Federal Reserve Plans Make For Greater Gold and Silver Rates

Nov. 3, 2010 - PRLog -- The Federal Reserve is making a high-stakes guess in the hope of having the economy sizzling along again. No one is sure the actual Fed's best endeavors will work, and so they may actually backfire. Read more here on Silver Dollar Values http://www.silver-dollar-values.com

The Fed introduced a plan to purchase $600 billion in government financial debt, aimed at generating already low extended-term interest rates even lower. The central bank would buy the financial debt in chunks associated with $75 billion a month through June of the coming year. Learn the Silver Dollar Values at http://www.silver-dollar-values.net

Economists call it quantitative easing. The latest package deal gets the title "QE2" - like the ship - because it is the second round. The Fed spent about $1.7 trillion from 2008 to earlier this year to take bonds off the hands of banks as well as stabilize them.

But some analysts and even followers of the program see dangers. It might make the vulnerable dollar even weakened and lead to business disputes with other nations. It could lead bond traders to trust that inflation can run wild, and so they derail the Fed's efforts by pressing rates higher. Numerous investors argue that it could create bubbles since hedge funds as well as other speculators borrow inexpensively and make a whole lot larger bets on shares, commodities and markets in developing countries like Brazil.

"It's a desperate act," states Jeremy Grantham, co-founder of the investment firm GMO. Grantham says it is a clear message in the Fed to the rest of the world: "The U.S. doesn't care if the dollar weakens."

"The Fed aims to push up the prices of stocks, bonds, real estate, and you name it, says Bill O'Donnell, head of U.S. government bond strategy at the Royal Bank of Scotland. "Everything is going to go up but the dollar."

The issue, according to several critics, is that low-cost borrowing costs and also buoyant markets produce a fertile environment with regard to bubbles, which at some point pop. "The effort to help the economy sets up another more dangerous bubble," says Grantham, who warned regarding Japan's surging property and stock markets in the 1980s, soaring Internet shares in the 1990's and the housing industry in the 2000s.

Granted that the Fed believes the creation of fiat currency out of nothing is necessary to satisfy its goals, it's essentially told the marketplace that it will still print as it views fit – the stance that should be music to the ears of those favorable on the gold price.

We see that Silver Dollar Values and silver prices will remain robust as the Fed tries its stimulus plans. Now is definitely a good time to purchase precious metals to guard against inflation and also the weakened dollar. Go to http://silver-dollar-values.com for silver prices and gold prices.

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