And Central Banks commit to inflation.

Boston FED President Erik Rosengren predicts that the FED will stop paying interest on bank reserves and commit to an open ended QE, starting with QE III and Rosengren casts one of the votes. The current FED policy is a disaster. Having increased the amount of dollars by $2T, the FED has the banks keep $1.5T in reserve. Not only that, but the FED keeps interest rates and gold artificially low. The result is not good: 1. it allows the Obama regime to borrow money at virtually no interest; 2. it inflates the currency without the benefit of allowing the extra currency to stimulate nominal GDP by allowing inflation to rise; 3. it exports our troubles and forces the world to devalue its currencies, disrupting international trade.

How will we know if the FED has changed its policy?

We will know by watching the gold price. Larry Edelson still forecasts a drop in gold price below $1,500, followed by a huge rally. According to Larry, gold would have to close above $1,770 to start a new rally, which would be the sign that the FED changed its policy. According to KWN, gold would have to close above $1,630 and silver above $28.30. That would push XAU to 170 and HUI to 465 (these are mining share indexes).

Frankly, I thought that the FED would ease in July. It did not. Which continues to commit us to deflation, higher unemployment and a slide toward a recession.