The Daily Reckoning January 26th

How Ben Bernanke Rationalizes “Exceptionally Low” Interest Rates

Anything happen in the markets yesterday? To tell the truth, we forgot to check. Let’s have a look now, then…

Dow up by 80-something points. A barrel of the world’s currently-preferred energy sits pretty at $100, on the nose. Nothing much, in other words.

Ooh…but here’s something: “Gold extends post-Fed rally to 6-week high.” MarketWatch has the story…

Gold prices climbed Thursday to levels last seen in early December, extending a rally triggered as the Federal Reserve pledged to hold US interest rates near zero until the end of 2014.

Gold for February delivery, having risen almost $25 yesterday on the news, now fetches $1,725 an ounce. And this, just when investors had begun to abandon the barbarous relic, to question its motives. But that was their mistake. Gold may go up. It may go down. But it has no motives. It is no man’s liability. Instead, it simply holds a mirror up to its government-issued competition. It is, itself, just a dumb lump of metal. But even so…it frequently appears the brighter, smarter choice — in relative terms — to the buffoons in the mirror.

Should we be surprised?

So Mr. Bernanke is fiddling the levers again, promising to keep rates lower than a sea snake’s belly until 2014. He might have just taken out an ad in the front page of the paper:

“Fed to Savers: Go to Hell!”

America’s #1 central banker may well be highly intelligent…but that does not preclude him from also being a dunce. Probably, it depends on the subject at hand. Maybe he’s a talented cowboy, for example. Or perhaps he is a whizz at the Times’ crossword. Either way, we wish he’d dedicate more of his time to words and herds because, as a central banker, he’s either a fool, a knave…or both.

This is a man, let us not forget, who proclaimed…

• In 2005, on the question of a speculative bubble building in housing as a result of cheap credit, that “these price increases largely reflect strong economic fundamentals.”

• In 2007, as the market started to turn, “we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

• In January of 2008, two months before the nationalization of GSEs Fannie Mae and Freddie Mac, “They will make it through the storm.”

• And in June of 2009 that, “The Federal Reserve will not monetize the debt.”

And now, despite all evidence to the contrary, Mr. Bernanke thinks he can pull the economy out of the very mess into which he helped to steer it. He thinks he can deliver prosperity to a nation by punishing savers and inducing malinvestment — gross capital misallocation — on a scale so grand that die-hard proponents of Social (In)Security must be starting to blush.

Bernanke’s commitment to holding interest rates “exceptionally low” for an “extended period,” reeks of exactly the kind of insanity required to double down on a bad bet, of repeating the same experiment and expecting a different result. Combined with his “relapse into QE3, Euro-style,” which Eric Fry highlighted in yesterday’s issue “Gentlemen, Start Your Printing Presses!”, dollar-holders (and metal holders) ought to expect more of the same.

Critics, amazingly enough, still wonder when the man will ever learn. Never, is our guess. For one thing, his incentive for denial is simply too great. What do we mean by that? Glad you asked…

Imagine someone’s whole existence, his entire life’s work, is somehow built on a false grasp of reality, a radically skewed first principle. Imagine, for example, he is an internationally respected professor of alchemy. Or a world renowned proponent of the “stalk theory” of conception. Or…a central banker who believes he can know the impossible…the minds, the desires and the needs, of the millions who make up the market over which he imagines himself to lord.

For a while, luck, coincidence and the arc of history appear to be on his side. As his life goes along, our hapless hero is awarded greater and greater accolades for his misbegotten theories and crackpot ideas. He is gifted the highest seat in the land. The adoration of friends and peers. TIME Magazine’s “Man of the Year.” Eventually, he comes to believe in the delusion he has created. It becomes his reason for being, his raison d’etre. Deeper and deeper he becomes convinced in his own ability to perform the impossible.

