How Certain Is Qe2?

Imagine how once-wealthy citizens of the Weimar Republic in pre-Nazi Germany felt

having to use a wheelbarrow to carry their cash in order to buy a loaf of bread, suggested the Werner-International adviser. Its an image thats almost impossible to conjure up but, according to several well-known economists, its entirely possible that such a spectacle could become reality if the kamikaze monetary policies of the worlds advanced economies continue with their current intensity for much longer.

Although these warnings are being taken a little more seriously by an increasing number of people, the general consensus is that the specter of hyperinflation is one used by goldbugs and tea-party activists to frighten their children if they dont go to bed when told. The root of the incredulity, according to Werner-International, lies in peoples willingness to accept official inflation figures issued by their countries central banks. Were forever being told that inflation is contained or that inflation expectations remain subdued but a trip to the store tells a different story. The prices of things we actually need are very much on the rise; things we have to import or things that rely on things we import like food, gasoline, electricity or heating oil all seem to be going up in price, said an analyst at the firm.

The truth of the matter is that central banks are trying desperately to support the prices of assets; things like real estate, stocks and the toxic assets sitting on their balance sheets and those of the commercial banks. They believe that by preserving the value of the things that so much of the consumer and corporate debt is secured on, they are preventing the real cost of servicing those debts from becoming unbearable and also saving the banks, the foundation of our economic system, from another crisis which would almost certainly bankrupt them leaving us unable to get to our money.

We can certainly understand their dilemma. There would be a complete breakdown of our social fabric if a trip to the ATM yielded no cash and that is why policymakers must continue down this path. The problem with doing so is that the price increases in the things we need have come at precisely the same time that demand for them in emerging economies is growing rapidly, said the Werner-International analyst.

So it appears that we are committed to this course of action and another round of quantitative easing by the central banks is a near-certainty. The can will be firmly kicked down the street and all we can do is to hope that by the time the Fed, the Bank of England and the rest catch up with it again, a lot more of us will own gold.

by: Abby Redmond

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