December update

This blog is turning into a monthly publication.
It was not my intent and I am going to try at least to make it a weekly event.

At the same time it is a way to reflect on a longer period and to avoid being caught up in the daily action that tends to confuse us.

So what's going on ?

Fed cut 25 bps on both fed rates and the discount window on dec 11th.
But Market was disappointed and plunged on that same day
Let's assume that it is because some hoped for 50 at least for the discount window (but you never know the exact cause. 2 weeks before 25bps was supposed to be a good news, but it was co anticipated, and a "surprise" 50 bps was so hoped for that here's a correction.

But next day, Fed announces new injection of liquidity along with the ECB and other Central Banks, to help avoid a Credit Crunch that tends to become a recurrent news, and the market "kind of" rallies.

Of course the Fed says his action had nothing to do with the market's reaction of the day before. Right ?

Gold followed the stock market during these two days. Fell on the 11th, rallied on the 12th.

But Gold is still a small footnote in all these events.

Sentiment in the stock market (and the economy at large) is all that counts in the US right now.
The establishment is doing all it can to avoid a panic that would have disastrous effects (think Wall Street 1929 or Japan 1988).

Of course inflation is much less severe in their mind, but they won't say so.
They continue to say that inflation is a continuing worry.

But you cannot fight both inflation and recession at the same time.
And when you choose not to choose you put the economy in an intractable situation.
It's called Stagflation. I remember that from my History classes.

For Gold it is going to be perfect until they decide to really raise interest rates in the face of a weak economy.

But we are very far from there now.