The Federal Reserve’s accommodative policy will keep pushing the dollar lower, so investors should buy foreign currencies and gold, says Sean Hyman, a Moneynews.com contributor and editor of Money Matrix Insider, a Newsmax newsletter.
Indeed, the precious metal may ultimately hit $2,200 an ounce, he tells Newsmax.TV Money.
Hyman agrees with former Alaska Gov. Sarah Palin that the Federal Reserve should “cease and desist” from its easing. “She’s spot on, because the Fed’s program will just destroy the dollar,” he says.
“It’s money printing in its simplest form. It drives up the cost of goods," he said. "It’s just a recipe for disaster. And it won’t do very much at all for the unemployment rate. I don’t think a country has ever prospered historically by diluting the value of its currency.”
The Obama administration is hypocritical in calling for China to boost the value of the yuan, Hyman says. “The problem is we’re the ultimate criminal in the currency war, because we continue to hold down the value of our currency,” he says.
“That’s why the Chinese don’t budge nearly as much as they possibly should.”
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U.S. Treasury Secretary Tim Geithner at times calls for a weak dollar and other times for a strong dollar, Hyman notes. “A weak dollar is never in the national interest. It’s never in my interest to have my dollars worth 80 cents.”
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But Hyman expects the greenback to fall further. “It definitely could drop another 10 percent in the near term. I do think they’ll continue to undermine the dollar.”
Hyman anticipates more quantitative easing from the Fed. “It seems to be his (Fed Chairman Ben Bernanke’s) only game plan,” Hyman says.
“He just thinks the way to everything is simply to throw more money at it. He either doesn’t have a clue about true economics, or he does and is choosing to ignore it for a short-term benefit.”
The Fed is highly unlikely to pull back from its easing in time to avert inflation, Hyman says. “Their speeches will tell you that they’re pre-emptive on inflation, that they’ll hike rates when they see signs of this thing happening,” he says.
“The problem is that by the time you see signs of this thing happening, it’s already getting out of hand.” It takes six to 12 months for a rate hike to take effect, Hyman says.
So how should investors deal with this sorry state of affairs? Buy foreign currencies — the Australian dollar, for example, he says.
Australia is raising interest rates, so you earn more income than in greenbacks, he said. You’re buying a currency that’s appreciating against the U.S. dollar and can rise in the face of inflation, because Australia’s a major commodity exporter, he said.
As for gold, “I think it ultimately has more upside,” Hyman says. It’s poised for a pullback in the near term. But, “long-term, could it top $1,500 and head to $2,200? Absolutely,” he says.
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