Asian Central Bankers Worry About Western QE Policy
Central bankers from around the world, specifically in Asia are worried in regards to the potential side effects of relying an excessive amount of on quantitative easing (QE) policies. This comes after the government Reserve embarks with an ambitious buying program of mortgages and treasuries. Quantitative easing poses risks for investors because the man-made increase of asset prices creates market distortions. By having asset prices skewing from economic fundamentals, capital resources might be shifted from productive sectors, which will have a negative sustaining impact on gross domestic product.
It's forced public investors to defend myself against more risk, especially public pensions who require to earn returning to finance liabilities. Real asset allocation has taken a larger section of asset allocation for public pensions. Even Japan’s GPIF is studying alternative investments, including institutional real-estate.
In the usa, there's been deficiencies in structural reform whether in taxes, entitlements, or fiscal spending according to the U.S. government. Deleveraging is a painful and unattractive course of action, not popular for politicians who wish to seek another term at work.
As QE usage grows and is also prolonged, it could create greater risks for countries trying to leave this system. Central banks provides liquidity to create some level of financial stability. Central banks are restricted in their power to put fiscal government finances over a sustainable path.
In line with the World Gold Council, at the end of 2011, there is around 171,300 tonnes of above-ground gold. Industry price close for gold on December 20, 2012 was US$ 1,667 per ounce. The entire worth of gold above-ground would be about US$ 9.14 trillion.
Central banks are increasing their gold reserves. Brazil’s central bank grew their gold holdings and now it stands at 2.16 million troy ounces.