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In response to a reporter's question on whether there was a currency war in progress, Draghi said, "I think we should have in mind one thing: changes in the exchange rates that we see today are not really deliberate competitive devaluations. They are more the effect of macroeconomic policies that are meant to revamp the economies - for example, very low interest rates, promises to stay low for a very long time.

"However, if these policies produce consequences on the exchange rates that do not reflect the G20 consensus, we will have to discuss this."

Draghi said the exchange rate is not a "policy target" but is "important for growth and price stability," adding, "We certainly want to see whether the appreciation - if sustained - will alter our risk assessment as far as price stability is concerned."

Observers blogging and tweeting from the room where the press conference was being held felt Draghi was being very careful in choosing his words and interpreted this as a sign that he was, in fact, attempting to talk down the euro or at least slow its rise against other major currencies.

Traders immediately sold the euro against the U.S. dollar and against the Japanese yen. The euro is currently trading down about 200 pips against the U.S. dollar and is off more than 150 pips against the Japanese yen.

There is no doubt Draghi succeeded in halting the rise of the euro, at least for today. But if the ECB is serious about putting a lid on the euro's strength, its options are limited.

Because the ECB must take into account the laws and preferences of its constituent national central banks, it would not be easy to intervene in the foreign exchanges market - except in extreme circumstances - or to undertake a competitive expansion of the ECB balance sheet as the Fed and the Bank of Japan are doing.

The ECB could create new credit by purchasing private-sector assets, as the Bank of England and the Bank of Japan have done, but it is unclear how the conservative Germans would react to such a plan.

Or Draghi could just keep talking.

To continue reading, please click here...

In response to a reporter's question on whether there was a currency war in progress, Draghi said, "I think we should have in mind one thing: changes in the exchange rates that we see today are not really deliberate competitive devaluations. They are more the effect of macroeconomic policies that are meant to revamp the economies - for example, very low interest rates, promises to stay low for a very long time.

"However, if these policies produce consequences on the exchange rates that do not reflect the G20 consensus, we will have to discuss this."

Draghi said the exchange rate is not a "policy target" but is "important for growth and price stability," adding, "We certainly want to see whether the appreciation - if sustained - will alter our risk assessment as far as price stability is concerned."

Observers blogging and tweeting from the room where the press conference was being held felt Draghi was being very careful in choosing his words and interpreted this as a sign that he was, in fact, attempting to talk down the euro or at least slow its rise against other major currencies.

Traders immediately sold the euro against the U.S. dollar and against the Japanese yen. The euro is currently trading down about 200 pips against the U.S. dollar and is off more than 150 pips against the Japanese yen.

There is no doubt Draghi succeeded in halting the rise of the euro, at least for today. But if the ECB is serious about putting a lid on the euro's strength, its options are limited.

Because the ECB must take into account the laws and preferences of its constituent national central banks, it would not be easy to intervene in the foreign exchanges market - except in extreme circumstances - or to undertake a competitive expansion of the ECB balance sheet as the Fed and the Bank of Japan are doing.

The ECB could create new credit by purchasing private-sector assets, as the Bank of England and the Bank of Japan have done, but it is unclear how the conservative Germans would react to such a plan.

Or Draghi could just keep talking.

To continue reading, please click here...

According to Schiff, the Fed has little choice: If rates began to climb, the interest payments on the ballooning federal debt would explode making annual budget deficits far worse.

"We're now so addicted to debt that the highest rate we can afford is zero," Schiff, the CEO and chief global strategist of Euro Pacific Capital, told Casey Research chairman Doug Casey in a video interview published today.

"We pay about $300 billion a year right now in interest on a $16.5 trillion debt," Schiff explained. "What if, in two or three years -- and the debt is $20 trillion -- what happens if interest rates are 5%? Well, that's $1 trillion a year in interest payments."

This scenario is not at all far-fetched; the historic norm for interest rates is just below 5%, and rates in the early 1980s were triple that.

Another reason the Fed fears higher rates, Schiff said, is that it would probably bankrupt most of the "too-big-to-fail" banks that the government bailed out back in 2008.

"The only justification for keeping rates so low is that the Fed knows any increase in rates will collapse this phony economy and we'll be right back in recession," Schiff said.

To continue reading, please click here...

According to Schiff, the Fed has little choice: If rates began to climb, the interest payments on the ballooning federal debt would explode making annual budget deficits far worse.

"We're now so addicted to debt that the highest rate we can afford is zero," Schiff, the CEO and chief global strategist of Euro Pacific Capital, told Casey Research chairman Doug Casey in a video interview published today.

"We pay about $300 billion a year right now in interest on a $16.5 trillion debt," Schiff explained. "What if, in two or three years -- and the debt is $20 trillion -- what happens if interest rates are 5%? Well, that's $1 trillion a year in interest payments."

This scenario is not at all far-fetched; the historic norm for interest rates is just below 5%, and rates in the early 1980s were triple that.

Another reason the Fed fears higher rates, Schiff said, is that it would probably bankrupt most of the "too-big-to-fail" banks that the government bailed out back in 2008.

"The only justification for keeping rates so low is that the Fed knows any increase in rates will collapse this phony economy and we'll be right back in recession," Schiff said.

To continue reading, please click here...

The Federal Reserve's misguided insistence on a loose monetary policy, ongoing resistance to government spending cuts, and another increase in the U.S. debt ceiling will all conspire to boost inflationary pressures and restrain the value of the U.S. dollar.

That will, of course, impact domestic market performance and cut into real returns on dollar-denominated investments - but it will also provide major opportunities for U.S. investors who can target issues denominated in the strongest foreign currencies.

Unfortunately, that doesn't include most of the world's other major currencies - including the euro, British pound and Japanese yen - since the economies of the underlying nations are also suffering from sluggish economic recoveries and problems with excess debt.

As such, the strongest currencies in 2013 will likely be found to the north and west of the United States, starting with the neighboring Canadian dollar.

To continue reading, please click here...

1. Institutions are unloading gold to raise cash against anticipated margin calls, redemption requests, or both. They are parking that money in treasuries and in dollars, creating additional demand. There are simply more buyers than sellers at the moment, so prices for dollars and treasuries are rising. And not just by small amounts, either.


2. Institutional portfolio managers and traders are required to maintain specific classes of assets under very specific guidelines. These guidelines dictate everything from the amounts being held to the quality of specific investments.