With the recent “correction” in the markets globally, are central bank’s monetary policies working? Some financial experts such as Paul Craig Roberts, Max Keiser, Peter Schiff, and Mike Maloney suggest this is the main cause of market volatility. The reserve bank of Australia transact in both the domestic market and the international market to assist in keeping the markets stable. The interest rate is lowered to keep inflation from getting out of hand. This encourages banks to loan more which keeps a recession in the economy at bay. These monetary policies add value to the assets in the market, as is also the case with Quantitative Easing (QE) in the US markets and everywhere else in the world for that matter. So far the US has put trillions into the market without much success. This is not how a free market should operate. The market just becomes full of debt. What happens when the debt gets called in and the liquidity is not there? Market correction which means overvalued assets drop in worth. The Bank of International Settlements (BIS), the world banks’ boss has also added another standard for world banks to use. This new standard is called Basel iii which will require banks to be able to meet their liquidity requirements in normal situations and crisis situations. More can be read here. It seems to me that they don’t really know how to control the volatility in the market. As one IMF official once said “we learn as we go along”.
Along with the eventual demise of the US dollar backed by oil (another story) and more market “corrections” coming now is probably a good time to buy precious metals.