Wednesday, October 30, 2013

Stocks Head Up Based on Continued Printing of Money

From Reuters:

A gauge of global shares rose to its highest in almost six years on Wednesday on expectations that the Federal Reserve will keep its current stimulus program intact, while the U.S. dollar edged lower, giving support to gold and copper prices. 
Many traders expect the U.S. central bank to signal later in the day, at the end of a two-day policy-making meeting, that it plans to keep in place a stimulus program that has lifted equities and other risk assets, and boosted Treasury bond prices while weighing on the U.S. currency. 
Spot gold rose the most in a week after soft U.S. jobs data supported an expectation that the Fed will keep its $85 billion a month in bond purchases in place, in a bid to spark life into a lackluster economic recovery. 
Data showed U.S. private-sector employers hired the fewest workers in six months in October, and that tepid domestic demand kept inflation benign last month, suggesting the economy was still in need of stimulus.
I'm not sure how this is going to stimulate the economy. Stock prices are heading up for much the same reason as gold--the value of the dollar is declining, and the prices reflect that. The Fed's policies are keeping the interest rates on savings accounts near zero, but good luck borrowing money.  And so what if the value of your 401k is rising--you can't access that money either. In short, quantitative easing is not going to resurrect the moribund economy--the only ones benefiting are Wall Street and the big banks.

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