One can see that our hero, sadly mistaken as he is, has every incentive to deny reality when (especially when) it is presented to him facts and all. Tell the alchemist he cannot alter the properties of led and his world, as he knows it, as it comforts him at night, begins to crumble. Likewise for our birdbrained OBGYN.

So let the evidence against Mr. Bernanke’s understanding of reality mount. As it will continue to do. We don’t imagine this man, whose entire reputation, whose entire career, rests on a false reality, is going to suddenly about-face anytime soon. He has every incentive to deny the facts, to look the other way.

Of course, it’s easy to deny reality. Not so easy, as Ayn Rand once quipped, to deny the consequences of denying reality. They will come due soon enough, Fellow Reckoner…and then, as Bill Bonner likes to say, all the Fed’s horses and all Obama’s men won’t be able to put Mr. Bernanke’s economy back together…ever again.

Joel Bowman
for The Daily Reckoning

How Ben Bernanke Rationalizes “Exceptionally Low” Interest Rates originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas.

Best Places in the World to Retire

If you had $20,000 a month to retire on — you could live lavishly pretty much anywhere on the planet. But we’re interested in the places where you can live that lifestyle on one-tenth the budget…

Places where you can have a maid clean for you…hire a gardener… wake up to a view…have great health care, eat well, enjoy the finer things in life — for less than $2,000 a month. You may be surprised how many there are…

Months ago, our far-flung editors and in-country advisers began collecting all the data and details that inform our annual Retirement Index.

To compile it, we evaluate and rank countries around the world according to eight crucial categories: real estate, special retirement benefits, cost of living, ease of integration, entertainment and amenities, health care, retirement infrastructure and climate.

This is a qualitative assessment, based on real-world data gathered on the ground. For each category in our Index, we looked closely at what matters most to you when you’re considering an overseas retirement spot — everything from the price of bread to how easy it is to make friends or stay in touch with family.

We considered a vast range of data points, from the average humidity to the cost of a taxi. And with costs in mind, we examined prices for real estate, rentals, and utilities like water, electricity, and cable TV. We looked at costs for groceries, eating out, even specific medical procedures. We took into account what kind of discounts retirees can get on travel, taxes and entertainment. And we considered whether there were direct flights back home…how many and how long they are, too.

And we asked: What is the Internet like? Do you need a car? Can you catch a movie in English? Are the people friendly? Does it rain? In effect, we asked all the questions you should ask when you’re considering a retirement overseas. This year’s Top 19 foreign locations are listed below:

Numbers and rankings don’t tell the whole story, of course. When it comes to relocating overseas, there is no such thing as “one size fits all.” So the staff and global correspondents of International Living also recorded a wide range of boots-on-the-ground testimonials from folks who have retired to these various foreign locales.

Take Daphne Newman, who lives in Caribbean Honduras. She’s spending just $1,400 a month to live yards from a white-sand beach on the island of Roatan. Only a three-hour flight from the US, English-speaking Roatan with its world-class reef just offshore, is an easy place to make friends and fit in. It lands mid-table in this year’s Index.

Jack Griffin and his wife Margaret have opted, by contrast, for city life in Nicaragua. When the stock market crashed and the value of their home in the States plummeted by 30%, they began to worry about how to fund their retirement. The final straw came with a 37% hike in their annual health-insurance premium. At age 60, they felt they deserved the retirement they had worked for all their lives, so they found a new home in Managua, the country’s capital.

Today their international medical insurance costs them 62% less than their policy did back home (yet their local hospital is internationally accredited and the doctors speak English). Retired now without money worries, they spend their days exploring, horseback riding, going to the beach or gym, and doing yoga. They have a full-time maid and a gardener and, says Jack, “We do it all for less than half the cost of a moderate lifestyle back home in Atlanta, Georgia.”

