Speaking with Forbes’ Russell Flannery on Tuesday, Jim Rogers, the co-founder of the Quantum Fund and author of several financial books, offered his latest musings about the current state of affairs on the inflation front.
Bernanke said during his Atlanta speech on Monday, “I think the increase in inflation will be transitory. Our expectation at this point is that in the medium term inflation, if anything, will be a bit low.”
In partial concurrence with Bernanke’s latest statements in Atlanta, Rogers, too, expects commodities prices to rise further due to supply-and-demand forces, driven mostly by Asia’s strongly growing 2-billion-plus consumer class and relatively constrained supplies of resources.
“All central banks are up against the fact that we do have a commodity boom market, and even if they didn’t print money, the prices of things are going to continue to go much, much higher,” Rogers asserted. “So forget the printing of money, for the moment, we’re going to have more inflation.”
But where he differed from Bernanke’s publicly held denial of the central bank’s role in the rapid rise of commodities prices, Rogers pointed his finger at the Fed and its unstated policy actions of debasing the value of the dollar.
It should be noted that the position of the Fed regarding the dollar’s relative value against other fiat currencies, gold and commodities remains a deep-rooted taboo subject following the official unpegging of the world’s premier currency from gold in 1971. The forthright Rogers is unencumbered, however, by that constraint.
“But with the U.S. pouring gasoline over the fire, it’s going to be much more difficult for anybody to stop inflation. America is fanning it as best as it can, and it’s going to get worse,” Rogers warned.
When asked about the effects of inflation in China, the 68-year-old Rogers reports that consumer prices are also soaring in the People’s Republic. He said the inflation problem in China is rooted in the tug-o-war between the Fed and the Central Bank of China over the renminbi-dollar cross in the Forex, forcing Beijing to create fresh Chinese currency to absorb excess dollars created by the Fed. Otherwise, the renminbi would rise too high and too fast against the dollar and other significant consuming nations, choking off the world’s largest exporter.
Moreover, because the renminbi’s convertibility limitations greatly inhibit currency outflows to foreign assets, China’s rapidly increasing monetary base has contained its burgeoning money supply within the country’s borders.
“No matter how much the People’s Bank of China might resist, the U.S. central bank is much, much, much bigger, and has got a lot more money,” Rogers explained.
Inflation. “It’s here. It’s serious. It’s going to get worse,” he continued. “Part of it comes from China because they’ve got the block on currency and the money’s trapped in China. It has to go into something so it goes into furniture and property and real goods and whatever else. So that’s part of the problem.”
Rogers, among many other notable financial figures, has noted that the U.S. has become the world’s principal exporter of inflation, which, over time, eventually comes back to the U.S. in the form of higher import prices, especially from export juggernaut China—whose products routinely are found in U.S. big-box chain stores.
In fact, Bill Simon, CEO of Wal-Mart U.S. (NYSE: WMT), warned consumers only last week that inflation is “going to be serious” in the coming few months. Simon told the USA TODAY editorial staff, “We’re seeing cost increases starting to come through at a pretty rapid rate.” Simon hints that Wal-Mart won’t absorb the higher costs.
So what is an investor to do about protecting his wealth from a declining dollar?
Rogers has repeatedly warned of the dangers of holding long-term U.S. treasuries and any asset denominated in U.S. dollars. Instead, Rogers recommended taking a position in commodities, specifically those which remain “depressed.”
“I try to find the ones that are still depressed like silver and natural gas or rice, suggested Rogers. “Even though it’s been booming, silver is still 30%-40% below its all-time high. If I’m right, agriculture prices are going to go much, much higher.”
- Need fast service and cheap rates from a broker? Buy stock online at my favorite brokerage
- See today’s top stock picks and market analysis
- Want more? Check out the message board buzz for these stocks
- See what newsletters are recommending these stock picks
- Get breaking news alerts on these stocks: http://thestockmarketwatch.com/
- This newsletter has been helping traders make a killing on these stocks. Click here for a 25% discount offer.
BeaconEquity.com is committed to producing the highest-quality insight and analysis of small-cap stocks, emerging technology stocks, hot penny stocks and helping investors make informed decisions. Our focus is primarily OTC stocks in the stock market today, which have traditionally been shunned by Wall Street. We have particular expertise with renewable energy stocks, biotech stocks, oil stocks, green energy stocks and internet stocks. There are many hot penny stock opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.
Beacon Equity Group Disclaimer
This newsletter is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. Beaconequity.com is a wholly-owned subsidiary of BlueWave Advisors.
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.