Ben Bernanke and the Federal Reserve are continuing on with their quantitative easing, dubbed “QE,” even in the midst of growing concerns about the impending possibility of extreme inflation. The Fed has continued to buy U.S. government bonds, and while the measure was initially meant as a way to improve the economy in the wake of the Great Recession, QE continues, with no sign of slowing down.
The Fed has bought an unprecedented $45 billion in Treasury bonds, and $40 billion in mortgage bonds each month. The result? Interest rates have remained low, and the tremendous increase in available money has sent the stock market soaring.
Traders have continued to try to anticipate when the Fed will begin tapering its bond buying program, which is throwing more than $80 billion into the economy each month, but Bernanke and the Fed remain vague about plans to end bond buying. This is great news for the stock market, but it has the average American consumer wondering what the result of such a dramatic policy will be.
It’s been speculated that the Fed may be looking for an unemployment rate below 6 percent before beginning a taper, but with the rate remaining stubbornly above 7 percent, that could mean bond buying by the Fed continues well into the future.
The Fed seems very reluctant to make any changes to its current policy, particularly as the economy’s growth is so slow. It’s unclear if the economy would have the strength to sustain itself without QE.
While of course the consensus is that any means necessary should be taken to bolster the economy, investors and economists are growing increasingly concerned about the possibility of future inflation. It seems inevitable that the creation of so much money simply floating around the economy will lead to higher price growth.
Many investors have expressed fears that the Fed’s measures will lead inflation to a rate of about 2.5 percent, or even more on an annual basis.
The commonly uttered phrase among most people is that a high level of inflation isn’t a situation that’s an “if,” but instead is a “when.”
While it’s expected Janet Yellen will replace Bernanke as the Fed chairman, it’s widely expected she’ll continue the same money creation strategies employed by the outgoing chairman.
With so much uncertainty, and all signs pointing toward inflation, investors are taking steps to protect themselves against the impending increase in consumer prices. One of the most solid investments to make in the face of inflation is within the realm of precious metals. It’s not just the threat of inflation that has investors turning to precious metals—as with any artificially inflated bubble, there’s a lot of indicators pointing to the potential for a stock market crash.
With this in mind, now is the time for investors to protect themselves against inflation. Rather than waiting until it’s too late, now, when inflation is holding steady, is the time to create safeguards against the catastrophic consequences of a rise in consumer prices. Regardless of the next move enacted by the government or the Federal Reserve, precious metals have withstood the test of time for thousands of years, and provide peace of mind in the midst of uncertain economic conditions.
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