The jitters continue as we near the Federal Reserve’s announcement of its new stimulation policy… which is likely to pump another half billion or so into the nation’s zombie economy through Treasury bond purchases. Perpetually influential Bill Gross, co-CIO & founder of PIMCO, which manages over $1 trillion in assets, is anticipating that Bernanke’s upcoming moves could lead to a precipitous 20 percent drop in the dollar’s value.
According to Moneycontrol.com:
“‘I think a 20% decline in the dollar is possible,’ Gross said, adding the pace of the currency’s decline was also an important consideration for investors. ‘When a central bank prints trillions of dollars of checks, which is not necessarily what (a second round of quantitative easing) will do in terms of the amount, but if it gets into that territory — that is a debasement of the dollar in terms of the supply of dollars on a global basis,’ Gross told Reuters in an interview at his PIMCO headquarters.
“The Fed will probably begin a new round of monetary easing this week by announcing a plan to buy at least USD 500 billion of long-term securities, what investors and traders refer to as QE II, according to a Reuters poll of primary dealers.
“‘QEII not only produces more dollars but it also lowers the yield that investors earn on them and makes foreigners, which is the key link to the currencies, it makes foreigners less willing to hold dollars in current form or at current prices,’ Gross added. To a certain extent, that is what the Treasury Department and Fed ‘in combination’ want, said Gross, who runs the USD 252 billion Total Return Fund and oversees more than USD 1.1 trillion as co-chief investment officer.”
The Fed is of course aware fully aware of the adverse consequences of its actions and seems to welcome them, with no remorse given the damage it will inflict upon the nest eggs of diligent savers. In light of the weak dollar policy, Gross’ main suggestion is to look into investing abroad, where at least some ongoing growth stories can still be found.
You can read the details of his perspective by visiting Moneycontrol.com’s coverage of how Fed easing may mean 20% dollar drop.
Rocky Vega,The Daily Reckoning
Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.
With so much of the national media focused on negative stories, it's easy to feel a bit depressed and to think that the world is hopelessly doomed to failure. But, as Alexander Green points out, there are several things for which humanity, especially in the developed world, should be eternally thankful. Read on...
The president and his supporters are trying to convince Americans that all of the problems with the implementation of Obamacare are simply bumps in the road, normal as part of any new program in its early days. Of course, that's not true. In fact, that's exactly what one should expect when the government is in charge.
With the markets rallying so much this year, it's natural to think that 2014 could start with a correction. But that's not what the data tell us. Greg Guenthner explains why you can expect the rally to continue in the early part of next year. Read on...
There's been a lot of press lately about the 3-D printing revolution - much of it right here on The Daily Reckoning. But there is one technology that's already threatening to make 3-D printing yesterday's news. Josh Grasmick examines a new kind of printing... that takes place in the 4th dimension. Read on...
Rejoice! What was perhaps the freest market in the entire world is now ended. Crushed. Wiped out by the swift hand of the state. Wait... That's NOT a good thing? (Sigh)... Oh well. It was fun while it lasted. Dominic Frisby explains why the shutdown of the Silk Road is such a travesty. Read on...
Say's Law fell out of favor among economists with the rise of Keynes. But if it still holds true, we can at least take comfort that there is economic life after monetary death.
The dollar in your pocket is worth a whole lot less today than 100 years ago. And you have the Federal Reserve to thank for you. So, as the Fed approaches its 100th birthday, Gregory Bresiger reflects on the controversial institution, relaying the criticisms of several of the Fed's most vocal opponents. Read on...