Central bankers from world wide, particularly in Asia are worried about the potential side effects of relying too much on quantitative easing (QE) policies. This comes after the federal government Reserve embarks with an ambitious buying program of mortgages and treasuries. Quantitative easing poses risks for investors since the man-made increase of asset prices creates market distortions. By having asset prices skewing from economic fundamentals, capital resources might be shifted away from productive sectors, which would possess a negative sustaining effect on gdp.
This has forced public investors to defend myself against more risk, especially public pensions who need to earn a return to invest in liabilities. Real asset allocation has taken a larger a part of asset allocation for public pensions. Even Japan’s GPIF is studying alternative investments, including institutional property.
In the usa, there has been a lack of structural reform whether in taxes, entitlements, or fiscal spending with regards to the U.S. government. Deleveraging is really a painful and unattractive thing to do, not popular for politicians who would like to seek another term at work.
As QE usage grows and is also prolonged, it might create greater risks for countries attempting to leave the program. Central banks can offer liquidity to make some degree of financial stability. Central banks are limited within their capacity to put fiscal government finances on a sustainable path.
Based on the World Gold Council, at the conclusion of 2011, there was clearly around 171,300 tonnes of above-ground gold. Industry price close for gold on December 20, 2012 was US$ 1,667 per ounce. The whole price 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.