Monday, September 3, 2012

Pouring Money Down the Jackson Hole

The US is running huge trade deficits. That is they sell less to the world than they buy. Surprised? The strong dollar doesn't help this situation one bit. With the Chinese currency and the Euro getting weaker, the deficits just continue to get worse.

Jackson hole was a bit of a fizzer as far as the QE expectations were concerned. Bernanke didn't really say anything different, just that he said it again. Number three count by my reckoning. Words like, "We will accommodate if necessary." Meaning; you didn't hear me before, hear me now, money printing is actually inevitable folks, so get speculating now and stimulate the economy! Meanwhile, I'll pull the dollar lower so you can sell your stuff to Europe and get more money.

Bernanke has decided to take the dollar lower and to help the US and help Europe.

So the currency wars continue. The race to the bottom is quickening. Little old New Zealand though is caught in the middle once again. Our high interest rates attracting hot money flows (carry trade) from all over. But this isn't likely to continue once fund managers realise that all currencies are getting trashed.

Then, as now, watch out for the gold price to strengthen considerably as everyone heads for the currency exit.
Gold in New Zealand dollars: $2106.08 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $39.52 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)

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