Comments on: The Fed Resumes “Printing” http://www.creditwritedowns.com/2012/02/the-fed-resumes-printing.html Finance, Economics and Markets Wed, 23 May 2012 01:55:46 +0000 hourly 1 By: BD http://www.creditwritedowns.com/2012/02/the-fed-resumes-printing.html#comment-80830 BD Wed, 08 Feb 2012 12:57:07 +0000 http://www.creditwritedowns.com/?p=41875#comment-80830 The only problem with this argument is that low interest rates don't require money printing. The Federal Reserve simply sets rates. Even, QE is not technically money printing. All this does is change the portfolio of the banking sector, which now has less long-term government debt and more reserve balances at the Federal Reserve. This action has no impact on broad money aggregates and even less of an impact on long term inflation. I liked all of your graphs though. With respect to gold, a zero-interest-rate policy for longer means that the expected carrying cost of gold will be low for longer, which should increase prices. Don't expect gold to go up as an inflation hedge. I don't understand why Austrians don't buy equity as an inflation hedge against inflation. It is as if they expect costs to increase, but not revenue. I would buy equity in highly indebted companies with good cash flow, but I don't anticipate any inflation, so I won't be doing that. The only problem with this argument is that low interest rates don’t require money printing. The Federal Reserve simply sets rates. Even, QE is not technically money printing. All this does is change the portfolio of the banking sector, which now has less long-term government debt and more reserve balances at the Federal Reserve. This action has no impact on broad money aggregates and even less of an impact on long term inflation. I liked all of your graphs though.

With respect to gold, a zero-interest-rate policy for longer means that the expected carrying cost of gold will be low for longer, which should increase prices. Don’t expect gold to go up as an inflation hedge. I don’t understand why Austrians don’t buy equity as an inflation hedge against inflation. It is as if they expect costs to increase, but not revenue. I would buy equity in highly indebted companies with good cash flow, but I don’t anticipate any inflation, so I won’t be doing that.

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