Jim Rogers: US Govt to ‘Juice Up’ Economy in Election Year

Article from: www.moneynews.com  


The U.S. government will spend beyond its means and the Federal Reserve will print money to juice up the economy as part of an election-year popularity ploy, says international investor Jim Rogers.

"You have to remember two things — election in America in November, so you are going to see a lot of good news. Of course you have the American government spending staggering amounts of money right now, printing a lot of money and getting ready for the election," Rogers tells The Economic Times, an Indian English-language daily newspaper.

"It happens every four years in America. They do their best to get the economy juiced up so they can win the election."

The Federal Reserve has carried out two rounds of quantitative easing, which are asset purchases from banks with freshly printed money designed to pump up the economy, and some Fed officials have said a third round may be needed this year.

Under such a scenario, investors should invest in the commodities, which strengthen amid a weakening dollar, the side effect of accommodative monetary policies.

"If the world economy gets better, then obviously commodity prices will do well because of the shortages," Rogers says.

"If the world economy does not get better, they are going to print a lot of money and you need to own real assets when they print money and yes there are 40 elections this year and yes they are going to print more money."

Some Federal Reserve officials say encouraging economic indicators, such as December's jobs report that showed the economy added a net 200,000 nonfarm payrolls, make further quantitative easing unlikely at this time.

"Hopefully, we will keep this momentum going in 2012," says Federal Reserve Bank of St. Louis President James Bullard, according to Bloomberg.

"The tone of the data has been very strong" and the central bank "probably could wait and see for now" before deciding whether there is a need for more accommodation.

Expect another cash into the international money system which will create a phantom financial health throughout the world.  Now is indeed a good time to buy gold and silver while prices are still low!

The worst is yet to come

By: John Mangun / Outside the Box (www.philstar.com)

Constantly being accused of being a wild and crazy optimist, (especially about the Philippines), for once I thought I would share some very negative thoughts.

All the nonsense talk these past two weeks about the possibility of the US not paying its debt was foolish. First, the US government takes in all the money it needs each month to pay its international “credit card” bills. Thank goodness, because the US owes the Philippines about $50 billion that the Bangko Sentral loaned to Uncle Sam. Oh sure, the US only pays the minimum monthly payment but that is just enough to avoid default.

Second, the real issue was and is the amount of debt, not the monthly installments. Here the situation is much more serious. It is only a matter of time before the sovereign credit-rating agencies lower the US AAA rating. Completely inevitable.

Money, international capital, is like a gold-digger, only interested in the next high-profit opportunity. While the global markets breath a silly sigh of relief that the US will not default, the rating agency Moody’s has already said “The ‘limited magnitude’ of both debt plans put forward by congressional leaders would not put the nation’s AAA credit rating back on solid footing,”

The conversation about the credit rating is simplified to “Can they pay their bills?” It is not about paying the bills as much as it is about total financial solvency. I have a neighbor that pays six or seven credit cards and loans each month. And every month he goes farther and farther into debt, just like the US government. It is not a matter of being “broke.” It is a matter of using a lot of your income to pay your debt and, most significantly, spending borrowed money. My neighbors borrow money to pay the school tuition.

The US government borrows 43 cents for every dollar that it spends. Why did the US need to raise the debt ceiling (credit-card limit) by $2 trillion? Because in the next 18 months it will spend about $5 trillion; $3 trillion it takes in from taxes and $2 trillion it borrows. Not a sustainable situation.

Yesterday the peso rose to 41.997 to the dollar. Expect to see peso appreciation continue. When (not if) the US credit rating is lowered, lenders will want a higher interest rate. That will put more dollars into the global financial system and the value of the dollar will continue to fall.

Two years Obama and his band of economic fools believed that the US economy was suffering from a liquidity problem. That is, they thought that there was not enough money in the financial system so they lowered interest rates to zero and told the banks to lend out very cheap money to get economic activity going. Two years later there is very little lending and almost no economic activity.

