It is pretty obvious regarding to the current financial situation that the search for a reasonable investment is full of compromises. Additionally, due to a growing loss of confidence all around that people prefer to spend their savings or, at least, prefer to buy some real tangible products like mortgages or wood. Where we are now? Is confidence really lacking or even returning?
According to the level of confidence it is also important that stock markets are rising, I suppose. Furthermore, if you have witnessed the smooth around investors since Lehman collapsed, confidence returned although fundamentals are still unchanged. Keep the stock markets going and suppress gold and silver that could be the key factor for Ben Bernanke. He is not that unsuccessful from his point of view as long as they can create artificial demand. People are still good consumers, which is also in favor of the Government. There is belief returning in stocks not only from the apple point of view. Let’s take a look at the following table:
“In Q1 2012, GDP rose $142 billion, while debt rose $359 billion. In other words, it took nearly $2.50 in debt to generate $1.00 in GDP. We wanted to understand how this relationship compared to those that prevailed in previous decades.” (Zerohedge).
If the US goes ahead with this strategy, debt will be rising massively. Its monetary policy looses absolute traction to the real economy. On behalf of the financial markets they can only reach an increase of the money supply, which could help stock markets and keep the level of confidence pretty acceptable. But for now there is no massive inflation apparent, only a step by step process, which is called “cold inflation”. But they have no monetary weapon on stock to keep this system under control on long term basis. But short term the FED is doing everything that’s possible to keep the economy going even its artificial.