Political Metals

Jim Rickards: Stealth Quantitative Easing Next?

Jim Rickards, in a recent interview with Eric King of KWN, discusses the possibility of “Stealth QE”  after June 2011, impact of the war in Libya and the Japan earthquake on oil and the economy, where he sees gold and silver going, and more.

On the Fed’s announcement that Bernanke will be holding quarterly press conferences to explain monetary policy decisions, Rickards said that it will decrease instead of increase the Fed’s transparency as it will be another form of propaganda used to stage manage expectations.

His first question to Bernanke would be “What are you doing in the gold market?”

Listen to the full interview here:

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Listen to the previous interview (Published on March 12, 2011). Here, Rickards explains the concept of “perpetual QE”  or “Perpectual Motion QE Machine” where the Fed is able to continue QE without having to further expand their balance sheet beyond June.

Knowing and anticipating this in advance is critical for PMs holders. The dollar value of PMs may be momentarily hammered down if come June, the Fed announced that there will be no QE3. As explained by Rickards, and as proven by precedent (see below), they may go in to Stealth QE, which does not change the fundamentals of PMs one bit. Any dip will be temporary and a great opportunity for anyone who does not yet own any PMs. Then again, this may not be the case considering the effects of the recent war in Libya and the Japan catastrophe.

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Source [The Federal Reserve Monetary Report to Congress: Monetary Policy over the Second Half of 2010 and Early 2011]

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