The latest revised economic figures almost ignored during the debt talks show that the US economy grew by a total of 1.6 percent in the last four quarters. Not 1.6 percent per quarter; 1.6 percent total. And the US needs in excess of 2-percent annual economic growth just to keep from going down more.

It was not a liquidity problem; it was a solvency problem. The US was not broke, meaning out of money. The US was and is insolvent, bankrupt, owing more money than it has assets. And the banks would not and will not lend money to individuals and businesses that are insolvent.

It is like my neighbor asking for some cash until he gets paid on the 15th. Sorry partner. Your paycheck coming on the 15th is already spent and the only way you are going to be able to pay me is to borrow from someone else. That is the US financial situation, both public and private, and it can only get worse because there is so little wealth-creating business activity going on.

Overall, Europe is in worse financial shape than the US. But the US is the big dog while Europe is the sick little puppy. And this is the important thing to consider.

The US, Europe and China are economically joined. It is not going well for China. China’s purchasing manager’s index (PMI) fell to a 29-month low in July to 50.7 percent. The PMI measures if companies business (production, new orders, employment) is “better,” “same,” or “worse” than the prior month. A reading of below 50 says business activity is decreasing.

The next 12 months are going to see a further deterioration of the US economy bringing a lower dollar and higher unemployment. The worst is yet to come for them.

*If this information astounds you then it is time for us to take action by securing ourselves through precious metal investments.

Dollar 'world's strongest currency': Japanese minister

From: Yahoo Financial Service

TOKYO (AFP) - – Japan's finance minister said Tuesday that the dollar was still the world's strongest currency and it was natural for Tokyo to keep large stockpiles of the greenback.

"It is clear that the dollar is still the world's strongest currency," Finance Minister Hirohisa Fujii said at a press conference.

"It is a matter of course that the country keeps its foreign exchange reserves in a strong currency."

This in turn "also supports the dollar," he added.

Japan has the world's second-largest forex reserves after China. Tokyo gives no breakdown of the currencies, but most are believed to be held in dollars as a result of past intervention to sell the yen against the greenback.

Fujii said countries should not seek to artificially weaken their currencies to boost the competitiveness of their exports, but also reiterated that he was not necessarily in favour of a stronger yen.

"It would have a negative impact on the world's economic and political conditions if each nation engages in a race to devalue their currencies," he said.

Japan has not intervened in the foreign exchange market since March 2004, allowing the yen to find its own level against the dollar.

Fujii has said on several occasions since taking his post last month that in principle he opposes action to curb the strength of the yen, which hurts Japanese exporters' earnings.

But he has also said Tokyo does not rule out stepping into the market to sell the currency "in an abnormal situation."

The dollar hit an eight-month low against the Japanese currency last month, dropping below the 89 yen level, as the greenback came under broad pressure.

But it has since recovered some ground, striking a five-week high of 92.33 yen early in Tokyo trade on Tuesday.


*There is something wrong with the facts of this article, can you spot it? If you can't then you would probably want to read the older posts in this blog.

Roubini: Risk of double-dip recession increasing

Nouriel Roubini, the New York University professor who predicted the financial crisis, said the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.

The global economy will bottom out in the second half of 2009, Roubini wrote in a Financial Times commentary. The recession in the United States, the UK, and some European countries will not be “formally over” before the end of the year, while the recovery has started in nations such as China, France, Germany, Australia and Japan, he said.

Governments around the world have pledged about $2 trillion in stimulus measures amid the worst worldwide recession since the Great Depression. Federal Reserve Chairman Ben Bernanke and other global policy makers have cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.

“There are risks associated with exit strategies from the massive monetary and fiscal easing,” Roubini wrote. “Policy makers are damned if they do and damned if they don’t.”

Government and central bank officials may undermine the recovery and tip their economies back into “stagdeflation” if they raise taxes, cut spending and mop up excess liquidity in their systems to reduce fiscal deficits, Roubini says. He defines “stagdeflation” as recession and deflation.

Those who maintain large budget deficits will be punished by bond market vigilantes, as inflationary expectations and yields on long-term government bonds rise and borrowing costs climb sharply, he wrote. That will in turn lead to stagflation, Roubini said.