Chuck and Jamie Bilbe, ready to retire in Florida, found themselves in a situation similar to the Griffins’. “We were concerned that our retirement savings wouldn’t see us through, so we began looking overseas for a place where our ever-shrinking nest egg might last longer,” says Chuck. Now they live in Corozal, Belize, their cost of living is much lower than it was in the States, but that’s not the greatest appeal. What they say they like most is the Old-World lifestyle. “Like Florida in the 1950’s,” they say. “We’re eating better, sleeping better and enjoying social activity much more now than we did before.”

It’s not just destinations south of the States that appeal. Pam Griner Leavy and her husband Jim are just two of the more than 100,000 American expats living in France. They’re retired in Paris on a reasonable $3,149 a month. “There are so many things for free here, or reasonably priced…big-city life is good,” says Pam.

In Asia you can live comfortably for less than $1,000 a month on a powder-sand beach in Thailand. Up the budget just a bit and you can afford First-World comforts and conveniences in colonial Penang Island, Malaysia. Keith Hockton and his wife Lisa live there, where they rent a sea-view apartment for $1,000 a month — it comes with a shared pool and gym — and they eat out five nights a week, keep a small sailboat, enjoy cycling through the botanic gardens. Their total budget is $1,719 a month.

In Brazil, expats with $2,150 a month can live a block from the country’s best beaches in Fortaleza. In Boquete, Panama, Karl and Liz Parker need just $2,000 a month to fund their life in a place that provides lavish highland views in a near-perfect climate. Panama’s retiree-benefit program provides them discounts on nearly everything, too, which helps keep their costs down.

In Cuenca, Ecuador, Douglas Willis, his wife and two children live on just $1,000 a month. In Costa Rica’s Central Valley, Sharon and Lee Harris bought a townhouse in Heredia for $75,000, and pay only $40 a month for healthcare coverage as members of the Caja, the country’s excellent national healthcare system.

Wherever the locale they’ve chosen — beach, city, highland, valley — these expats all have one thing in common:  They’re living the lives they’ve always wanted for much less than they ever dreamt they could.

This 2012 Retirement Index covers all the bases, revealing a wealth of choices when it comes to comfortable retirement living abroad. Choices you don’t have to be wealthy to take advantage of.

Regards,

The International Living Team
for The Daily Reckoning

Best Places in the World to Retire originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas.

Obama’s Fairness Doctrine

“The US is going to hell,” we told the group at the Watergate last night.

“You mean the economy is really going to get worse, huh?”

“No, I mean it’s going to hell.”

We had been invited to watch the State of the Union address with a group of dinosaurs…a group approaching extinction with dignity and intelligence. You might call them ‘thinking conservatives,’ ‘paleo-conservatives’ or ‘constitutionalists.’ Whatever they were, they were not like the scoundrels currently running for the Republican nomination or the yahoos who vote for them. They were more like a renegade, retrograde group…like a secret society of White Russian intellectuals after the Revolution of 1917. They cling to hope…that the nation will come to its senses…that the constitution will again be honored…and that the old republic, established by the founding fathers, will be resurrected…

…they will hang on to their hope…until they are hanged by a rope.

“What do you mean?”

“I mean…it is on the road to hell… This isn’t just about losing money. Heck, the US is going broke. But you can go broke with honor. Good people go broke. Smart people go broke. Dumb people go broke. You can’t go to hell with honor. Bad people go to hell.”

“You’re saying the American people are bad?”

“Not by nature. No people are bad by nature. Even Republicans are not bad by nature. Or good. They’re all subject to influence. And now Americans are under a bad spell…being influenced to do terrible things…”

We turned to the TV. There was the commander-in-chief. The gist of his message was that the economy was getting better…thanks to all the feds’ nifty programs and fixes. He spoke of all the wonderful things he and his group of fixers had done.

But he didn’t seem content with what he has achieved. Something vexed the chief executive. It was not the economy. Nor the constitution. Nor the foreign wars.

What stuck in POTUS’s craw was ‘fairness.’ He didn’t seem to think there was enough of it. And he felt it was his job, or part of it, to determine what was fair…and how to make sure it happens.

