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The Fed's Mess Is Inflation and Gold - Mike Swanson (06/08/09)

Submitted by Mike Swanson on Mon, 2009-06-08 07:41.

The Federal Reserve announced a $1.2 trillion dollar plan several months ago to artificially lower interest rates to try to force a bottom in housing prices.

But it hasn't happened. Housing prices have continued to decline and now interest rates for mortgages and US Treasury bonds are rising - going the opposite direction intended by the Fed.

All of the earmarks of another Federal Reserve mess are appear to be occurring all over again. Remember it was Alan Greenspan's intervention in the economy to stop the 2000 stock market bust by keeping rates artificially low for too long that helped create the housing bubble - which created the wild orgy of debt and speculation by Wall Street banks deemed "too big to fail."

It is Greenspan that created the mess we are in now and it appears the Fed is taking actions now that are creating their own set of problems. It is no coincidence that gold stocks have risen since November while gold has tested $1,000 an ounce recently.

What is happening is that bond investors are beginning to demand higher rates of return, due to the dangers of inflation and growing deficit spending by the part of the Federal government.

We live in a wild market environment in which a return to stock trading basics is necessary.

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Hello. My name is Mike Swanson. I’m the best-selling author of the book Strategic Stock Trading. In a former life I used to run a hedge fund from 2003 to 2006 that generated a return of over 78% during that time frame. In fact it was ranked in the top 35 out of 5,000 hedge funds in 2005.

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