Discover The Reason U.S. Treasuries Are A Gigantic Wealth Trap? Gold & Silver Rules!

Aug. 16, 2011 - PRLog -- This past week’s wild activities on Wall Street ought to serve as being a stark reminder that most traders have any clue as to what's truly going on beneath the surface area of America’s troubled economic climate. However this week did carry startling clarity on a minimum of one front. In its August policy statement the Federal Reserve took the extremely uncommon step of placing a particular timeframe for the continuation of its close to zero interest rate policy. Read more at http://silverdollar.cc for more profitable silver and gold tips.

We think that ultra-low interest prices are amongst the greatest impediments presently stopping real financial development in the US economic climate. By committing to help maintain them close to zero for the next two years, the Fed has really lengthened time U.S. residents will now have to wait around prior to an actual recovery starts. Reduced rates would be the root trigger of the misallocation of resources that outline the contemporary American economic climate. As being an immediate outcome, U.S. residents borrow, consume, and speculate an excessive amount, while we save, create, and make investments too small.

A week ago Fed Chairman Bernanke elevated eyebrows and denied background when he declared in front of Congress that gold does not qualify as cash. The other day he took the unprecedented step of announcing the Federal Reserve would maintain interest prices close to zero for a minimum of the next two years. In very short order thereafter it required a lot more of the cash that he believes in (U.S. dollars) to purchase the cash that he does not believe in (gold).

In any occasion, it had been beyond uncommon for your Fed to create this kind of an explicit time dedication on financial policy. To underscore this reality, 3 voting members of the Federal Open Market Committee came out in opposition to the policy. This kind of dissent inside the Fed's ranks hasn't been noticed in a long time. However Bernanke's shameless appeasement of marketplace fears did interrupt, if only for a couple of hours, the totally free drop on Wall Street. Wiser traders, knowing how a more activist Federal Reserve will ruin the worth of the dollar, relocated to gold, pushing the metal as much as north of $1,800 for each ounce. http://silver-dollar-values.net has all the details for a precious metals investing decision.

The financial forecast found in the Fed statement was much gloomier than earlier pronouncements. Bernanke sees ongoing sluggish development for your U.S. economic climate and subdued inflation. Usually below this kind of circumstances gold ought to be anticipated to drop. Nevertheless, as we have stated regularly, these occasions are far from normal.

Some investors will know currently that we think the U.S. Treasury marketplace is really a gigantic wealth trap. Even prior to the Fed's statement, traders looking for security from European financial debt fears and staggering losses as well as unnerving volatility in the shares markets had flooded into U.S. Treasury securities. Nonetheless, this week has therefore noticed a stampede into Treasury securities, triggering yields to plummet. One-month Treasuries now yield 0.02 %, making them no better than cash; the 5-year yields 0.93 %, 10-year 2.17 % and also the 30-year 3.56 %. Assuming a Consumer Price Inflation charge of 3.2 %, all new traders in U.S. Treasury securities having a maturity of less than thirty many years are dropping 'real' cash. Furthermore, with small prospect of further interest rate reductions the chance of capital gains via Treasury investments are basically nil.

These unfavorable returns will ultimately act as being a stress for money to drift absent in the bloated bond marketplace in to the beaten down equity marketplace. However the total dimension of the international bond marketplace is more than two times the dimension of the international equities markets, so these fund flows, once they happen, might make a huge influence on equity prices.

Moreover, the Fed is debasing the U.S. dollar at a growing rate. In spite of the reality that other nations are subsequent suit to safeguard their exports, the dollar is set to drop further. Certainly in criticizing the S&P downgrade last week, Former Fed Chairman Greenspan stated the Fed need not be concerned about financial debt service because it can just print more cash!

Facing unfavorable actual yields, the possibility of further credit rating downgrades and also a falling dollar, traders in U.S. Treasuries are placing themselves up to be plundered.

Having said that, in spite of recession fears, the upwards march of gold continues, with many popular investment firms now setting price targets of more than $2,000 for each ounce. Yet skepticism remains, with some experts pointing out the price of gold is in "record" territory and is consequently extremely speculative. Nevertheless today's gold price of $1,766 at the time of this composing is still about thirty % beneath the inflation adjusted high set in 1980 when gold struck $850 for each ounce. Coming from my perspective, having a sovereign financial debt crisis threatening, a currency failure looming, as well as a chronically persistent reduced interest rate regime, gold looks absolutely cheap. Today is a great time to buy gold and buy silver for your investment portfolio to protect your wealth. Go to http://www.silverdollar.cc for more profitable silver and gold tips.

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