In his wisdom, he has determined that it isn’t fair for a rich person to pay less than 30% of his income to…well…to the feds.

Here’s the Bloomberg report:

President Barack Obama, offering an election-year prescription to spur the economy, said the wealthiest Americans should pay more taxes in the name of fairness, to bring down the deficit and ensure those trying to make ends meet don’t have to “make up the difference.”

In his State of the Union address last night, Obama called on Congress to embrace a tax plan named for billionaire Warren Buffett that would require those making $1 million or more pay at least 30 percent in taxes. With congressional gridlock heightened by the 2012 election, there is little chance the proposal will pass.

“You can call this class warfare all you want,” Obama said in a nationally televised speech before a joint session of Congress. “But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense.”

The president’s 65-minute address was directed at both voters and Congress. The populist themes — tax fairness, help for homeowners, cracking down on US financial crimes and unfair trade practices in China and investigating the lending practices that preceded the housing crisis — are those he will be repeating as he campaigns for a second term.

On the same day that Barack Obama revealed that 30% was fair, Mitt Romney revealed that he paid less than 14% of his income in US federal taxes.

Fourteen percent of income seems like more than enough to us. Serfs in the Dark Ages paid less. But it’s not enough to satisfy our main man, Barry Obama. He wants more. And all the low-life zombies who decide elections want more too. ‘The rich’ should pay more, they say.

Even a lot of the world’s rich people think so. Also in the news was a report telling us that a group of very nice billionaires has gotten together at a very chilly place and suggested that they should all pay more in taxes.

Ukrainian billionaire Victor Pinchuk wants to talk about income inequality. So does Irish billionaire Denis O’Brien and Indian billionaire Vikas Oberoi.

The three are among a contingent of at least 70 billionaires who are joining more than 2,500 business and political leaders at the World Economic Forum’s annual meeting in Davos, Switzerland, this week, according to a list of attendees and promotional materials obtained by Bloomberg News. A half-dozen of the richest participants, interviewed in advance of the conference, say economic disparity needs to be addressed.

Some sessions in a series labeled “Ensuring Inclusive Growth and Development” will touch on income inequality, said Kevin Steinberg, chief operating officer of the forum in the US. A panel titled “Remodeling Capitalism” is scheduled for Jan. 27 at the Swiss Alpine High School auditorium, six shuttle- bus stops away from the conference’s main location.

See there. A group of people in Davos is going to figure out how to ‘remodel capitalism.’ Out with the dowdy old rattan furniture. Throw out the chintz. Let’s get contemporary!

Already, there’s a problem. If you think you can remodel capitalism you are hopelessly already lost. You must presume someone modeled it in the first place. Who? When? How?

Fact is, capitalism is what you get when you don’t have master designers on the job. It’s what happens when POTUS and the feds leave it alone. It’s what you get when people are allowed to work out their own designs, one by one, willingly… without a gun to their heads… When they can make money or go broke themselves…and Washington doesn’t care.

But that’s the trouble with Davos. They’re all meddlers. They’re all world improvers. And they’re all making the world a worse place.

“If James Madison and the rest of the people who were at the constitutional convention came back to the US they wouldn’t recognize it,” said a man we met last night at the Watergate.

“They’d be appalled. They put all that work into the US Constitution…using every trick they could think of to limit the power of the executive branch. Because they knew that if you let the executive branch get away with it, it’s only a matter of time before it becomes a tyrant. It doesn’t matter whether you call it a king or a dictator…or an emperor…once you put too much power in one man’s hands, you will corrupt the man who has the power…and destroy the society that gave it to him.

“That was the whole point of the constitution. It was to limit power. They put in checks and balances…and the Bill of Rights. They thought about it. They figured it out. They wanted to be sure that the US really was different. The people were meant to be sovereign. They were meant to be in control.

