Tall Paul Volcker and Jeff Harding agree (per The Telegraph):
Paul Volcker, the former Federal Reserve chairman credited with taming the inflationary threat of the 1970s, has warned that further quantitative easing will fail to repair economies in Europe and the US.
Mr Volcker, addressing a conference at Gleneagles in Scotland, said the decision by the Fed to begin a third round of asset buying — nicknamed QE3 — amounted to the “most extreme easing of monetary policy” he could recall…
Although not explicitly directed at Fed chairman Ben Bernanke, Mr Volcker’s words will be seen as a veiled criticism of the limitations of the current strategy being employed by the Federal Reserve…
“Monetary policy is about as easy as it can get,” said Mr Volcker, who built a reputation for quelling inflation through the unpopular decision of raising interest rates during his tenure at the US central bank. “Another round of QE is understandable – but it will fail to fix the problem. There is so much liquidity in the market that adding more is not going to change the economy…
Mr Volcker stressed that although the risk of inflation was not imminent, central bankers had to be careful. “The risk is that central bankers are not able to tighten policy in time. Will they be able to pull back fast enough from loose monetary policy?” he said.
The money-printing is being co-ordinated globally, as the article makes clear:
In the UK, the Bank of England is also expected to pump more money into the system. The recent minutes of the monetary policy committee revealed several policymakers believe more stimulus will soon be needed and analysts are predicting a further £50bn of QE could be launched at the November meeting.
The simple conclusion: Bonds down, real assets up. Timing: uncertain; no reason to expect this trend to continue Monday morning, but likely not “too far” away.
No matter. Volcker is a demi-god. When he asks in public if central banks will tighten policy in a timely fashion, he knows that Chairman Bernanke has already answered in the negative. Volcker is voting against Treasurys and for hard assets. He speaks authoritatively on this matter. He of course is the Fed chairman who from 1979-82 turned the tide against hard assets and in favor of Treasurys. For 25 years, from 1979 to 2006, gold hung around $400/ounce. Then Ben Bernanke became Fed chairman. Gold is now almost $1800/ounce.
For an asset rise from $400 to $1800 in six years means that it has risen at a 28% rate per year.
And now Mr. Volcker is warning us that even more extreme monetary policy is being implemented.
The price target for gold that I propounded last spring of at least $2000/ounce no later than the end of this year might actually be hit. I hope not, but to my knowledge, easy monetary policy and “stimulative” fiscal policy generally have led to rapid rises in commodity prices.
Anyone who has wished to live in interesting times is getting to live in very interesting financial times indeed.