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Federal Reserve Hints at QE3   July 13th, 2011
Not that it was hard to predict       


More observations...

I've been predicting it since early 2009 and very explicitly since November 2010... and now the Federal Reserve is hinting QE3 might indeed be coming. And gold is creeping up on $1600/oz.

Though "experts" and market observers have been saying that QE3 was all but impossible for months now, on Monday the minutes from the last Federal Reserve meeting indicated that some members are considering the merits of ... (drumroll)... QE3.

Gold jumped to a record high Tuesday after the minutes from the Federal Reserve's June policy meeting indicated the central bank might be open to more monetary stimulus...

It's one of the first times the Fed has made any direct reference to a third round of quantitative easing. The most recent round of quantitative easing, nicknamed QE2, ended in June.

It's the first time the Federal Reserve has said it, but not the first time a lot of people (myself included) have predicted it.

Now, of course, this is just a hint. It's not a done deal yet.

But the Federal Reserve started hinting at QE2 in the summer of last year before making it official last November. So the timing of this "hint" is about right if my late September/early October prediction is right.

And once the debt ceiling is increased, there will be a huge supply of treasury debt as the government borrows two months worth of money, and it's unclear whether there will be enough buyers. And if we have another month like May and June in terms of unemployment, the Federal Reserve will be under pressure to engage in QE3 so that the government can sell all its debt and to try to further stimulate job growth.

So we'll see.

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