Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Overseas Stimulus Train Keeps Hurtling Forward

  by    0   0

As we focus on the most recent moves of the Federal Reserve, it’s easy to miss the bigger picture. The Fed has been trying to move toward an interest rate “normalization” program for more than a year, since nudging rates up .25 points in Dec. 2015.

Although it remains to be seen whether the two interest rate hikes last December and March signal a rocket launch or a sputtering firecracker, the central bank at least wants to give the appearance of tightening. The Fed has also launched some trial balloons with talk of shrinking its bloated balance sheet.

But some other central banks around the world aren’t even making a pretense of “normalization.” For instance, Bank of Japan Governor Haruhiko Kuroda said Monday the central bank remains committed to maintaining its massive monetary stimulus program.

Last fall, the BOJ launched a program to hold short-term interest rates in negative territory at minus 0.1%. The bank also seeks to keep the Japanese 10-year bond yield at about 0% through aggressive asset purchases.

Kuroda’s comments echoed statements he made in March. Japanese central planners remain obsessed with hitting the 2% target inflation rate, as Kuroda stated at a Reuters Newsmaker event last month:

“There is no reason to reduce the level of monetary accommodation in light of current economic and price developments. I don’t think we need to raise our interest-rate targets now. It’s unclear whether inflation will hit our 2% target before my term ends next April.”

Meanwhile in Europe, EU Central Bank chief Mario Draghi insisted last week stimulus was still necessary in the 19-country eurozone, despite signs of strengthening in the economy.

“The recovery is progressing and now may be gaining momentum,” Draghi said in a speech at a conference at Frankfurt’s Goethe University, according to an AP report. But despite the optimism, Draghi cautioned that much of the improvement depended on the ECB’s monetary stimulus efforts and that it was “too soon to declare success.”

According to the AP, the stimulus will likely remain in place at least through the end of 2017.

“The ECB has said it intends to continue its main stimulus program — which pushes newly printed money into the eurozone economy through bond purchases — at least through the end of the year. It has also kept its key interest rate benchmark at a record low of zero. Both steps aim to raise inflation and increase credit to businesses so they can expand and hire people.”

Draghi wrote an account of the ECB’s March meeting and indicated the bank’s 25-member rate-setting committee remained in “broad agreement” that “a very substantial degree” of stimulus was still necessary.

One has to wonder whether the Federal Reserve will be able to maintain any kind of long-term tightening of its nearly decade long stimulus policy when the rest of the world remains hopelessly addicted to easy central bank money. While the Fed may want to give the appearance of throwing on the brakes, it appears much of the world remains intent on hurtling full-speed ahead with monetary stimulus and aggressive economic intervention.

This underscores the importance of keeping an eye on the big picture. The US economy and the Fed don’t operate in a vacuum. Despite tentative moves to kick the easy money habit in America, the rest of the world shows little sign of turning away from its drug of choice. And we all know what happens when a recovering addict doesn’t change the company it keeps.

 

Get Peter Schiff’s latest gold market analysis ñ click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Ireland Adds Gold to Reserves as Inflation Worries Increase

Over the last several years, we’ve seen strong central bank gold-buying. The surge in gold purchases has primarily been driven by a handful of consistent players. But over the last several months, we’ve seen several new countries enter the market. The most recent is Ireland.

READ MORE →

That Was One Weird Jobs Report

That was one weird jobs report. The labor department released the November employment data on Friday. The numbers simply don’t make any sense. As one chief investment officer put it, “One of the weirdest reports I have ever seen.” One thing seems pretty certain. The labor market has not recovered, no matter how the powers […]

READ MORE →

Gold Demand Continues to Rebound in India

Gold demand in India strengthened in October despite higher prices. This continues a rebound in the world’s second-largest gold market after it was pummeled by government policies during the coronavirus pandemic.

READ MORE →

I’m Dreaming of a Red Christmas?

It appears American consumers are going to have a red Christmas this year. Red — as in going deeper into debt.

READ MORE →

Singapore Adds Gold to Reserves for the First Time in Over 2 Decades

Singapore expanded its gold reserves by about 20% earlier this year, joining a growing number of countries increasing their investment in the yellow metal.

READ MORE →

Comments are closed.

Call Now