The Fed's Problematic Destabilizing Dollar Policy To Blame For Gold Prices Rising

May 11, 2011 - PRLog -- The Federal Reserve has kept interest rates at zero % for 27 months and has created--out of the blue--2 trillion new dollars within the final couple of years alone. If these actions constitute a powerful dollar policy, Americans can only cringe at the thought of what a weak dollar policy on the part of the Fed would possibly appear like! Visit http://silver-dollar-values.com for a lot more silver coins and gold coins tips and ideas.

Ben Bernanke’s press conference was packed full of an incredible quantity of contradictions, and economic fallacies. For instance, the cost of gold soared by $25 throughout the conference because the dollar was falling to a brand new 52 week low. Actually, the U.S. dollar has lost 40% of its buying energy as measured against a basket of foreign currencies within the final decade alone. And also the cost of gold has risen 400% throughout that exact same time frame. However somehow Bernanke needed investors to think that these circumstances are just transitory although they've been in place for the last ten years. How could they possibly be transitory if the Fed maintains its zero % rate of interest policy and refuses to decrease the size of its balance sheet? Visit http://silver-dollar-values.com for a lot more silver coins and gold coins tips and ideas.

He also had the courage to recommend that stable costs really engender increasing unemployment and that inflation needs to be close to 2% for an economic climate to function correctly with out the threat of deflation. But the former Princeton Professor by no means explained the economics behind how a powerful and stable dollar can ever result in growing layoffs. Can it be that Bernanke is unaware that a stable dollar is completely essential for a vibrant middle class and to have an economic climate that's balanced using the suitable quantity of savings and investment?

The Fed head lastly uttered a truth when he properly stated that reduced and contained inflation expectations are important for a powerful economic climate and that the FOMC would closely monitor these expectations of increasing costs. Nevertheless, Bernanke fails to comprehend that he is performing every thing in his energy to ensure these inflation fears turn out to be intractable. He blamed the uptick in inflation on increasing commodity costs, which are once more supposedly transitory. But he fails to associate these quickly increasing commodity costs using the fall with the dollar, that is straight the result with the Fed’s monetary policy. He rather blames the 30% rise with the CRB Index within the final year on global elements. Visit http://silver-dollar-values.com for a lot more silver coins and gold coins tips and ideas.

But probably the most egregious error created throughout the press conference was Bernanke’s failing to acknowledge the Fed’s aiding and abetting of our massive budget deficits. Even though he properly identified the greatest issue facing our nation is our overwhelming debt, he failed to understand that it's the Fed’s sponsorship of an ever-expanding cash provide that enables our government to run up huge debts with out sending interest rates so high that they render the nation insolvent.

The sad truth, nevertheless, is what will probably be transitory will be the U.S. dollar’s status because the world’s reserve currency. The finish of that situation coupled with quickly increasing inflation will ultimately send interest rates a lot greater than any economic model Bernanke has ever observed. While the US dollar destabilizes and falters, the price of gold will keep on rising as investors look for a safe haven for their assets.

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