Tags: hyperinflation | coming

Experts Fear U.S. Will Suffer Zimbabwe-Level Inflation

By    |   Tuesday, 02 Jun 2009 10:15 AM

Investing experts now worry that inflation in the United States will approach that in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates when it should.

Zimbabwe’s inflation rate was last reported at 231 million percent in July.

The Fed has kept rates at or near zero and has promised to continue to keep rates low for as long as necessary. According to the last Fed minutes, members were still concerned about deflation, not inflation.

"I am 100 percent sure that the U.S. will go into hyperinflation," contrarian guru Marc Faber told Bloomberg News.

"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."

Faber doesn’t think, however, that gold will run up right away.

“I never sold gold and I’m still buying gold,” he says, adding that gold “has been an adequate hedge against inflation.”

“If you bought (gold) in 1980 at the price of $850, then it hasn’t been a good hedge against inflation, but if you bought it in 1999 at $251, then it has done very well,” he notes.

David Rosenberg, chief economist at Gluskin Sheff, believes inflation won't take hold until consumer spending rebounds, which he thinks could take years.

"Not until the household sector expands its balance sheets are we likely to see the re-emergence of inflation on a sustained basis," Rosenberg told The Wall Street Journal.

However, Universa Investments, the hedge fund firm that reaped huge rewards betting against the market last year, is about to open a new fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.

Meanwhile, students at China’s Peking University literally laughed out loud after U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its trillions in dollar-denominated holdings was safe from inflation.

China holds $768 billion in Treasuries as of March, but the total value of its dollar-based assets is likely to closer to $2 trillion by some measures.

"Chinese assets are very safe," Geithner told students, a comment which drew laughs from the crowd.

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Investing experts now worry that inflation in the United States will approach that in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates when it should.Zimbabwe’s inflation rate was last reported at 231 million percent in July.The Fed has kept...
hyperinflation,coming
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2009-15-02
Tuesday, 02 Jun 2009 10:15 AM
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