Tags: Forbes | gold | Fed | economy

Steve Forbes: Fed Policy Continues to Plague Asset Markets, Economy

By    |   Wednesday, 17 April 2013 02:05 PM

The Federal Reserve’s massive easing program is still wreaking havoc on asset markets and the economy, says Steve Forbes, chairman of Forbes Media.

“[Fed Chairman] Ben Bernanke has pulled off a neat trick that could well give us the worst of all worlds: a brief commodity deflation, future inflation and a stagnant economy,” Forbes writes on Forbes.com.

“It will earn him a prominent place in the central bank’s Hall of Infamy.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for
Mishandling Economy. See What They Did

The weak economy has helped push inflation down, leading to gold’s recent drop, he says. “Leveraged speculators are waking up to the fact that we won’t be getting a 1970s-style inflation in the near future and are bailing out — for now,” Forbes writes.

“Gold rose sharply in anticipation that all that quantitative easing would flood the economy with excess money just as happened in the 1970s.”

But that water has now been bottled up. “Or a better metaphor, it lies in a vast reservoir. However, in this case, the water is held in place by a very weak dam,” he notes.

“The Fed is still doing enormous damage to the economy by distorting the credit markets both in the pricing of credit and in creating uncertainty about the future value of the dollar.”

Spot gold has plunged 28 percent from its September 2011 record high of $1,921 an ounce, trading at $1,378 Wednesday afternoon.

Some gold market participants say the selling onslaught may not be over. “I am not so sure we have seen the bottom,” Frank Lesh, a trader at FuturePath Trading in Chicago, tells Bloomberg. “Prices could dip below $1,300 because the mood is still bearish.”

Credit Suisse analysts expect to see gold at $1,300 within three months. “Over a one-to-six-month time horizon, risks remain to the downside, given the negative trend and merely neutral fundamentals,” they write a report obtained by Reuters.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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The Federal Reserve’s massive easing program is still wreaking havoc on asset markets and the economy, says Steve Forbes, chairman of Forbes Media.
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2013-05-17
Wednesday, 17 April 2013 02:05 PM
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