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Bankers at both the U.S. Federal Reserve and the Bank of Japan (BoJ) met in the last 12 hours (on April 28) to decide where they would take monetary policy next. But, when they sat down to make decisions, they realized their options were limited. There was a lot they wanted to do but little they could do.
Japan’s central bank pushed borrowing rates down into negative territory in January, joining its counterparts in the European Union, Switzerland and Sweden in an aggressive bid to discourage banks from sitting on money.
Currently, the Bank of Japan and the Federal Reserve are moving in opposite directions. The U.S. is cautiously working to push up borrowing rates, but a global slowdown and tepid U.S. inflation are hampering these efforts.
Once Japanese shares were sold off, the yen surged against the dollar Thursday after the Bank of Japan’s (BOJ) decision to keep monetary policy steady disappointed a section of the market that was betting on further stimulus.
BoJ Governor, Haruhiko Kuroda, is betting a stronger yen won’t damage business momentum. He’s obviously hoping a recovering US economy will generate a tighter US monetary policy and reduce the strength of the yen, since he and Mario Draghi at ECB are both reluctant to debase too obviously. However, that decision moved the yen up hard against the dollar – by some two percent overnight. Japanese equities sold off, while investors were disappointed about the lack of near-term stimulus on the part of the BoJ.
What just happened to international currency and equity markets, specifically the dollar and yen, is predictable, if you understand the forces at work throughout the West and in Asia. In fact, Jeff Berwick, of the Dollar Vigilante (follow him HERE) has been saying since 2009, that the Fed would never raise rates significantly again – and he stresses that 0.25% is not significant.
Basically, the plan is to continue to pound the dollar. And as the dollar debases, that gives other central banks wiggle room to debase their currencies as well, according to Jeff Berwick.
Jeff predicts the US dollar is at the beginning of a new bear market. The foreign central banks don’t want to see it, because that will mean they will have to inflate more, in order to stay competitive with exports.
Once the US dollar goes a bit lower, you can look for other central banks to begin to ease. Each bankster wants the other’s currency to go first for political and professional reasons. But, they are all going down sooner or later. And metals are going up. If you have not bought yourself some physical gold and silver, you better do it while you still can.
Gold analysts polled by Reuters have hiked their forecasts for gold by nearly $100 an ounce since the start of the year after it posted its biggest quarterly rise in nearly 30 years.
According to Gold News, they are expected to rise steadily this year, peaking at an average $1,250 an ounce in the fourth quarter, the survey showed, before extending gains to average $1,300 an ounce in 2017.
“The chief supportive factors are the shift in Fed stance, the weaker dollar and the prospect of inflation,” Macquarie analyst, Matthew Turner said. “The first two have raised the base price, the third is why we expect higher medium-term prices.”