Like rats getting nervous as they see the shore disappear from the deck of the Titanic, there’s been a lot of rather suspicious movements of assets by both governmental and private players in the global financial scene lately. First comes the news that big-time market players, we’re talking billionaires here, have been leaving the market. Now comes news that the New York Federal Reserve vault’s gold deposits have been hit by a rash of withdrawals. How bad has this gold run been? 42 tons of gold has been repatriated from the Fed’s gold vaults in the past month alone. Not exactly a vote of confidence…
It is too easy to feel puzzled by this move (which followed a similar action taken earlier by the Netherlands to the tune of 122 tons) to repatriate Fed-held gold. After all, aren’t global equities markets setting record after record? The Dow just zoomed past the psychologically important 18000 mark. Moreover, the accoutrements and usual indicators of boom times like sales of luxury sports cars, ridiculously expensive Manhattan premium properties, and high flying real estate projects are all indicating the good times are back.
Maybe the answer lies in what is propelling today’s market. Here’s a hint: it isn’t strong corporate earnings growth or sound baseline economic fundamentals. With America up to its gills in trillions of debt and trillions more in unsecured liabilities (think Social Security), one would be hard pressed to say that the US is in the pink of long-term financial health. Nope. The real ghost behind the Dow Jones record-setting machine of late is the Federal Reserve. Put more precisely, the Fed’s easy money policies that have left interest rates stuck to near zero and the Fed’s quantitative easing. These two policies have unleashed a flood of easy money into the finance markets and inflated asset values. What do you call something inflated by simple empty air with no substantial structure based on real economic assets? Why, a bubble, of course! Stay tuned.
With over 20 years experience in the heart of the investment industry, Ben Myers has become one of the most respected commentators in the financial world. Having worked for global institutions such as HSBC and Bank of Ireland, Ben ran his own successful investment company in the UK before becoming a chief analyst at ECMarkets and now YesOption. Ben remains a keen forex, stocks and crypto trader and is a regularly featured analyst for a number of online news portals including bbc.com, investing.com,