“And the role of the government…and the only role of the government…was to protect the liberty and sovereignty of the people. And they knew too that the main threat to individual liberty was the government. That’s why you needed warrants…you need to have a trial by a jury of your peers…you needed habeus corpus. They built all these protections into the system to protect the individual from the government. They weren’t there to protect the individual from Al Qaida or from China. They were there to protect the individual citizen from the government.

“And now, with this anti-terrorism bugaboo all of those protections have gone away. The president has the power to put any American citizen in jail — for life. No charges. No witnesses. No hearing. No trial. No nothing.

“He can have you tortured. He can have you killed.

“I mean, President Obama has powers that King George would have envied. And he got those outrageous powers without a word of protest. Nobody said anything. Congress said nothing. The people said nothing.

“Yeah…I guess that’s what you mean about Americans going to hell. I guess they deserve to go to hell. But, of course, that’s exactly what we’re trying to stop…

“And now the prez has more power than Louis the 14th… And he was upposed to be an absolute monarch I mean, Louis had to pay for his wars. He had to pay for his public buildings. He had the nobility against him much of the time. He had much of Europe against him.

“America was lucky. It was far from Europe. It was protected by oceans from foreign domination. Every backwoodsman had a rifle and he knew how to use it. You know that when King George sent troops to put down the revolution a letter appeared in the London paper. It came from a man who had lived in the colonies. He told his countrymen that if they were shipping out to fight the Americans they should be sure to write their Last Wills and Testaments before they left. Because the Americans all had guns and knew how to use them.

“And that is also why the new government of the US went to such lengths to try to curb the power of the army. There was to be no standing army. The whole idea was a nation of free men. Armed and ready to protect themselves. And the constitution was very clear, if the president wanted to make war he had to convince congress not only to approve it…it also had to raise an army and raise the money to pay for it.

“But now the president can make war on whomever he pleases with no act of Congress. He doesn’t even have to ask the congress for money. There’s so much money sloshing around in the Homeland Security and Pentagon budgets that he can make war on anyone.

“The apologists for this kind of thing say the president will only use his new powers for good causes. But that’s not what history tells us. Even if one or two presidents resist…and govern more or less benevolently, like Caesar Augustus…it won’t be long before we get a Caligula, a Nero, or a Gingrich…

“So now we send out drones and hit squads to kill people in Afghanistan and Pakistan. And soon — it is just a matter of time before the power corrupts the US president, if it hasn’t already — that the drones and hit squads target Americans on American soil.”

“Yeah…you.”

Regards,

Bill Bonner
for The Daily Reckoning

Obama’s Fairness Doctrine originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas.

Big Ben Discusses Another Round of Quantitative Easing

Good day… And a Tub Thumpin’ Thursday to you! I wonder what I’ll talk about today…. Hmmmm… Could it be…. The Fed meeting? Oh, you are so smart! In case you missed this yesterday, because I’m sure the major media outlets couldn’t muster up enough intestinal fortitude to do it, but the Fed threw a cat among the pigeons yesterday… There are a lot of things I’m thinking about, this morning, so, this should be entertaining… For me at least!

OK… The Fed announced yesterday that they “expect short-term interest rates to stay close to zero at least through late 2014.” So much for the previous statement that rates would remain at current levels through mid-2013… But, 2014? And late at that! That’s just crazy, folks… But, as I expressed here many times over the years… We’re turning Japanese, yes, I really think so! Didn’t the Japanese cut rates to zero, pass stimulus after stimulus, and keep rates near zero for over a decade? Yes, they did… And… Haven’t we done close to the same thing, with our zero rates running for 6 years if they end in late 2014? Why, yes we have!

But, as I’ve always pointed out… The US consumer is different than the Japanese consumer… The Japanese are savers… We are spenders… But… As I pointed out to a group of “big guys” last week, where someone thought deflation for that long a time was OK… Yes, it does keep prices down, but you, me and the guy down the street know that prices aren’t going anywhere. And if that happens, no spending will occur, and that will shut down the economy, just like it has in Japan!

