The debt crisis that is now roiling Europe will ultimately come knocking in the U.S., says esteemed financial commentator Robert Wiedemer.
His 2006 book “America’s Bubble Economy” predicted the recession that began in 2007.
And his latest work “Aftershock” was named one of the best investment books of 2009 by Smart Money magazine.
The financial woes now afflicting Greece will spread throughout Europe, infecting governments and banks alike, Wiedemer told Newsmax.TV.
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“It’s inevitable,” he said.
“That’s doesn’t mean it’s inevitable tomorrow or next month, but certainly over the next two years if not sooner. They all have the same problem – Spain, Italy, Ireland and ultimately England.”
And then comes the United States, Wiedemer says. “It won’t be that soon, but our debts our just as bad.”
Greece’s budget deficit totals 13.6 percent of GDP, and the United States isn’t too far off at 9.9 percent.
“We have a bigger credit limit, so we won’t get hit as fast,” Wiedemer says. “But it will get to us eventually.”
We won’t be able to escape the scourge of inflation either, he maintains.
“Our monetary base has gone from $800 billion in late 2008 to almost $2.4 trillion today. That bodes very well for inflation and very poorly for the rest of us.”
To be sure, prices won’t start jumping immediately, Wiedemer says.
“There are huge lag factors between when you increase the money supply and when inflation hits,” he explains. “We’d say that it will be at least two years, perhaps longer.”
The Federal Reserve’s commitment to zero interest rates for an extended period translates into tons of financial trouble, Wiedemer says.
“If you debase your currency, people will lose confidence in it,” he notes. “Inflation is one of the fastest ways to destroy interest in your currency. Ultimately that scares the heck out of foreign investors.”
The economy has clearly bottomed out in many sectors, Wiedemer says. “For example, we’ve seen growth growth in auto sales from 10.5 million to 12 million this year.”
But don’t get too excited: that’s down from 17 million a few years ago, he points out.
As for gold, which jumped above $1,200 amid the stock market’s recent plunge, it may slip back down over the short term, Wiedemer says.
But, “Long-term the outlook is extremely good,” he believes. “Gold is driven by fear in the financial system, and one thing we’ve got right now is a lot of fear in the financial system.”
As for stocks, recent market activity indicates they’re in a mini-bubble, Wiedemer says. “It’s sure acting like a bubble, not like a rationally valued market.”
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