You might be wondering, exactly why are today’s markets rising? Are they truly experiencing their finest showing since 1997?
Generally, markets are tightly correlated with the economy and global growth, however, this upward movement is due to neither. This low volume rally is a result mostly from money printing by all of the central banks, particularly from Europe and the USA. Please don’t be deceived by these rounds of “real rallies”, they are merely a short-term boost to make mainstream America think we’re recovering from this bleak condition our economy is in.
The truth is money printing disguises the real fundamental economics. Consumer spending and production failed to reach targets this month and in December of 2011, housing prices fell nationally by 3.7% and new house sales dipped by 3.5%. Our economy is still very much in danger and having problems to stay afloat.
The FED will almost certainly introduce a third round of Quantitative Easing in the near future. It will inundate the system with money to help keep this phony bull market going. Regrettably, this will do nothing to encourage real sustainable economic growth, or generate jobs. It only adds trillions in financial debt, which causes further devaluation of our currency. It’s only a matter of time before investors realize that QE does not generate real sustainable growth, and that circumstances may not be as pretty as they appear currently. Financial institutions will continue to collapse, the outrageous derivatives market will cave in, and the printing presses will triumph, as it’s the only strategy our government has left.
My recommendation to anyone who is looking to hold onto their wealth is to purchase gold and silver as a hedge in these inflationary times. A tiny one to two percent of institutions are currently holding a position in gold, which means gold prices have a long way to move.