Since The Bernank clearly believes that all's well that ends well, measure for measure this comedy of errors most certainly should be categorized as a comedy.
So now we get this:
- $85B/month of QE continues. No changes.
- Inflation expectations, which The Fed wants to see at 2.5%, have been ratcheted down to 1% for 2013. This is a Fed "green light" for more QE, not less.
- The fact that the unemployment rate has fallen from 8.1% to 7.6% is a "substantial improvement" due, in large part, to Fed policies. This despite that fact that most of the drop is because the labor force participation rate has fallen to 30-year lows.
- The economy would be growing at 3% instead of 1.5% if it weren't for "bad fiscal policy". And these "bad policies" are going to improve soon? Good one.
- The Fed Funds rate will stay at 0% for at least two more years. (Doesn't that say something about the overall economic condition?)
- IF...and this is a huge, qualified IF..."continued improvement is seen in the economy", The Fed will begin to reduce asset purchases and end them outright by this time next year.
And it kills me that so many people continue to take this nonsense so seriously. The Bernank offers conjecture, guesswork and hope and the internationally-recognized price of gold drops by over 1%. Stocks plummet and The Pig rallies. Why?
Traders react instantly to the forecast of less economic stimulus by The Fed. Bullshit. A bunch of computers are mindlessly swapping paper assets back and forth at light speed, hoping to profit from each and every, mind-numbing mumble. Ridiculous.
So, I really don't know what's going to happen next. The paper gold and silver markets are primed for a very sharp, short-covering reversal and rally but until some type of spark settles upon all of the dry timber, The Cartel banks will be content to simply buy what the specs are selling. The longer this continues, the greater the gain will be for The Cartels once price inevitably turns.
For now, let's just watch and see how $1350 holds for gold. This level has been a stout floor for almost two months. Can it withstand this current onslaught of selling? We'll see. And $21.40 has held well for silver since $22 was broken two weeks ago. Watch that level closely as a drop through there will likely lead to a test of the 5/19 panic lows just above $20.
In closing, I beg you again: Please ignore the SPIN and the MOPE. The U.S. federal deficit will likely exceed $1T again in fiscal 2013 (which ends 9/30/13). It will likely exceed $1T in fiscal 2014, too. IF THE FED STOPS BUYING TREASURIES, WHO IS GOING TO STEP IN AND DO IT FOR THEM? (The Chinese? The Russians? How about PIMCO?) AND WITHOUT THE FED DIRECTLY MONETIZING A MINIMUM OF $570B OF U.S. DEBT IN FISCAL 2014, FROM WHERE WILL THE U.S. GOVERNMENT RECEIVE FUNDING? (An improving economy leads to higher tax revenues? Rrrrright.) IF THE FED EXITS THE TREASURY MARKET, INTEREST RATES WILL RESET MUCH, MUCH HIGHER. WOULD DRAMATICALLY HIGHER RATES HELP OR HURT "THE ECONOMY"? (Any semblance of growth dries up and we're right back to where we started, needing to jumpstart QE∞.)
You know, maybe I'm wrong in my assessment. It's not a comedy, it's a tragedy, which you are taught in English 101 is "a form of drama based upon human suffering". Yep. That sounds about right.
Just keep stacking, while there's still time.