central bank gold-buying increases by 500%, page-24

Hi Leanne

Looks like some interesting discussion points have been made. I suppose these are just each posters opinions, and everyone is entitled to voice their thoughts on the topic. That's what Hotcopper is all about.

I agree with your fears Leanne about printing money, the ECB also released another batch of 489Billion Euros lent out before Christmas.

In total over 1Trillion Euros was lent out to over 800 European Banks in the last 3 months.

Where did the money come from? The ECB has the power to "print" money when necessary. They don't actually print it, they just make an entry into their accounts, then begin to transfer it to European banks.

The reason why they did this was to avoid a catastrophic banking collapse which was imminent in Europe, then it would have spread globally, including Australia.

The US has also completed two rounds of Quantitative Easing, in late 2008, $US500Billion and again QEII, in mid 2010 another $600Billion was printed by the US Federal Reserve.

As long as they can manage the inflation which is in the global financial system, by buying these MBS's back and increasing interest rates in 2-3 years, inflation will rise, to above 5-10% per year, but the Western Central Banks do have the economic tools to avoid a 10-50% inflation rate.

It will still lift demand for gold, based on normal inflation rates of less than 8% per annum the China and India will continue to accumulate gold, as per my previous post regarding the low percentage of reserves held in gold by China and India.

We can all sit back and harp on about the problems of printing money, but there is no question, when Mr Bernanke embarked on QEI and QEII, he helped the global economy avoid a depression.

The asset value destruction caused by the GFC, the subsequent nationalisation of the toxic bank debt, increased the US Govt Debt to over 100% of US GDP, forcing the US State and Federal Govts to reduce spending at a time when increased spending was crucial to avoiding a depression in the world's largest economy.

Mr Bernanke's brave Quantitative Easing programs helped to increase the US money supply at a time when interest rates were already near zero. Accumulating US Govt debt and toxic Mortgage Backed Securities were critical in avoiding a second depression in less than 100 years.

I suppose the thinking is a little additional inflation can be managed over time and it much better alternative to the destructive affects of a depression to an economy.

Now that markets are lifting, now is the time to be making a bit of money from these events.

Cheers Nectar