Tags: Axel Merk | Dollar | Risk | crashing | Triggering | Inflation

Axel Merk: Dollar at Risk of Crashing, Triggering Inflation

By    |   Thursday, 04 Nov 2010 05:03 PM

The Federal Reserve’s decision to embark on another round of quantitative easing (QE2 as it has been dubbed) puts the dollar at risk of a plunge, says Axel Merk, chairman of Merk Investments.

The Fed will buy $600 billion of Treasuries over the next seven months to jump-start the sluggish economy. Such purchases hurt the dollar by increasing supply of the currency.

The euro hit a nine-month high of $1.4282 Tuesday, and at 80.70 yen, the dollar isn’t far from its post-World War II low.

As for QE2, "It's with the best of intentions but I think it's a very, very wrong policy," Merk tells CNBC.

Inflation is on the way, he says. "One of the key things here is a weaker dollar has traditionally not been inflationary because Asian exporters like to absorb the higher cost of doing business," Merk explains.

But that’s not the case this time. “We're going to get inflation, but not where Bernanke wants to have it. We're not going to get wages to go up. We'll get the price at the gas pump to go up instead," he says. Gas prices could breach $4 a gallon.

The QE2 announcement has benefited stocks and commodities. “It’s called the Bernanke put,” Stephen Wood, chief market strategist for Russell Investments, tells Bloomberg.

“The Fed wants to put a floor under the employment market and asset prices. You’re seeing that being reflected in stock and commodities markets.”

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The Federal Reserve s decision to embark on another round of quantitative easing (QE2 as it has been dubbed) puts the dollar at risk of a plunge, says Axel Merk, chairman of Merk Investments. The Fed will buy $600 billion of Treasuries over the next seven months to...
Axel Merk,Dollar,Risk,crashing,Triggering,Inflation
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2010-03-04
Thursday, 04 Nov 2010 05:03 PM
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