QE3 Silver Impact
Silver has been selling off relentlessly since the Federal Reserve expanded its third quantitative-easing campaign last week. As that decision was highly inflationary, silver‘s subsequent weakness has really vexed traders. But its counter-intuitive selloff had nothing to do with fundamentals. As the Fed’s past QE campaigns demonstrated abundantly, QE3 will eventually prove to be very bullish for silver‘s fortunes.
Quantitative easing is a pleasant-sounding euphemism for debt monetization. Historically this dangerous practice has been scorned because it ultimately unleashes serious inflation. Monetizing debt is exactly what it sounds like. A central bank chooses to buy bonds, and then conjures up the money to do so out of thin air. This new money is injected into the economy as the bond sellers spend it, igniting inflation.
