May 27 (Bloomberg) -- The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”
Action Economics is predicting inflation of minus 0.4 percent in the U.S. this year, with prices increasing by 1.8 percent and 2 percent in 2010 and 2011, respectively, Cohen said.
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I must agree with the article above. The US economy is wrecked, and will continue to be wrecked due in large part to the layoffs and slowdowns of retail and manufacturing businesses. Goods and services will by nature become more costly, as supply dims. The government will become the money purse for so many things, that the citizen inspired economy will reduce too an all time low. The picture painted is this:
ReplyDeleteCorruption and greed disolved the already fragile economic posture of the country.
Uncle jumped to try and stall the fall by "stimulation" of the economy.
In other words the government tried to "buy off" the damage and keep going. Everyone from Fred to Ed said this would fail and we see it has. We are "out" of the frying pan, and "into" the fire. America's two problems are:
1. We know everything.
2. We don't listen to reason.
Cheers!
Nothing is more cruel to the populace than hyperinflation. People that have saved and been responsible get wiped out.
ReplyDeleteIf I was 100% sure of hyperinflation coming in the next three years I'd buy a dream home with a fixed mortgage sans the early payoff clause. Paying off a whole mortgage would cost a gold coin, maybe two.
100% sure?
ReplyDeleteMy goodness. Now THAT's what I call carefull analysis.