Friday, March 20, 2009

Quantitative Easing ( Money Printing )

On the 18th of March, the US Federal Reserve Chairman, Ben Bernanke annouced that the Federal Reserve has made plans to purchase as much as $1.15 trillion in U.S. bonds and mortgage-backed securities. These measure are also known as quantitative easing.

What the US Federal Reserve is similar to what the Bank of England (BOE) is doing. For those who are not familiar with these terms, they are basically printing money just to meet payment demands. By doing so, they are basically devaluing the US Dollar.

Due to the US Federal Reserve actions, investors has become wary and striking fears on the credibility of the US Dollar and its treasuries as a safe haven. Since the announcement, the US Dollar has started to depreciate.

Investors might flee from the US Dollar to other types of assets such as precious metals in order to preserve their wealth. The announcement has triggered the price of gold back to the USD 940 to USD 960 range since gold has been know to be a safe haven.

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