-- Posted Sunday, 13 May 2012 | | Disqus
By Dr. Jeffrey Lewis
Major central banks around the world are employing historically loose monetary policy to prop up the fundamentally flawed fractional reserve banking sector artificially. As cases in point, the Federal Reserve Bank, the Bank of Japan, the Bank of England and the European Central Bank have each dropped bank funding interest rates to almost zero over the last few years.
These same central banks have also engaged in huge quantitative easing programs that involved extensive debt asset purchases as a way to keep long term interest rates and bond yields at low levels and stimulate their domestic economies. Since such programs typically necessitate printing or electronically generating money, these lax policies have severely expanded the money supply of these major economies.
The logical result of increasing these countries’ money supplies without having more physical assets to back it up is a persistent devaluation of the purchasing power of these economies’ respective currencies. These programs prompt growing inflationary pressures that should ultimately lead to appreciating prices for hard investment assets like silver and gold.
Intervention Masks True Asset Value
Furthermore, the more the central banks try to intervene in currency, bond and asset markets to help prop up financial institutions and the value of their currencies, the more detached from reality the true value of assets becomes.
The more overt or covert intervention occurs, the less investors understand real value and so price distortion increases. Valuable physical assets — such as gold, silver and real estate — become mispriced, and the misapplication of capital among investors increases.
This leads to an investment environment where less attractive alternatives for the individual investor are available.
More Cracks Appear in the EU
Meanwhile, more cracks have been appearing in the European Union at the intersection of Eurozone policies aimed at political and monetary union.
France and Holland have both seen political shifts, as incumbent French President Nicolas Sarkozy was defeated in a recent election and the Netherlands’ governing coalition collapsed. These developments come on top of the Greeks ousting an austerity disposed government, causing its politics to splinter into extremes created by a leadership vacuum.
The Hall of Mirrors at the Palace of Versailles was where the German delegation accepted the Treaty of Versailles, which effectively concluded World War I. Could the nations of Europe be heading toward another serious conflict as government policies move toward austerity measures that constrain economic growth and leave many jobless?
If so, when the masses realize that no paper currency issued by any of their national banks can be trusted, they may quite be surprised by the lack of investment grade silver lying around.
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"In addition to running a busy medical practice, Dr. Jeffrey Lewis is the editor and publisher of www.silver-coin-investor.com where he provides practical information for precious metals investors".
For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com, subscribe to our E-Course completely FREE of charge.
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-- Posted Sunday, 13 May 2012 | Digg This Article
| Source: GoldSeek.com
