Thursday’s Wall Street Journal’s headline reads “Central Banks Flex Muscles.” The article goes on to state “Massive injections of stimulus into financial markets by the world’s largest central banks are creating a domino effect around the globe…”
Perhaps that article should have qualified the headline stating instead that central banks are trying to flex what little muscle they have left. For while massive injections of currency into the global marketplace may temporarily stimulate financial markets, it has done little (so far) to abate the global recession but in the long run will be quite effective in promoting inflation. On Wednesday, Sept. 19, the Bank of Japan became the latest central bank to ease monetary policy following in the wake of the European Central Bank (early this month) and the Federal Reserve Bank (last week). The actions of these central banks in turn “prompted governments from Brazil to Turkey to lower interest rates in order to weaken their currencies and prevent the easy money policy of others from driving up their currencies.” This is the so-called “domino effect” referred to in the article.
What does all this mean? It points toward inflation in the future and makes the prospect of holding paper currencies increasingly suspect (unless, of course, they were to be backed by gold or silver). It also means governments (with the collusion of their banks) are finding it increasingly difficult to hold down the price of gold (and silver). This issue was addressed head-on yesterday in an interview given by legendary value investor Jean-Marie Eveillard to King World News. It also means the despite rising prices of gold and silver, you should be buying some of both right now. If you listen to the nay-sayers and wait for a rapid decline in the price of gold and silver it could be too late.
Bob Porfirio is the owner of Pacific Coin Exchange, Suite 207 at Carlsbad Village and an expert in metals. He can be reached at 877-917-5266.