Every Government Action Results In A Reaction Somewhere Else
Today, the Fed announced they would buy government debt as well as more Fannie / Freddie debt. At the same time, gold shot upwards as you can see in the chart here.
The green line is the price of gold today.
The point here isn’t that the government should or shouldn’t be taking the current course of action (even though I strongly believe they shouldn’t). The point is that government interference in the economy is not isolated. You can’t prop up the economy without having an adverse effect.
Since the government seems to want to prop up a fundamentally flawed economy by destroying our currency, the effect should be a strong rise in gold, much higher than we’ve seen so far.
FYI, this is a belief held by most economists and almost all of our leaders in Washington.