Oh, man—this guy is saying exactly what I’ve been thinking ever since CoalSpeaker first pointed out the Fed’s latest action to “save” our economy (which they decided to do right while we were distracted with the election). Anyway, so here’s a cutting from an article at Bloomberg.com from today:
Federal Reserve Chairman Ben S. Bernanke’s decision to pump a further $600 billion into the economy shows his grasp of economics is weak, said investor Jim Rogers, chairman of Rogers Holdings.
“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers, 68, said in a lecture at Oxford University’s Balliol College yesterday. “All he understands is printing money.”
“His whole intellectual career has been based on the study of printing money,” said Rogers, who predicted the start of the global commodities rally in 1999. “Give the guy a printing press, he’s going to run it as fast as he can.”
I’m continually surprised that most people who are aware of how the Fed works and yet aren’t upset by the fact that there’s a bunch of unelected white guys in suits someplace who can just print up more money while the rest of us have to work for it.
What’s really scary here is that Bernanke’s plan to print up a fresh wad of bills, totaling $600 billion, will devalue our currency even more (they did this before, back in September of 2008 while all eyes were on Congress while they debated how to save the economy, and gosh it really saved us?). $600 billion is a huge amount of money.
I’m not sure how else to describe this aside from mass devaluation.
I think the idea is to encourage foreign investment and make it super cheap for domestic businesses to borrow money. Since that money won’t buy much, what are businesses supposed to do with it? Hire new employees and pay ‘em!
That’s the hope, I suppose. In the meantime, our money buys less. The other irony is that the inflation rate will go up and make your savings accounts useless or even costly to you. Think about it. The inflation rate this year has fluctuated between 1 and 2.6(ish)%. What’s your savings account interest rate? If it’s not more than that window, you’ve already taken a hit.
Don’t have a savings account? Good boy! Shove that cash under the mattress or buy stuff with it. You’re probably better off.
That’s just my ¥2, of course.
Go read the Bloomberg article for all the details. Sure, Rogers has a book to sell, but his logic is sound, sadly.
UPDATE: And I just read this in another article on Bloomberg about Japan’s economy:
No matter how much yen the Bank of Japan pumps into the economy, deflation deepens. It’s all about confidence, of which there is virtually none. Companies don’t trust that growth will return and so they avoid investing and hiring and trim salaries. Households fret about the future.
Was puzzling about that article is that it talks about deflation being the cause of a race to the bottom for prices. He cites Hooters as an example because they sell cheap food and cheap alcohol. But does that mean deflation? How many wings is the Yen actually buying? Hm, maybe it’s that we’re switching positions with Japan. We’ll all be making more money (if this plan works) but the money won’t buy as much so we’ll have to spend more to get the same stuff.
But injecting money into the economy in Japan hasn’t worked and has inspired price-drops across every sector because the money injection didn’t work. So, maybe we’re seeing into our own futures?
Geh… why does money have to be so confusing?