The printing press goes overdrive

The wait for QE2 is now over, the Federal reserve announced a new money printing program today.
The Fed will print 600 Billion dollars by the end of June 2011,
which is on top of $30 billion or so printed every month related to their QE lite.

The printing effort will drastically increase monetary base and devalue the currency, the US dollar. While
the short term effect is unclear – the market expected as much as $1-2 Trillion in newly minted dollars,
keep buying precious metals on every dip.

The new printing program is unlikely to help the economy, as inflation so created by the Federal reserve will
push prices of assets not backed by debt far higher than assets backed by debt, such
as houses. Nevertheless, this author expects stock prices to close higher for the year, because in the environment
of rapid devaluation of the currency stocks do better than bonds.

Given recent monetary policy decisions, it appears likely that the Fed will keep printing money until the cows come
home, so be aware that the dollar now has a rapidly vanishing value and invest accordingly.

Gold price target for the year used to be 1455, however, it is unclear how high the metal can soar in this tragic environment.

Wednesday, November 3rd, 2010 US currency crisis, US dollar as a reserve currency

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