muses of the moment

December 13, 2012


Over at Peak Prosperity, Mish and Chris have a weekly audio discussion. You pay for the privilege. However, here is the bullet point summary:

In this week’s Off the Cuff with Mish & Chris podcast, Mish and Chris discuss:

  • QE4

    • NOT a sign of a ‘recovering’ economy
  • Asset overpricing

    • The liquidity flood is making nearly every asset class overvalued now
  • No exit

    • The Fed has no plan on how eventually to remove this liquidity from the market
  • Potential for a monster upward move in gold

    • It’s relatively undervalued, and it’s the only safe haven left



  1. Hi GG,

    Since QE4 is unsterilized, won’t this cause massive price inflation next year? If my calculations are correct, $85 billion per month of QE4 ($40 billion in Treasuries and $45 billion in MBS) will increase the assets on the Fed’s balance sheet by 3% per month or 36% over the next year.

    Here’s my calculation: $85 billion per month of QE4 divided by the total assets on the Fed’s balance sheet as of 12/12/2012 which is $2,919 billion (Table 8 Consolidated Statement of the Condition of All Federal Reserve Banks). If this continues for the next 12 months, $1,020 billion will have been added to the Fed’s balance sheet by the end of 2013.

    Does this mean the value of the US$ will decrease by 36% over the next year? Compared with other fiat currencies, maybe not. Compared with hard assets like gold, it certainly could. If so, the price of gold in depreciated US$ should be $2,310 by the end of 2013. It also means we will be paying a lot more for essentials like food and energy.

    Comment by sw — December 13, 2012 @ 9:11 pm

  2. SW,

    personally, gg thinks the real balance sheet of the Fed is alot higher. I am also not sure that dollar creation and gold runs so correlated. It ebbs and flows with the confidence in the dollar since we have all “floating” currencies now. But as far as will gold reach your number within the next few years, I think the answer is yes.

    All excellent points!


    Comment by totallygroovygirlfriday — December 14, 2012 @ 8:40 pm

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