printing"?
If all central banks at some point reverse it, the net impact would be zero. So in that sense it is not "money printing."
3) So it could be "money printing"?
It could. If central banks are never able to reverse it.
4) Ah-ha! So Gold will go up because of the money printing?
It may. The amount of QE is still pretty small.
5) What! Are you nuts? Have you seen this chart?
Yes and Yes. Have you seen this chart?
6) Not sure I get what you are saying. Can you be a bit more clear?
Sure. Total documented wealth is around 400 Trillion, but that misses a lot of shit. There are plenty of government owned assets and tons of assets not counted in this set. The total wealth of the people of earth could be in the range of 700 Trillion to 1.2 Quadrillion.
Total QE is 18 trillion. You can shag that number till doomsday and if it gets a nice velocity and comes blazing out...it still has a lot of assets to choose from. With a multiplier of 1, it would increase the prices of all assets by 5%. With a multiplier of 20 it might double all asset prices. Yeah but your jerk-off dream of Gold $10,000 or $100,000 will not happen because of QE.
7) But QE appears so large. Why does everyone get overwhelmed with this 4.5 Trillion on the Fed balance sheet?
Because they compare to what it used to be and assume it is bad. Because they compare to total outstanding Government debt and assume it is bad. Nobody looks at all assets available for this money to chase.
8) So no inflation?
I did not say that. We will likely get a good inflationary cycle soon.Full employment, trade protectionist policies and just the cyclical nature of inflation, will make it so. QE and low interest rates will likely make it worse.
9) So would you buy Gold to protect yourself against this inflation?
No. REITS would be much better, Platinium is a wonderful choice as well. Why would I play 25% premium for an item like Gold vs Platinum when annually we mine 10X as much Gold vs Platinum, above ground we have 1 Billion ounces of Gold vs almost none for Platinum and Platinum has historically got me more tail than Gold. Perhaps even some Silver. But no Gold for me. This does not apply to trading positions.
10) Do you think Central banks are suppressing the price of Gold?
Look at the chart below and draw your own conclusions. I am late for a scheduled 69.