So… You should have seen the euro (EUR) lead the currencies higher along with gold and silver when the Fed made that announcement yesterday… The overnight markets also decided that the Fed is going in the wrong direction, and to the woodshed.

The other thing that gives me reason to pound on my chest this morning, is that Bernanke said that he was laying the groundwork for a third round of large-scale asset purchases (I told you they wouldn’t call it quantitative easing) should unemployment remain higher than the Fed Reserve would like, while inflation falls below a newly-established “target”… He went on to say, “The FOMC recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation.”

Currencies and gold (and silver) weren’t the only beneficiaries of this statement… US stocks rallied too.

So… Once again, my confusion gets some clarity, for I had said originally that the next round of QE would come last fall, but the Fed decided that it wasn’t time yet… So, then I said it would come about the time I get back from spring training… And it looks like I’ll be bang on that…

Not that I want any accolades. This is bad stuff, folks… This Quantitative Easing or QE… Not bad for stocks, bonds, currencies, and metals… But bad for us, and US citizens… One day, all the money supply that the first two rounds of QE generated ($2.4 trillion) and the next round of “X”, are going to be unleashed on the economy… And you want to talk about the velocity of money? This will be warp speed!

Now… Onto other things… You know the baby steps of stabilization that I’ve talked about for the Eurozone lately? Well… What if I told you that it just so happens to have coincided with a HUGE increase in the money supply here in the US? And what if I told you that $103 billion seems to have been sent in swaps to the Eurozone? Well… I do believe that’s what’s happened… So, when it comes down to it, you and I are bailing out the Eurozone… And, I can’t imagine that $103 billion is going to be “it”… More dollars will be printed, and shipped…

And, now I want to talk about something that I found on the BLS website the other day… Read it first, and then I’ll have comments…

Effective with the release of The Employment Situation for January 2012 scheduled for February 3, 2012, population controls that reflect the results of Census 2010 will be used in the monthly household survey estimation process. Historical data will not be revised to incorporate the new controls; consequently, household survey data for January 2012 will not be directly comparable with that for December 2011 or earlier periods. A table showing the effects of the new controls on the major labor force series will be included in the January 2012 release.

OK… Clear as mud, right? Well… More confusion is in store for us, folks… From here on out, we won’t have a previous reading to compare the data with… Reading my friend, Bill Bonner, in The Daily Reckoning yesterday, he addressed what’s going on with data here in the US. Here’s a snippet of Bill, first quoting Bloomberg…

“The adjustment process ‘has been knocked out of whack by the financial crisis,’ Ellen Zentner, a senior US economist at Nomura in New York, said in a telephone interview. “The model ends up adjusting for a growth pattern that isn’t there. The sudden drop-off in economic activity in late 2008 is not a pattern, it doesn’t happen late every year. It was a one-off event.”

In effect, the models are over-compensating…trying to make sense of the big collapse of ’08-’09 by treating it as though it were a seasonal adjustment issue. If the winter weather were so severe as to cause such a big drop-off, the machines reason, we must move the bar lower next year. Then, even a modest improvement will look spectacular.

But Goldman’s economists estimate that unemployment will average 8.5% this year — almost unchanged from last year. That is not a recovery.

Thanks Bill!

Now back to the Fed… O’ brother where art thou? Remember all last year, the Fed kept saying that they expected stronger growth in the fourth quarter? I wonder where that thought went… Now “The Federal Reserve downgraded its outlook for economic growth this year”… Really?

Remember what I said at the top of the year? I said that the year had already started with glowing forecasts for the economy in 2012, but by the time I headed to spring training, those glowing forecasts would be fading… Well, the Fed didn’t even wait until pitchers and catchers report next month to begin downgrading those forecasts…

OK… The Greek talks with private creditors resumed this morning, after being suspended yesterday… I can’t believe an agreement hasn’t been ironed out by now (recall I thought it would be done last weekend)… Just goes to show you that when you have debt, you are not in a position to negotiate… I hope US lawmakers are paying attention here, because if they don’t, this is the same thing we’ll be going through at some time in the future.

