Secure your gold lifejacket before the QE2 sets sail

QE

What is QE?

With all the talk of another round of huge stimulus in the US, this latest attempt at kick starting the largest economy in the world is being deemed QE2.

For those in the know, the QE refers to Quantitative Easing – the method of injecting funds into an economy when all else has failed.  The 2 in the title refers to the fact that it will be the second huge cash injection the US have performed in the past couple of years.

In the UK QE2 is best known for our luxurious flagship cruise liner.

But this round of QE would be better compared to another famous historical luxury cruise liner – The Titanic.  Like the Titanic ship, QE2 will be huge. Its not worth the US Government injecting peanuts.

But this time we can all see the iceberg coming. Any QE program is an obvious sign of desperation for a Central Bank.  Indeed figures last week showed the US economy growing at half the pace of the UK’s economy last quarter, which is pedestrian itself.

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Spiralling Quantitative Easing

The fact that the previous stimulus program failed to steady the ship is not a good omen for the latest sticky plaster being placed over the US economy. Simply adding more Dollars poses a huge threat to inflation by its very nature of undermining the value of a currency which has already lost 12% of its value in the past 2 months.

Let’s not fool ourselves, it’s the US tax payer who will have to repay the debts being taken on to provide the stimulus. Just like we are experiencing now in the UK, tax hikes and future spending cuts will have to be implemented to pay back the money.

The gamble is for the economy to grow quicker than the rate of interest on the QE, otherwise you see a spiralling debt large enough to sink any ship.

So as we set sail on this latest round of stimulus, surely it’s wise to have protection in case we cannot navigate around the iceberg. We all know that holding physical gold acts as a lifejacket when economic and political catastrophe strikes. It can provide the lifeboat- for the average saver and investor to escape going down with the ship.

The saying goes that when the US sneezes, the UK gets a cold. So we’re all on board as the latest QE2 sets sail. Let’s make sure we hold some investment gold in our portfolio, or we risk sinking with the ship’s band and captain!

Daniel Fisher

Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.

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