Sunday, July 8, 2012

What the FED might do.

Investors anticipate more money creation. That is what can be concluded from the USD graph. However, the FED can create excess Dollars without printing any. Since 2008, the FED has demanded higher deposit from banks and paid them 25 basis point interest. That was like a field of corn to a herd of pigs. Banks like to earn money while taking no risk.

But, federal spending is having a negative effect on the economy, causing deflation. The FED CAN increase the money supply by stopping payments to the banks and maybe even charging interest on excess deposits. That would put a lot on money into circulation. And because of the fractional rule, the banks can use the $1.5T reserve to loan (or invest) $15T theoretically.

That may end gold correction.

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