The Aussie dollar (AUD) has pushed back above $1.06… I’m told by my charts friend that the next resistance level in Aussie dollars isn’t until $1.0760… So at $1.0675, where it is right now, it’s still got room to run without resistance… The Aussie dollar, even with the RBA doing their best imitation of Alan Greenspan, still enjoys a very strong positive interest rate differential and, with the Fed’s latest announcement, that rate differential will remain for some time, eh?

But… More than the positive interest rate differential, what the Fed’s announcement does is open the playing field for the low rate currencies around the world. Specifically, the Asian currencies. I’ve said for some time now that the Asian currencies were the place to be this year, and as long as interest rates don’t in the way of comparisons, the Asian currencies should be able to win a comparison to the dollar…

And, when the euro goes on a rally like yesterday and overnight, the currencies like Norway and Sweden get to have moon shot rallies!

And then gold… OMG! What a rally! And then push that further, with the rally that silver had too! Gold and silver are both up this morning, too… Not like yesterday when gold added nearly $40 and silver $1.20… But still up, good to see that profit taking or price manipulators haven’t entered the market. Speaking of the price manipulators… A reader asked me yesterday about if the new commodities exchange that’s starting in Asia is going to help gold and silver; and I said that as long as the price manipulators aren’t allowed there, yes!

A friend of mine, (thanks, Dennis) sent me a note from a guy that does numbers, and I found one of the items to play well with the Fed announcement yesterday… OK, let me set this up for you… The Fed announces that interest rates will remain near zero for more than two more years… It’s more than inflation they want, folks… Consider this:

The average interest rate paid on the $15.2 trillion of debt that the USA has outstanding is 2.826% as of 12/31/11. Every 1% increase in the average interest rate paid by the US government would add $152 billion of additional cost per year, equal to $4,820 of additional interest expense per second for the entire year (source: Treasury Department)

So… Now you know the rest of the story…

Then there was this… I’ve quoted James Turk many times over the years… Mr. Turk is the foremost expert on the history of money and the role of gold in our economy. James thinks that hyper-inflation is coming down the road. This leads him to forecast an eventual price for gold of $8,000 or more. He sees mining companies as a good option now, as costs are down relative to revenues that can be realized (given the price of gold at $1,600 and growing).

A Bull Market on most mining stocks in 2012 will create great profit opportunities. Silver could likely outperform gold in 2012 as the historical silver/gold ratio is 16:1 and this ratio is currently out-of-line at its current ratio of 50:1. This ratio is likely to be closer to 30:1 by the end of 2012. Gold is money as it was chosen by the people some 5000 years ago as money.

Yes… All good thoughts, and the hyperinflation he’s talking about is the warp speed velocity of money, when the (to be) 3 rounds of QE/money printing are unleashed on the economy… When that is… Is the question of the day, but, when it hits, I don’t think anyone will have time to react, which is why I truly believe you have inflation fighters, like gold and silver, in your portfolio now! That way, you won’t have to be the guy that remembers he needs new tires before the winter snow begins, but keeps putting buying the tires off, and then one day he wakes up to a foot of snow on the ground… Now, he has to try to get to a tire store, with every other procrastinator that put off buying new tires, and now he’ll have to pay whatever price the tire dealer chooses to charge him… Don’t be that guy!

To recap… The FOMC meeting threw a cat among the pigeons yesterday, by not only announcing that the Fed Funds rate would remain near zero until late 2014, but also that more QE is coming should unemployment remain sticky… So, you might as well oil up the printing press, Ben, unemployment is going to remain sticky! The currencies, metals and stocks all rallied on the news, and have continued those rallies in the overnight markets.

Chuck Butler
for The Daily Reckoning

Big Ben Discusses Another Round of Quantitative Easing originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas.