Strategy

Banks depleted their capital during 2008 financial crisis. To help banks, US government came out with Stimulus where Fed bought securities held by banks and gave them much needed capital. Now this is how I think, strategy will unfold.

Fed knows that banks are investing money outside of US and making money. American Banks are controlling some stake in companies outside USA thereby insulating against dollar fall. The plan could be, banks make enough money (even by investing outside USA) and then Fed withdraws slowly.

The USA is also targeting unemployment but that plan is unlikely to succeed. If I get labour at 1 dollar an hour in Alabama and 6 dollars in Washington, will I get my work done in Alabama or Washington? Therefore, instead of doing it in USA, I will do it in Chindia. I firmly believe that most of the jobs from developed economies have disappeared forever. Job market does not go to zero, as people need electricity, water, food and other basic amenities. To supply these basic things, you need to employ certain number of people per household. Therefore, thirty thousand people employed in social service sector (including some privatised utilities company) are not an indication of growth. If population goes up by 10%, then you will need 10% more people in social sector. Therefore, if someone comes up with a chart that shows rise in employment in social service sector (including some privatised Utilities Company), one must see how much population has gone up by in the period under consideration. I THINK POPULATION IS KEY TO GROWTH!!!

Before I end this post, I have started to believe that gold price is an indicator of structural changes. When Mr. Nixon broke gold standard, traders reacted by jacking up prices of gold. Action of Mr. Nixon was sudden and probably caught world unaware. As a result, gold prices rose AFTER the announcement of Mr. Nixon. This time, god prices are reacting BEFORE any kind of announcement.

-Shrihas Pandharkar

DYOR.
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