Traditionally, when the economy seems robust and growing, people feel optimistic about spending, investing and developing new products, business and so on. The new paradigm in the business and financial worlds has been that the better the times, the more likely we are due for an imminent catastrophe. Investors and business leaders may finally be accepting the fact that our economy has indeed recovered, though: even on news of a potential pullback on the Fed’s bond buying program, traders didn’t go scrambling to sell off all their stocks and the gold market didn’t suddenly boil over as people looked for a financial safe haven.
5 The Fed Finally Seems Ready to Taper the QE Program
At its meeting in October, the board of the Federal Reserve System voted 9-1 against tapering off the bond buying program known as quantitative easing. How quickly things have changed. Apparently, in the most recent meeting, the mood of the board members had changed and most were now confident enough in a robust American economy that they might move to end or at least slow (referred to as “taper”) the massive $85 billion a month purchasing program as early as December.
4 Janet Yellen Moves a Step Closer to Confirmation
The Senate Banking Committee has just approved the nomination of Janet Yellen to replace outgoing Fed chair Ben Bernanke when he steps down in the coming weeks. This approval will see her nomination sent on to the full senate, where her confirmation is expected next month. The fact that several Republicans joined with their Democrat colleagues to approve Ms. Yellen signals strong likelihood of her soon chairing the Federal Reserve System.
3 Gold Prices Are Dropping After the Fed’s Announcement
Gold prices have been performing well in the wake of the recession, as the precious metal is seen as a safe haven for money even when businesses are going bust and the stock market is on a rollercoaster. But right now, gold prices are sliding downward and may end the year priced lower than it was at the end of 2012, thus breaking a thirteen year record. The Fed’s taper of the QE program both points to a strong economy and may help slow inflation, which is great news for most folks, but bad news for gold buyers and holders.
2 There’s Drama at the Minneapolis Federal Bank
The Federal Reserve Banking System is rarely known for internal drama, but apparently there has been no shortage of it at this branch of the Federal bank. The president of the Minneapolis Fed, Narayana Kocherlakota, has been firing people left and right, ostensibly because they are not performing up to his standards, but allegedly for personal and vengeful reasons, as well. Kocherlakota has assumed an activist stance as head of the bank, and feels the Federal Reserve System should influence domestic employment, investment and more, rather than helping maintain a stable economy in which others manage such issues.
1 No Rise in Interest Rates Yet
At the same time as the Fed released information that it might ease off on its bond buying program in the coming weeks, chairman Bernanke also suggested that the Fed would maintain dramatically low interest rates for the foreseeable future. That announcement should soothe concerns in the business and financial worlds about any tightening of credit and harder-to-get loans. If indeed the economy is still performing as well as the Fed seems to think, the QE taper should be offset by the maintained interest rate and it should be continued boom times for business in the USA.