James Rickard on the Fed’s asset reduction program

Daily Reckoning/James Rickards/9-21-2017

“The Fed wants you to think that QT (Quantitative Tightening) will not have any impact. Fed leadership speaks in code and has a word for this which you’ll hear called ‘background.’ The Fed wants this to run on background. Think of running on background like someone using a computer to access email while downloading something on background.

This is complete nonsense. They’ve spent eight years saying that quantitative easing was stimulative. Now they want the public to believe that a change to quantitative tightening is not going to slow the economy.

They continue to push that conditions are sustainable when printing money, but when they make money disappear, it will not have any impact. This approach falls down on its face — and it will have a big impact.”

USAGOLD note:  As we mentioned in a previous report, we are in an economy deeply mired in disinflation with deflation knocking quietly on the door. The markets are wary.  Investors are still buying gold.  The SPDR gold ETF  total gold weight was up 199,539 ounces yesterday to 27,400,195 ounces, or .7%.  Over the past four weeks it is up 5.84%.

During the whole period, the investment business had a pretty good idea what the Fed would announce.  Keep in mind that the gold ETFs are dominated by professional investors.  They know disinflation is ingrained in this economy and they are buying for defensive, safe-haven purposes, i.e., as a disinflation hedge. The following chart covers holdings in all the ETFs Aug 22 thru yesterday – an interesting buy-the-dip divergence.

Chart courtesy of GoldChartsRUs
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