Despite Friday’s optimistic jobs report and increasing evidence of a moderate economic recovery across-the-board, Fed head Ben Bernanke showed no monetary backbone in his speech before the Washington Economics Club.
As far as Bernanke is concerned, it’s going to be ultra-low rates and a growing Fed balance sheet as far as the eye can see. In other words, no dollar protection whatsoever.
It’s quite possible that this cheap-dollar policy will be good news for stocks in the short run. As for gold, folks selling the yellow metal right now might want to reconsider and begin buying this dip. That’s what I would do. Buy commodity stocks and gold, because much to my dismay, the easy-money train’s still chugging along.
Unfortunately, the longer the Fed waits to raise rates, the more difficult and harsh its eventual exit-strategy is going to be. Increasingly, I believe that Bernanke’s timidity today will ultimately lead to half- and three-quarter-point interest-rate hikes down the road — not quarter-point hikes. Stocks are not going to like that shock one bit.
Another big economic threat out there is the EPA’s endangerment finding to regulate greenhouse-gas emissions through the economy. This, of course, comes on the heels of the Copenhagen global-warming conference, which began along very dubious lines following e-mail revelations of scientific skullduggery.
The EPA is badly overstepping here — legislatively and constitutionally. They are basing their decision on phony science. But even more important, their command-and-control regulatory dictum can do great harm to the economy, which is still struggling to regain its footing. Oil, utilities, coal, manufacturing, construction, and consumer-energy costs will all be damaged because of this unilateral EPA move.