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More Surreptitious Action from the FED

Check out this passage from Motley Fool:


Rogers: Well, agricultural commodities is where I would be. I've told you this before. But Larry, they're already in QE; at least the Fed is. When Bernanke said in early August, "We're going to keep interest rates low" ... Larry, the only way you do that is you go into the market and you force them down. He's already in the market. He's lying about it. If you get out the M2 numbers, Larry, from the first week of August, you'll see they jumped up as soon as he said that and they've stayed higher, going higher. He's in the market. They're lying to us again, Larry. C'mon, you're a Princeton graduate; you should know how they do it.

Kudlow: "I do. I do. [laughing] And I basically agree with you, Jimmy Rogers. I'm sorry, I'm flat out of time, but I basically agree."

What do you think?
So Kudlow "basically" agrees with Rogers that the Federal Reserve is engaged in surreptitious action in the Treasuries market. That certainly places a fresh spin upon efforts to improve the transparency and public accountability of this famously opaque institution. But what do you think?

If you trust that Bernanke's Fed wouldn't dream of engaging in any sort of undisclosed market activity, then the capital markets must appear to trade freely in accordance with underlying fundamentals. I envy the sense of well-being that must accompany such a view. I would encourage you, however, to take a close look at the gold market for corroborating signs of surreptitious market intervention.

If, on the other hand, you agree with Kudlow and Rogers that quantitative easing has been under way since early August, and that both Europe's ECB and the Fed are likely to follow up with announcements of further easing as Europe's crisis unfolds, then Rogers' admonition to make room in one's portfolio for exposure to hard assets makes a whole heap of sense.


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