Yellen’s $60 billion promise to rescind the balance sheet monthly is derived from weekly M2 which sloshes around at roughly $52.9 billion per week. Currency in Circulation bounces at about $2 billion per week and $2 billion per week to Money Market Funds. Commercial banks are increasing at an average of $12 billion per week, $5 billion to deposits.
The new Yellen stimulus is raise a severely overbought Fed Funds rate to flood the system with cash. The M2 rising Weekly average at current $13,628.7 is up from $13,608.3 in July and $13,526.8 in May. The 4 Week average at current 13,619.6 is up from $13,569.9 in July and $13,492.6 in May. Loose money for a period in the future based on the last Fed statements means the balance sheet drops by $720 per year and after 5 years, the balance sheet remains at $2 trillion. A continuation of the 4 week average from a yearly perspective results in an increase in billions at $163, 435.2. Current averages presumes Fed Funds remain at current rates.
A raise in Fed Funds as stated would result in a new set of cash into the system. The fall in DXY and short term interest rates is explainable yet the rise in Gold is the stimulus result. If Yellen raises Fed Funds again then Gold will travel far higher.
Thr risk to the Gold price is Yellen is thankfully gone in February and the 8 year political term of Bernanke / Yellen’s damage to the economy may end. In hindsight, Praise praise to Yellen and Bernanke at confirmation hearings was the message to the future. Any policy the Democrats advocate means America must be against.
Trump and America’s economic opportunity will derive from 8 open positions total on the Fed Board. The true Trump test to answer is he a Teddy Roosevelt or Taft Republican will be known. Supply Sider appointments such as an Arthur Laffer or John Taylor would seal the conviction Trump is a Supply Sider and Taft Republican, last seen in Reagan. Supply Sider appointments would presume negative for Gold as Stimulus would be seriously addressed for the first time in 8 years.
What is Stimulus and its enormity is known by how the economic /political system operates. Under the 1st George Bush Administration from 1988 to 1992, the total economy was $1.2 trillion. That was the total budget. Of $1.2 trillion, $750 million was mandated by law. This money is untouchable and it goes to the programs intended as for example Agriculture, Social Security, Social Programs. The only way to use this money is to rescind the law. This can’t be done because the money is appropriated by Congress at the time of budget passage.
Of $1.2 trillion, $300 billion went to Defense by law. George Bush had $200 million leftover for Discretionary spending and this is pittlance as no damage can be done. But it also leaves the president as a figure head and powerless. This was the founders intention in Article 2, Section 1 to 4.
A budget increase comes by new and / or higher taxes. This is the Democrat dream. The previous way under Democrat presidents was slash the Defense budget and reroute the money to social programs. The current Defense budget is about $150 billion and not enough to safeguard America. Yet Democrats found their big winner by Democrat Congressional majorities to vote for $1 trillion in Stimulus then expanded to $4.4 trillion. Political power overrode economic prosperity.
Run stimulus against economic data and one would see the economic implications. Read Agency by Agency Regulations in the Federal Register and the evidence to shit down the private sector is crystal clear. 30,000 total regulations is 5,000 per year.
The Trump appointments to the Fed Board is most important to America’s future. Yet it decides also the question to Gold’s future.
Gold as XAU/USD in the next 24 hours will range from 1302.62 to 1403.50. The bottom is rising to support higher Gold.