According to the famed international investor, former Soros partner and general market maker, Jim Rogers, the U.S. federal Reserve has continued to pump money into the economy. Rogers, in a recent blog post, described the Federal Reserve as being among the primary dangers to our economy. “They don’t know what they are doing,” he said. Rogers gives credence to the potential impact of European debt problems and China’s slowing growth rates, but continues to see the U.S. as the main source of the problem.
While Presidential nominees and congress debate the impact of raising taxes on the wealthy and other measures with a questionable impact on the economy, Rogers believes that the nation’s wealth is already being deteriorated. Rogers point to low interest rates and a rising inflation rate as the reasons why the numbers on our bank statements may look the same but will not go as far. Rogers is accusing the Federal Government of what is essentially a smoke and mirrors act to cover up their market tinkering. “Bernanke said last August he was keeping interest rates artificially low,” Rogers said in Yahoo Finance last week.”The only way you can do that is to go into the market.”
Within the article, he directed focus to an increase in the broad M2 measure of the United States Money supply. In spite of the Fed’s second quantitative easing program ending on June 30, there has been a 5 percent rise in the level. In total this represents a 20 percent increase since November 2008. These statistics, according to Roger are representative of major problems with inflation and he adopts the rather unpopular position that he would prefer that the Fed actually raised rates.
“Since August – well, this whole year – the M2 has jumped up,” he said in a recent interview “They’re in the market. They’re lying to us.”
Certainly, with the worries over the global economy and a domestic growth rate near zero, some do not object to the Fed’s presence in the economy and the printing of money. In fact Roger’s position that the group should raise rates could bring domestic economic growth to a tax, considering the low levels at which is stands today. Still, those who believe Roger’s statements regarding the position of the Fed in the economy right now, may want to heed the billionaire investor’s advice in terms of how to protect themselves against inflation.
Like many managers and individual investors, Rogers has been staying short on equities and going long on commodities and currencies. In the past, he has voiced his support for investment in the Swiss Franc, which remains a stable and reigning currency among European debt madness. In addition to the Franc, he is a proponent of Japanese currency investments. The Japanese economy has shrunk significantly as a result of the disasters that occurred there this year, but he believes this presents opportunities. Rogers, alongside the rest of the investing public, acknowledges the reasoning behind why many have fled from the nation’s currency and equities, but believes they have been more than priced into the market.
Beyond his long-term currency positions, Rogers is looking to take a defensive stance in commodities. The commodities tend is largely a defensive move and has been widely embraced amid fears of continued declines in the equity market in 2012. Additionally, commodities investments are among the few positions are protected from inflationary changes. Rogers says that for him, it’s a win-win situation. If the market recovers then the commodities will grow on the basis of increasing demand from China. He stresses that with pay rates rapidly rising in China and the expectations for life quickly shifting upwards, commodities of all kinds, from corn and wheat to industrial metals would all get a boost. In the event the economy continues to struggled and inflation heads higher, then his assets will be tucked away.