European Central Bank (ECB) officials led by President Jean-Claude Trichet are suggesting they won’t rush to reverse their emergency stimulus amid mounting evidence of an economic recovery. The ECB has cut its benchmark interest rate to a record 1 percent and is buying covered bonds and flooding banks with money.

“We see some signs confirming that the real economy is starting to get out of the period of freefall,” Trichet said at the Fed’s annual symposium in Jackson Hole, Wyoming, on Aug. 22. This “does not mean at all that we do not have a very bumpy road ahead of us.”

When needed, the ECB will implement a “credible exit strategy” from its crisis policies, Trichet said.

The United States must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the economy and the dollar, billionaire Warren Buffett said last week.

Roubini currently expects a U-shaped recovery, where growth will be “anemic and below trend for at least a couple of years,” he said. A full global recovery from the current recession may take two years or more, Nobel laureate Paul Krugman said earlier this month.

Rising unemployment, a global financial system that is still “severely damaged” and weak corporate profitability are among reasons why any recovery won’t be V-shaped, Roubini said.

“Strains persist in many financial markets across the globe,” Bernanke said in an August 21 speech in Jackson Hole. “The economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.”

Energy and food prices are also rising faster than warranted by economic fundamentals, which may also increase the risk of a double-dip recession, Roubini wrote, adding that they could be driven by speculative trades.

“Last year, oil at $145 a barrel was a tipping point for the global economy as it created negative terms of trade and a disposable income shock for oil-importing economies,” he said. “The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly toward $100 a barrel.” (Bloomberg)

*Credible economist speaks of coming eminent disaster.

Buffett Says Federal Debt Poses Risks to Economy

By Shamim Adam

Aug. 19 (Bloomberg) -- The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaire Warren Buffett said.

The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”

The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record $1.841 trillion in the year that ends Sept. 30.

“Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects,” Buffett, 78, said. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

The “greenback emissions” will swell the deficit to 13 percent of gross domestic product this fiscal year, while net debt will increase to 56 percent of GDP, Buffett said.

Warren Buffet is an authority on this and we should listen to what he is saying.

Many Predict US Financial Collapse in September

By: Charles

Let us contemplate the day in the near future when the consequences of financial chicanery finally outpace the ability of the governments, central banks and big media to cover up and obfuscate the truth. Many respected voices have now gone on record that September 30 or thereabouts will be that day.

Bob Chapman [Internationalforecaster.com] revealed that the US State Dept has advised embassies worldwide to stock up on a year's worth of the local currency in anticipation of collapse of the US dollar. Look for a temporary banking shutdown timed for around September 2009. As under Roosevelt, some banks won't reopen. 96% of bank reserves are currently held with the Federal Reserve who tells the banks not to loan the money, but rather to save it for further banking acquisition and consolidation. Chapman foresees a bank holiday lasting 4-5 days. Chapman thinks this first bank holiday presages a much more significant bank holiday months to years later which will involve simultaneous devaluations of multiple currencies as well as other significant changes in the banking system.

Harry Shultz [as quoted in marketwatch.com] says "Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."

Benjamin Fulford [http://benjaminfulford.typepad.com/benjaminfulford/] states that for almost a century the US Treasury Dept has been issuing specialized debt instruments to countries with which the US has had a trade surplus. These complex debt instruments are tailored by complex treaties. Unfortunately, the recent US Treasury funding needs exceed the willingness of these creditor nations to extend additional credit. Fulford writes, "The problem is that after nearly a century of issuing these debt instruments, the chickens are coming home to roost. President Obama tried at the recent G8 plus 5 meeting in Italy to borrow more money than George Bush junior did in 8 years. He was told a resounding no. The result should be total economic chaos in the U.S. by September 30th . "

Jim Willie [goldenjackass.com] writes of an Asian led initiative ending dollar hegemony beginning this weekend. Willie suspects that the Fed/Treasury is covertly loaning foreign central banks the money with which the central banks are now using to buy US debt. Increasingly, US debt is being bought by foreign central banks taking up the slack of investors abandoning US Treasury debt. Willie confirms Chapman's comments and says he solicited and received "multiple confirmations." He adds, "CHAOS WILL PREVAIL WITHIN SEVERAL MONTHS, PERHAPS A YEAR AT MOST{his emphasis}."

