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Exactly one month ago today, I wrote that Fed Chief Ben Bernanke would soon “pull out nuclear-sized bombs to try and destroy the debt crisis that is affecting the world.”
And for a long time, I’ve been warning that he would:
• Print money, virtually nonstop.
• Do everything in his power to keep interest rates near zero “for as far as the eye can see.”
• Worst of all, literally CREATE inflation, even if it meant going into the open markets to buy up all kinds of assets.
Now, this is precisely what
the Fed says it wants to do!
In yesterday’s release of its September Federal Open Market Committee minutes, the Fed officially announced that …
“Unless … underlying inflation moved back toward a level consistent with the Committee’s mandate, they would consider
it appropriate to take action soon.”The Fed is considering “… possible steps to affect inflation expectations” and “targeting a path for the level of nominal GDP.”
That’s Fed-speak for a MANDATE TO CREATE INFLATION — with lots more money printing, and many more purchases of Treasury bonds, mortgage bonds, corporate bonds, commercial paper, even possibly equities or real estate!
No wonder the dollar is crashing toward new,
all-time lows against ALL major currencies!
Instantly after the Fed’s meeting notes were released, the dollar started plunging again — to fresh record lows against the Swiss franc … to nearly a new 15-year low against the Japanese yen … and another record low against the Australian dollar.
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The dollar even fell to a 13-year low against the Thai baht!
Indeed, right now, as I pen this update …
The dollar is a mere THREE-TENTHS of ONE PERCENT away from making all-time RECORD lows against ALL major currencies!
And no wonder gold is soaring — again!
Overseas investors are clearly running scared of the endless supply of dollars the Fed will be printing …
So they are buying gold, hand over fist.
Meanwhile, savvy domestic investors are also gobbling up gold, driving gold trading volume to record highs …
Piling into every conceivable gold investment under the sun — from gold coins and bars … to mutual funds … to gold ETFs … and gold futures contracts.
Hardly surprising when you consider the dollar’s downside fate is now virtually sealed … that the Fed has officially admitted that it will take any measures it deems necessary to devalue the dollar and boost inflation — no matter how unorthodox those measures may be. Adding fuel to this fire …
A massive tug of war is about
to begin in Washington!
In my 32 years in the markets I have never seen a set of forces merge together at one time and place like we have today!
Not only is the U.S. still mired in the worst economic disaster since the Great Depression …
Not only is the Fed embarking on unprecedented misadventures to boost inflation …
But we ALSO face one of the most historic Congressional elections, ever!
What will happen?
There is no question in my mind that, in this teetering economy …
1. We will see a monumental tug of war between a more conservative Congress and a more aggressive Fed backed by the Obama administration …
2. This new conflict will bring about a sea change in the financial markets, and …
3. It will directly impact every stock and ETF you own.
My Recommendations
First, I feel you absolutely must hold a long-term core position in gold regardless of any short-term fluctuations. The most handy vehicles: Gold ETFs like GLD.
Second, if gold suffers a temporary correction — which would be completely normal — use it as a buying opportunity to ADD to your core gold holdings.
Third, seriously consider foreign currencies. On any short-term weakness, one good choice is the Australian dollar, which you can also buy via an ETF — symbol FXA.
Best wishes,
Larry
