Tags: Mark | Skousen | Dollar | Rates

Skousen: Dollar Will Rise When Fed Raises Rates

By    |   Tuesday, 26 Jan 2010 12:30 PM

Mark Skousen, a columnist for Newsmax’s Franklin Prosperity Report, expects the dollar to rise this year as the Federal Reserve raises interest rates.

“I’m predicting the dollar will rally this year, only because the Fed can’t maintain its zero interest rate policy forever,” he told Newsmax.TV’s Ashley Martella.

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“Once the economy starts showing any evidence of significant recovery, and that may happen at any time this year, they’re going to be forced to raise rates. That will cause the dollar to rally. . . . I don’t think the dollar is doomed to go lower and lower and lower.”

The U.S. currency also is unlikely to be ousted as the world’s main reserve currency, says the publisher of Forecasts & Strategies newsletters.

“The dollar is just used everywhere around the world, especially when the local currency is unstable,” he pointed out. Most commodities are priced in dollars too.

“There’s no reason why that would change. I don’t know what you’d go to,” Skousen said.

“The euro wouldn’t work, the yen wouldn’t work. You really just don’t have an alternative to the dollar now.”

As for the Fed, he doesn’t think it should be in the business of setting interest rates.

“They should provide a steady, sound money system. Let interest rates fluctuate according to the market,” Skousen said.

If the Fed got out of the way, short-term interest rates would naturally stand at 2-3 percent now instead of near zero, he says.

“It’s creating a lot of artificial bubbles in the economy,” including stocks.

Economic recovery has begun, Skousen says, but more due to government spending than anything else.

“That’s not a good sign,” he says.

“You want consumer spending, and you want investment spending to be growing. Finally investment spending is growing. . . . That’s the most important sector.”

But Skousen isn’t looking for any sort of economic boom.

“I think the growth is tepid at this point. I’m predicting a stagflation environment for the next year or two.”

The economy’s biggest problem is the lack of job creation, Skousen says. He’s most concerned about the long-term unemployment rate – those people who have been out of work and looking for a job for more than a year.

“Traditionally it’s been 1 to 2 percent. Now it’s rising to over 3 or 4 percent.”

Skousen says that instead of focusing on spending, President Obama should implement a corporate tax cut, lowering the rate from 35 to 20 percent, so that the U.S. matches Europe. He also favors a tax credit for businesses that add workers.

“A reduction in the corporate tax rate would encourage businesses to hire more,” he said.

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Mark Skousen, a columnist for Newsmax s Franklin Prosperity Report, expects the dollar to rise this year as the Federal Reserve raises interest rates. I m predicting the dollar will rally this year, only because the Fed can t maintain its zero interest rate policy...
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2010-30-26
Tuesday, 26 Jan 2010 12:30 PM
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