Did the FED snuff out the metal surge?

[Immy]

By backing JP Morgan Chase's absorbtion of Bear Stearns, the FED claims they stopped a potential domino effect of bankruptcies with other large investment banks and the resulting ripple effect it would have had on the world economy. But they also stopped what is a needed correction in the markets, which is a natural consequence of over-extended financial institutions. In other words, banks should fail and consider it a lesson learned. The problem is, investors and employees would be the collateral damage.

And now the precious metals market is another casualty. By not letting the correction take place, metals never surged to their proper potential. This may sound opportunistic and greedy but I can't help but feel the FED hamstringed the metal market with this decision. But was it worth it considering the financial calamity that could have taken place? Lots of people speculated heavily in metals anticipating this very scenario but the expected outcome was choked off before it could occur.

 

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[luckyinkentucky]

I, for one, am glad it did grind to a halt!

The escalated price on metals in an already fragile market spells disaster for the economy. Auto production globally would slump, people would be laid off, and more money would be lost due to the freeze of consumer spending. People don't want to spend their hard earned money on luxury items when they are worried about what their dollar is buying. I think the FED did the right thing for the economy. If nothing else they may have halted a looming recession and put the economy back on the right track for recovery. If they had not we would see a rationing of goods and services that would mirror the WWII era.

I don't think people realize how fragile the economy is in this day and time. It needs to be governed by someone who is not worried about making their own pockets fat through the misfortune of others. Also, it's a known fact in the investment community that metals are NEVER a good investment. You'd be better off playing the slots at your favorite casino!

 

[snake35]

I would not say that metals are never good investments. Scrap steel is still at its highest price in history.

 

[ringding]

That may have been part of it, but keep in mind that when the PM prices shoot up as high as they were, folks sell coins and jewelry which they would have normally hung onto. With all that supply coming out of the closet, the price would go down until their was more demand again. Also, after the Great Depression, our government wants people to have faith in banks, so they are going to prop them up as much as possible.

 

[jim4silver]

By backing JP Morgan Chase's absorbtion of Bear Stearns, the FED claims they stopped a potential domino effect of bankruptcies with other large investment banks and the resulting ripple effect it would have had on the world economy. But they also stopped what is a needed correction in the markets, which is a natural consequence of over-extended financial institutions. In other words, banks should fail and consider it a lesson learned. The problem is, investors and employees would be the collateral damage.

And now the precious metals market is another casualty. By not letting the correction take place, metals never surged to their proper potential. This may sound opportunistic and greedy but I can't help but feel the FED hamstringed the metal market with this decision. But was it worth it considering the financial calamity that could have taken place? Lots of people speculated heavily in metals anticipating this very scenario but the expected outcome was choked off before it could occur.

The fed helping the financial institutions will only work for so long. With the economy deteriorating each day, more and more borrowers will default, whether it be housing, autos, student or general loans. The leverage these financial institutions took on each mortgaged dollar alone is staggering. Banks can only write off losses for so long.

It seems that with precious metals, many "bulls" are flying high and celebrating as the prices go up, but as they correct many seem to become afraid and declare the bull market is over and they want to bail. I believe that the bull market has at least a couple of more years to go and while there will be corrections along the way, the general trend will be up. Even if there is deflation, PMs seem to be preferable to holding fiat dollars.

I wish I had a more positive view of our future economy, but my gut tells me that there is much worse crap coming in the next year or so, such that holding what has traditionally been considered money (gold and silver) cannot be too bad of a bet to make. Cash on hand to an extent could be good though to snap up the real estate bargains that will happen down the road as foreclosures increase exponentially.

Jim