Even after five years of the Fed’s most aggressive accommodative policy in history, there is still a lack of hoped for quality credit creation in the economy, which could be a sign that the greatest deleveraging of the U.S. economy since the Great Depression is still not complete. The Fed’s unrelenting dovish policy appears to support this concern.
By December, the most recent month for which statistics are available, the U.S. dollar Fiat Money Quantity (FMQ) had grown to $12.48 trillion. This is $5.05 trillion more than if it had grown in line with the established average monthly growth rate from 1960 to the month before the Lehman Crisis.
A few months ago the World Gold Council suggested the Banc d’Italia use its gold reserves as collateral for their sovereign debt. But this doesn’t look like an option following a speech by Salvatore Rossi, director general of the Italian central bank.
The LBMA conference heard from participants that emerging market central banks, with large foreign exchange reserves, are likely to continue diversifying into gold and remain net buyers of gold in the coming years.