Quote from S2007S:
Im sure 99% here will not agree with the word hyperinflation and about 75% believe were probably not going to see any inflation at all, however inflation is will come no matter what the fed does. Everyone knows the fed is always a tad late in moving interest rates and with them being at historical lows the chances of them making any attempt to keep inflation in check is going to be nearly impossible as the trillions they are printing will be too much for them to even put a handle on. I believe inflation is going to skyrocket and the dollar is going to collapse. With trillions of dollars and lack of knowledge with the magnitude of this credit crisis, it will be nearly impossible to keep inflation tame at any point.
U.S. Inflation to Approach Zimbabwe Level, Faber Says (Update2)
By Chen Shiyin and Bernard Lo
May 27 (Bloomberg) -- The U.S. economy will enter âhyperinflationâ approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Prices may increase at rates âclose toâ Zimbabweâs gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabweâs inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
âI am 100 percent sure that the U.S. will go into hyperinflation,â Faber said. âThe 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.â
Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officialsâ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
âThere are some concerns of a risk from inflation from all the liquidity injected into the banking system but itâs not an immediate threat right now given all the excess capacity in the U.S. economy,â said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. âI have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.â
Action Economics is predicting inflation of minus 0.4 percent in the U.S. this year, with prices increasing by 1.8 percent and 2 percent in 2010 and 2011, respectively, Cohen said.
Near Zero
The U.S.âs main interest rate may need to stay near zero for several years given the recessionâs depth and forecasts that unemployment will reach 9 percent or higher, Glenn Rudebusch, associate director of research at the Federal Reserve Bank of San Francisco, said yesterday.
Members of the rate-setting Federal Open Market Committee have held the federal funds rate, the overnight lending rate between banks, in a range of zero to 0.25 percent since December to revive lending and end the worst recession in 50 years.
The global economy wonât return to the âprosperityâ of 2006 and 2007 even as it rebounds from a recession, Faber said.
Equities in the U.S. wonât fall to new lows, helped by increased money supply, he said. Still, global stocks are ârather overboughtâ and are ânot cheap,â Faber added.
Faber still favors Asian stocks relative to U.S. government bonds and said Japanese equities may outperform many other markets over a five-year period. âOf all the regions in the world, Asia is still the most attractive by far,â he said.
Gloom, Doom
Faber, the publisher of the Gloom, Boom & Doom report, said on April 7 stocks could fall as much as 10 percent before resuming gains. The Standard & Poorâs 500 Index has since climbed 9 percent.
Faber, who said heâs adding to his gold investments, advised buying the precious metal at the start of its eight-year rally, when it traded for less than $300 an ounce. The metal topped $1,000 last year and traded at $949.85 an ounce at 12:50 p.m. Hong Kong time. He also told investors to bail out of U.S. stocks a week before the so-called Black Monday crash in 1987, according to his Web site.
