30 January 2011

Quantitative Easing and Relative Asset Performance From 2008: Gold, Silver, SP 500, US Dollar

Note the extreme volatility in silver. It was actually underperforming gold until the short squeeze breakout began in the second half of 2010. It is quite possible that this short squeeze was triggered, at least in part, by the Fed's announcement of a second round of quantitative easing and the further debasement of the dollar. That second round was a signal of their monetary policy intentions. The Fed will print to the limit of the bond and the dollar in a de facto default on the debts. And this is what has China angry.

When it becomes clear that the Fed will be doing quantitative easing for quite some time, it will be progressively harder for the bully boys in the bullion banks to keep 'a lid on things,' with a wink and a nod from the regulators. And then it gets even more interesting to say the least.