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DID THE MID-TERM ELECTIONS AFFECT THE PRICE OF GOLD?
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DID THE FED ANNOUNCEMENT OF Q.E. 2 AFFECT THE PRICE OF GOLD?
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WHAT ARE THE RAMIFICATIONS OF THE FED'S ANNOUNCEMENT?
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The entire financial world had been waiting for weeks for the Fed to make this announcement. It was important because it directly affects the value of the dollar inside and outside the U.S. While the U.S. does not intend to cause a devaluation that will enhance the international competitiveness of the U.S., that is what is happening. That is how the rest of the world will see it. They will take action in their own interests to protect themselves. They have to or see themselves suffer as the U.S. has been doing so for some time now. This will have three primary effects on the global economy: -
•1. The U.S. will lose the cooperation it had hoped for with China and other nations who it asked to let their currencies rise but who will now suffer from a lower dollar, such as China. Global monetary cooperation, sorely needed now, will decay. Currency crises in different nations will be inevitable as they each strive to protect their own interests.
•2. Foreign investment capital channeled into the U.S. and badly needed there, will accelerate its diversification from the dollar. This will accelerate the fall of the dollar and see capital exit the U.S. To the extent this happens it will act as a counter to QE 2.
•3. It will undermine the dollar's global hegemony, which in itself will create considerably more uncertainty as to exchange rates and values.
•1. The U.S. will lose the cooperation it had hoped for with China and other nations who it asked to let their currencies rise but who will now suffer from a lower dollar, such as China. Global monetary cooperation, sorely needed now, will decay. Currency crises in different nations will be inevitable as they each strive to protect their own interests.
•2. Foreign investment capital channeled into the U.S. and badly needed there, will accelerate its diversification from the dollar. This will accelerate the fall of the dollar and see capital exit the U.S. To the extent this happens it will act as a counter to QE 2.
•3. It will undermine the dollar's global hegemony, which in itself will create considerably more uncertainty as to exchange rates and values.
Julian Phillips is a long time precious metals analyst and is the principal writer on www.goldforecaster.com and www.silverforecaster.com
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