The question is whether the United States economy's recovery is "firmly established." That seems to be the message delivered today by Fed Board Governor Jerome Powell today in San Francisco.

"Monetary policy in the United States is likely to remain highly accommodative for some time, as our economy fights to overcome the remaining headwinds from the global financial crisis," he said while reiterating that one of the Fed's pressing jobs is to communicate what it is thinking in very clear terms. He was referring to the jitters set off this past June when it seemed as if the Fed was going to imminently taper QE3 bond purchases.  

He also said, "The timing of this moderation in the pace of purchases is necessarily uncertain, as it depends on the evolution of the economy." That sounds clear. Keep in mind that the Fed cannot see the future much more clearly than the rest of us. If unemployment goes down more and at a faster clip and if inflation picks up, expect tapering. We are of the mind that the economy is still as soft as sponge cake.

Another interesting Fed development came with the release of a survey that said business loan standards are being relaxed by banks. (Much of the banks' strategy is self-serving, but a fact of life nonetheless. The home mortgage side of lending has slowed and, with rates so low, there is increasing competition to loan the mountains of money the banks are sitting on courtesy of the Fed.)

"Banks eased their lending policies for commercial and industrial loans" as well as standards on prime residential mortgage loans in the third quarter, the Federal Reserve said in its survey of senior-level loan officers that was released today. The proportion of banks relaxing mortgage standards was described as "modest."

This is important to precious metals bulls because this is the sort of action that indeed will lead to more production, more house-selling and more employment. This was the original intent of the Fed when it pushed so hard to implement quantitative easing. 

However, moving the meter using this machinery will take 4 to 6 months. (Apply for loan; receive loan; begin spending loan; build business or house; hire new help, etc.; wait for those people to spend money paid for new work.) The gains in lending haven't translated into the broad-based growth that was expected. The government shutdown and confidence crisis further hampered recovery in the third quarter. A big date comes this Thursday.

Economists in a Bloomberg survey have estimated that the economy expanded merely 2 percent in the third quarter, down from a fairly robust 2.5 percent the previous quarter. The Commerce Department plans to release its initial estimate of third quarter growth at 8:30 in the morning on Nov. 7. This will give us some insight as to where QE3 is heading.

There are some who are saying that the jobs-created number due out for October's activity are going to be dismal - 120,000. That is even less than September's paltry 148,000. (In August the jobs gained numbered 193,000.) It is likely that the unemployment rate ticked up a notch in October. 

We often feel compelled to repeat ourselves, but for good reason. We feel as if it should not have take 3 or 4 years to begin to get more money in the hands of consumers. There is still a problem with the chronically unemployed and partially employed. If the money were to have been spent at all, it should have been in a more direct manner: infrastructure spending, updating (ahem, are you listening federal government?) computer systems, building more schools, and so forth. 

Waiting for money to gush forth from the Fed and then have it hung up and turned into a trickle by banks who wouldn't loan money was a colossal blunder. But it is what we have to live with.

Watch the reports due out and you too can be a Fed watcher. The bond market will be another great indication of where we are headed. More on that another time.  

Wishing you as always good trading,