22 Mar 2012
Investors should enjoy 2012, as economic stimulus measures will prop up markets this year, an election year, but economies will tank in 2013 and in 2014 when they can no longer grow on ultra-loose monetary policies and government borrowing, says international investor Jim Rogers.
In the United States and elsewhere, central banks have cut interest rates to near zero and have flooded their respective economies with liquidity to spur more growth and hiring, policies that critics brand as printing money out of thin air.
“This is an election year in the United States, and a lot of politicians want to be re-elected,” Rogers tells Opalesque Radio.
On top of monetary policy, governments have run up debts via stimulus programs, widening fiscal deficits in the process.
Sooner or later, economies will have to mop up liquidity and pay down debts, which will result in economic contraction in a year or so.
So enjoy 2012, because growth and rising stock markets won’t last.
“The overall situation is getting much worse because the debt is going through the roof for all of us,” Rogers says.
“You should worry about 2013, you should be very worried about 2014, but this year, more or less, is not going to be so bad.”…
Also at Moneynews.com, Obama Budget Raises Taxes for 27% of Households, Report Says
Related: Why China Is Dumping The Dollar – And Why You Should Read Up on the Weimar Republic [illustrative graphics]
As ZH posted today, China is systematically dumping the dollar (and beginning to set up other agreements). CNBC assures everyone, however, that things are fine. Don’t read those anonymous financial blogs.
China has a long way to go in turning itself into more of a consumption based economy, so the dumping of USD has to be rather gradual (as to not rock the boat too much, the U.S. still needs to be supplied the funds to purchase Chinese goods, and also most trades are settled in USD for now), but it is happening.
One major reason for this action by China is due to the fact that the United States Government has loaded up on so much debt that it’s not possibly sustainable – and the Federal Reserve knows that unless they want to see the house of cards the Keynesians have built come crashing down, they have no choice but to completely monetize the debt. As the dollar continues to be devalued (more in a second), the more yuan China has to print in order to buy dollars to keep their fx target. So not only is China on the hook to pay higher commodity prices (priced in dollars), they’re stuck with creating more domestic inflation as well – which is something they don’t have time to deal with at the moment, as their housing market is on the verge of collapsing…
…”It is a prefect time now to make the yuan exchange rate more flexible and push forward the financial system reforms,” Yu Yongding, an economist with the Chinese Academy of Social Sciences, said at the forum.
International Monetary Fund Managing Director Christine Lagarde said on Sunday that further economic reform could help China’s currency to become a global reserve currency…
H/T New Purple Nation: “When this goes through, the Fed will no longer be able to just print money to indebt us.”
…Hu in effect opened the door to flag officers to become referees and sometimes power brokers in the Communist Party’s increasingly nasty political struggles. And the result of that is the reversal of more than a decade of declining military influence in China. Since then, the budgets for the People’s Liberation Army have mushroomed and the top brass have become vocal on matters once considered the exclusive province of civilian officials. There has been, in short, a partial remilitarization of politics and policy.
It is not so much that China’s flag officers have been gaining control over civilians; the generals and admirals are winning the latitude to conduct their own affairs with only limited interference from civilians. In January of last year, then-Defense Secretary Robert Gates spoke of the “disconnect” between China’s civilian and military leaders. As he suggested, the regime is dividing into constituent elements, which often carry out their own policies with little evident coordination.
In this environment, it is not surprising that in the last few months there have been rumors of coups, all of them fascinating, none of them confirmable. But we have to remember that people do not talk of military takeovers when a regime is stable. And people are gossiping now because they know how powerful the military has become.
That’s undoubtedly why Hu Jintao issued a warning of his own on Monday. In Beijing, he reminded military officers that the People’s Army was subordinate to the Party. As a retired senior colonel said to the South China Morning Post, recent comments from flag officers have “undermined the absolute leadership of the Communist Party.”…