"Have We Reached The Breaking Point?", page-113

Back to the beginning (I have been out of town).

Silverdoctor's Bill Holders wants us to believe that the Fed is running out of policy options and is somehow painted into a corner.

I think that he is trying to create uncertainty where none exists. Towards the end of his article he asks some questions for which there are all to obvious answers:

Can the Fed really raise rates?
They can, but it wouldn’t be wise given very low inflation and weak labour environment. It would probably weaken the US economy. And there are no good reasons why they have to raise rates. The Fed don't have to do anything.

Do they have the ability to “buy” everything that will be sold?
Technically, they do.
The Fed could buy back the entire outstanding US government debt if it chose too - without printing a single dollar. QE was always self funding because the sellers receiving money for Fed bond purchases eventually feed the proceeds back into reserve deposits with the Fed. There is nowhere else that the dollars can go. (That is why QE was never inflationary in itself.)

How will they (the Fed) “buy” dollars themselves?
Obviously the Fed can buy dollars through their dealer panel as they usually do for the FX transactions. But why do they need to. I am sure that the Fed would be very happy to see to US dollar fall. A weak US dollar is good for US manufacturers.

Can they buy homecoming dollars using new dollars?
There is no need for the Fed to any buy dollars at all. If American investors start repatriating their offshore investments (“homecoming dollars”) they can go to the FX market and buy the dollars that are for sale. If there aren't enough dollars the price will rise until there are. The Fed doesn’t have to do anything.

Everything will need to be supported and nothing can be allowed to fall.
I don’t think that is true. The US dollar can be left to float as it always has. Because US corporations and governments borrow in US dollars, the Fed has no reason to defend its value. That can raise rates or leave them where they are if they choose. If the economy weakens, they can do more QE (which doesn't really help, but it seems to be good for morale).

You must ask yourself this, can you go to sleep for eight hours and expect everything to be the same “normal” as when you went to bed?
I sleep very easily. But I understand how this all works.


The only problem that the Fed has at the moment is dealing with the ill informed expectations of interest groups such as Wall Street and wealth American rentiers.

Bill Holders is trying to manufacture uncertainty in an effort to frighten naive investors into buying overpriced precious metal products from the company that pays his salary.


"Goodbye Yellow Brick Road
Where the dogs of Silver Bear howl
You don't scare me with your barking
I'm going back to the Dow"

Apologies to Bernie Taupin