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Skarica: Weakening Dollar to Push Gold, Inflation Higher

By    |   Friday, 15 Jul 2011 01:45 PM

The dollar will rally from time to time thanks to worries that debt problems in Europe will bruise the euro, but in the long run, the dollar won't seriously strengthen due to excessive money printing that is sure to continue in the United States, says David Skarica, editor of the Gold Stock Adviser newsletter and author of "The Great Super Cycle."

The dollar recently hit a four-month high against the euro on fears that Greece's economic problems could spread to Italy and elsewhere.

Yet the Federal Reserve will stick with loose monetary policies designed to fuel more robust economic growth in the United States.

Side effects of those policies include inflation and a weaker dollar.

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"I think dollar rallies are very short-term in nature,” Skarica tells Newsmax.TV.

“I think the one thing you have to look positively of what's going on in the euro zone is essentially all these countries that are in trouble now have to tackle their debt problems with austerity measures, meaning cutting spending, raising taxes, getting those budget gaps down," he said.

"And because the dollar is a reserve status, we've seen a reluctance to do this in the United States."

That means gold will continue to be a good investment.

Gold prices traditionally rise during times of rising inflation rates and weakening currencies.

The Federal Reserve has tried to fuel more economic growth by keeping interest rates low and through buying bonds and other assets held by banks, the latter known as quantitative easing, which has injected trillions of dollars into the financial system.

And that means the dollar will likely stay very abundant — and very weak.

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On top of that, other countries have maintained loose monetary policies as well.

That makes gold even more attractive, as investors cannot hedge one currency against another as well as they can with the precious metal.

"You're seeing countries all over the world print money. It's also a monetary issue right now where people just don't trust a lot of fiat and paper currencies, and they're going to gold not only to protect themselves against inflationary increases, but to protect themselves against the decline in the value of paper currencies," Skarica says.

China has been moving to curb inflation and some say rising consumer prices are finally peaking in the Asian giant.

That doesn't mean inflation-related problems are over in Asia, Skarica says.

The U.S. can export them.

"With the U.S. being the reserve currency and with the devaluation in its currency, that increases commodities prices, and commodities prices are much more sensitive to people at the bottom of the economic ladder," Skarica says.

Beijing can do what it can to cool homegrown inflation, but with the Fed's dollar printing presses running in high gear, price pressures remain in China and elsewhere, which bodes well for gold.

Editor's Note: Get a free copy of David Skarica’s "The Great Super Cycle" — Read More — Click Here Now.
 
"Until the United States starts some fiscal and monetary austerity, you're going to continue to see high inflation rates in both the first and third world."

Bernanke: We're Ready for More

Federal Reserve Chairman Ben Bernanke, meanwhile, says the central bank remains ready to inject fresh stimulus money into the economy if it doesn't gain steam soon.

"We have to keep all options on the table," Bernanke tells the House Financial Services Committee on the first of two days of Capitol Hill testimony, the Associated Press reports.

"If we get to the point where the recovery is faltering" and inflation is dropping toward zero, then the central bank would consider the additional stimulus options, Bernanke says.

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The dollar will rally from time to time thanks to worries that debt problems in Europe will bruise the euro, but in the long run, the dollar won't seriously strengthen due to excessive money printing that is sure to continue in the United States, says David Skarica, editor...
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