In one of the most dovish interviews of a Fed member that I’ve ever seen, voting member Charles Evans “would favor more accommodation.” He believes that we would be worse off without QE2 and Fed policy isn’t why commodity inflation took off, he thinks it was solely the demand side. He expressed his full support for the Aug 9th FOMC statement that stated an explicit time frame for keeping interest rates ‘exceptionally low.’ While he said that it’s not certain what the next step the Fed will take, we can be sure that as long as his thought process is still shared by his fellow doves of Bernanke, Yellen and Dudley, this Fed won’t stop with their attempts at easing if the US economy doesn’t improve soon. I want to emphasize ‘soon’ because this Fed has shown ZERO patience with the lag of the economic cycle, an economic cycle that needs time to work without the constant distortion and influence of Fed contraband. Be sure that if Friday’s Payroll figure is very disappointing, we will hear non stop QE3 talk until the Sept 20-21 FOMC meeting. I fully understand the concept of ‘if at first you don’t succeed, try, try again’ but if by the 3rd or 4th time you keep failing by doing the same exact thing (creating cheap money and US$ debasement), isn’t it prudent to take a step back with some introspection and self assessment? Gold is at the highs of the day no coincidence.
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