Jim Sinclair [jsmineset.com] has recently visited China meeting with its leaders. He states that China is increasingly more willing to take on the United States in its apparent maneuvers to inflate its way out of its debt crisis. In early July Sinclair started a 120 day countdown till breakdown of the US dollar ends market manipulation and all those sour economic chickens come home to roost.

OUT OF TRICKS

Seemingly the Federal Reserve/US Treasury have exhausted their bag of tricks. The Fed is fighting rising interest rates, a difficult task given the hyperinflationary debt financing it is now doing. Once rising pressure on interest rates become too much for the Fed to control, there will probably be several sudden economic and financial surprises cascading with currently known dilemmas: crashing dollar; increasing home mortgage defaults; commercial mortgage defaults reaching critical mass; falling bond and stock markets extending insolvency of pension funds; defaults on debt by state and local governments. And don't forget derivatives and further exposure of corruption and criminality on Wall Street. Bernie Madoff may soon have lots of company.

Unable to produce any more financial wizardry, the cynical federal government is arrayed in full battle dress uniform: 1] Mass forced swine flu vaccinations scheduled this fall performed under the specter of martial law; 2] Rumblings of extending the wars in Asia into Iran and Pakistan; 3] Rekindling the Korean conflict may also be in the cards. Of course, don't forget that both Iran and North Korea are client states of the British World Order. All the recent saber rattling involving Iran and North Korea is wholly orchestrated. We need the distractions from the economic crisis, so our clients Ahmadinejad and Kim provide us with the necessary theater. So what will come first, further banner headlines of dollar collapse and market crashes or the distracting theater of more war or 911 type events?

What will this fall really bring? It is not too far away so we shall soon know. Unfortunately, it may make last fall look pretty tame. When the government answers economic distress by preparing for the worst, then the worst may very well be what happens.

* It is scary but we owe to be vigilant whether or not the time frame is right or wrong. Even if we are in the Philippines, when the US sneezes, the rest of the world catches a cold.

Weaker U.S. Dollar Boosts Gold and Silver

(CEP News) - Gold prices are extending their gains Thursday as the U.S. dollar continues to tumble lower.

Gold, along with all commodities, appears to be benefiting from the FOMC decision to implement major quantitative easing measures on Wednesday. The Fed announced that it would expand its balance sheet by almost $1.2 trillion, which includes purchasing $300 billion in longer-term Treasuries.
Thu Mar 19, 2009 12:05pm

Gold prices sold off modestly in overnight trading, but prices held around $930 an ounce and sharply recovered just ahead of the North American trading session. Renewed pressure on the U.S. dollar at 8 a.m. EDT helped to push gold prices to session highs. Gold is trading just below $960.

In the last two days, CBOT spot prices have climbed over $75 dollars and commodity strategists are looking for further gains, as investors move into gold as a hedge against inflation.

Along with gold prices, silver has also done extremely well. Although the precious metal didn't receive much of a boost following the FOMC announcement and ended the day around $12 an ounce, it has outperformed gold on Thursday. CBOT silver futures started rallying during the European session and have been on a steady rise, jumping over 8% during the trading day.

Mike Glaser, futures broker at LaSalle Futures, said he is expecting all commodities to be underpriced as the U.S. dollar index eventually falls close to 70.0.

"I think with all this money the U.S. government is printing, inflation is going to be the main concern going forward," he said.

*The US is robbing the currencies by printing more Dollars. Each currency that gets out of the printing press robs the value of each dollar and peso that is in our bank accounts and payrolls. Indeed, they are letting the world pay for the financial errors of their people, this 'robin hoodlum' scheme will not last as other countries will slowly dump their dollars and replace it with something more stable.