The QE 'experiment' has done its job. people are working...

The QE 'experiment' has done its job. people are working churning out goods and services.

I take a philosophical view on the question of Fed's approach since GFC. Evolution is natural, it is quite possible history will show in 50 years that this is the start of an evolving monetary policy 'a new financial digital age'. Changing with the times. More liquidity needed to fund exponential advancement in technology. Debt is little more than a recording function at government level. The absolute figures should not be a concern, they can change rather quickly.

I don't know the answer to debt reduction. My question is why worry about it? The tell tale sign has to be inflation, if there is too much money sloshing around in the system not being put to use in productive capacity then naturally we have inflation. We don't have inflation, if anything inflation is lower than might be expected. Part of the debt reduction answer might lie in taxes, with everything firing on all cylinders and full employment there will be increasing revenues. The major factor is allowing maturity without rollover but that signals the end of support and currently business is sensitive to this.

I agree with your observation at the markets reaction to the slightest hint of winding back monetary support. Inevitably there will be another volatile down swing, possibly this year. Market do seem hyper-sensitive to news coming from almost any source. That's just markets at work. Serious economists are predicting a slowdown and I'm certainly not going to disagree, cycles are part of business. The extent to which monetary support can be ongoing will determine the extent of decline - and that will be determined by inflation. That is the breeding ground of volatility. A big risk as I see is if inflation does starts to creep up but productivity declines. If that scenario rear its head then the next recession is round the corner. It will be short lived though and a fresh round of support will soon get things moving again.

As for gold. I honestly don't think it has a part to play. Correlations seem to ebb and flow. It moves with other markets then it moves against - clearly the $US is currently dominating gold movement. I think of it as purely speculative, I wouldn't over-extend in either direction. Then again it will hardly be a killer as I can only see it moving in a tight range with just incremental increases in that range year-on-year to keep mining it viable. I'm calling it a $1370 - $1280 range this year. Because of its speculative nature there is always the risk of a short-lived spike outside of that range but if it does I'll definitely see it as a buy or sell depending on which direction it spikes.

In any scenario gold forms only a small part of my overall cash, whether short or long. It is too unpredictable 'and costly' for buy/sell and hold for the long term.