Central bankers from around the world, particularly in Asia are involved about the potential side effects of relying too much on quantitative easing (QE) policies. This uses 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. Insurance firms asset prices skewing from economic fundamentals, capital resources may be shifted away from productive sectors, which will possess a negative sustaining influence on gross domestic product.
It's forced public investors to battle more risk, especially public pensions who need to earn a return to fund liabilities. Real asset allocation has taken a better part of asset allocation for public pensions. Even Japan’s GPIF is studying alternative investments, including institutional property.
In america, there has been too little structural reform whether in taxes, entitlements, or fiscal spending with regards to the U.S. authorities. Deleveraging is 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 trying to leave this program. Central banks provides liquidity to produce some degree of financial stability. Central banks are limited in their capacity to put fiscal government finances on the sustainable path.
According to the World Gold Council, at the conclusion of 2011, there is approximately 171,300 tonnes of above-ground gold. The marketplace price close for gold on December 20, 2012 was US$ 1,667 per ounce. The entire price of gold above-ground could be about US$ 9.14 trillion.
Central banks are increasing their gold reserves. Brazil’s central bank grew their gold holdings and today it stands at 2.16 million troy ounces.