QE2 - Crazy Gold Action

[Storm]

Check out this chart -in the space of just a few minutes we have some wild swings on gold:  


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[MediumTex]

QE2 makes me very happy to be a gold owner, and very sad to be a 30-year treasury owner (in the long term, at least).  QE1 and QE2 will sum to more than $2 Trillion.  And this of course is in addition to TARP, stimulus plans, etc.  The Fed is starting to get more attention lately, but the whole concept is still largely lost in the drama of elections every two years.  It's unfortunate that we don't elect the Fed Chairmen. 

Japan has been trying to make QE work for years and their 30 year yields are under 2%.

There's just no way to tell where we're headed.

The bizarre truth about the U.S. Bond market for the last 30 years is that the more reckless government spending has become the lower yields have gone.

[Pkg Man]

  It's unfortunate that we don't elect the Fed Chairmen. 

I don't want to defend the Fed in this case, since I don't agree with the policy, but I think if the position of Chairman were an elected position we would be MUCH worse off.  The elixir of easy money is not something that the general public, which has zero understanding of monetary policy, would be able to resist.  This is also the reason that the Fed was set up with relative independence  -- politicians directly controlling the printing presses would be worse still.  This has been proven over and over again in dozens of countries.  And to be fair to the Fed, I do believe that if inflation begins to rise they will act to drain the liquidity.  Whether or not this occurs before the genie is out of the bottle is another question...