Central bankers from around the world, particularly in Asia are worried concerning the potential side effects of relying a lot of on quantitative easing (QE) policies. This comes after the federal government Reserve embarks on an ambitious buying program of mortgages and treasuries. Quantitative easing poses risks for investors as the man-made increase of asset prices creates market distortions. With asset prices skewing far from economic fundamentals, capital resources could be shifted far from productive sectors, which may possess a negative sustaining influence on gdp.
It has forced public investors to battle more risk, especially public pensions who require to earn returning to fund liabilities. Real asset allocation has taken a larger section of asset allocation for public pensions. Even Japan’s GPIF is studying alternative investments, including institutional real-estate.
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 can be a painful and unattractive thing to do, not popular for politicians who want to seek another term in office.
As QE usage grows and is also prolonged, it could create greater risks for countries attempting to leave the program. Central banks can offer liquidity to produce some level of financial stability. Central banks are restricted in their power to put fiscal government finances over a sustainable path.
Based on the World Gold Council, at the conclusion of 2011, there is 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 worth 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.