You are here
Fed will go to war on deflation next week, leading economist predicts
By James Quinn
The Telegraph, London
Monday, August 2, 2010
http://www.telegraph.co.uk/finance/economics/7923054/Federal-Reserve-to-...
The Federal Reserve is set to kick-start a new phase of monetary easing, a leading Wall Street economist claims.
Paul Sheard, Nomura's chief global economist, argues that the current conditions are ripe for the American central bank to take affirmative action to put the US recovery back on track.
In the first call of its kind from a Wall Street economist, Mr Sheard says that given subdued growth and concern about inflation, the Federal Open Markets Committee will act when it meets a week today.
His comments follow those of James Bullard, president of the St Louis Fed, who last week said the central bank needs to equip itself with a plan for further quantitative easing should it be required, and after the latest US growth figures showed the American economy deteriorated somewhat in the second quarter.
... Dispatch continues below ...
Sona Resources Expects Positive Cash Flow from Blackdome,
Plans Aggressive Exploration of Elizabeth Gold Property
On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia.
Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013."
For complete information on Sona Resources Corp. please visit: www.SonaResources.com
The Fed is thought unlikely to make any change to its base Federal funds interest at the meeting, which has been held at a range of 0-0.25 percent since December 2008.
"We now believe that current conditions have moved policymakers into action and that the FOMC will adopt a more accommodative stance at its 10 August meeting," Mr Sheard wrote in a research note. "We expect the Fed to at least stop the passive contraction of its balance sheet."
Such a step is one of three possible options the Fed has in its arsenal, as outlined by Ben Bernanke, chairman of the Federal Reserve, before the US Congress last month.
The other two are restarting the asset purchase programme that ended in March, and changing the language in the FOMC's statements to make it clear deflation will not be tolerated.
However Mr Sheard argues that stopping the Fed's balance sheet from contracting further seems a sensible move.
"To the extent that the size of the Fed's balance sheet matters, this, in effect, amounts to a gradual tightening of monetary policy. Further shrinkage of its asset holdings now seems inappropriate in light of downside risks to growth," he continued.
Concerns about the health of the US economy shone through in the fate of the dollar yesterday, with the dollar index -- which values it against a basket of currencies – hitting a three-month low on fears that US recovery is stalling.
The index touched 81.354, as sterling hit a six-month high against the greenback, touching $1.5820.
A string of recent disappointing US data was to blame, along with fears over the latest US unemployment figures, to be published on Friday.
The dollar failed to be revived by news that construction spending rose 0.1 percent in June, thanks mainly to a 1.5 percent increase in public spending on infrastructure projects.
Meanwhile the Institute of Supply Management index edged down slightly, slipping to 55.5 in July from 56.2 at the end of June, on a scale whereby anything above 50 suggests that the manufacturing economy is expanding.
"Forward momentum is slowing in the manufacturing sector, but there are no signals in this report that a sharp growth slowdown is in the cards," said Brian Bethune, chief US financial economist at IHS Global Insight.
* * *
Join GATA here:
New Orleans Investment Conference
Wednesday-Saturday, October 27-30, 2010
Hilton New Orleans Riverside Hotel
http://www.neworleansconference.com/redirect.php?page=index.html&source_...
* * *
Support GATA by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
http://gata.org/node/wallstreetjournal
Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:
* * *
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
http://www.gata.org/node/16
Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource
Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen.
For Prophecy's complete press release about its production plans, please visit:
http://www.prophecyresource.com/news_2010_may11.php
