Billionaire Rupert Says Crisis May Provoke Unrest, Inflation; Sounds An Alarm

I encourage everyone here to read what this man has to say and to consider those words very carefully.

He speaks the truth.

http://www.bloomberg.com/apps/news?pid=20603037&sid=a4X0Co5HSGYE&refer=home

Billionaire Rupert Says Crisis May Provoke Unrest, Inflation
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By Thomas Mulier

May 14 (Bloomberg) -- South African billionaire Johann Rupert said the financial crisis may lead to inflation and social unrest as savers find they’re too poor to retire, while pension-fund managers deserve to be jailed for incompetence.

Rupert, speaking at the annual presentation for Cie. Financiere Richemont SA, the luxury-goods company he controls, said he doesn’t see any “green shoots” of economic recovery. He said governments may resort to inflation to reduce the burden of increased debt from stimulus programs, such as U.S. President Barack Obama’s $787 billion package.

“If this thing carries on, my generation will have to work until they are 75,” the 58-year-old Rupert said. Governments are “going to have to find the capital in the markets, which will crowd out the private sector, or they’re going to have to tax the living hell out of consumers, or inflate their liabilities to oblivion. There are not too many other options.”

Rupert told analysts at the meeting that they’re too young to remember Red Brigade terrorism in Italy or the 1968 Paris uprisings, when the French state sent tanks into the streets.

“Things can get volatile very quickly,” he said. “This is a very turbulent situation. It could flat-out turn into big inflation if not managed properly over the next two or three years. The saver is going to start rebelling.”

Spain needs to reduce unemployment from its current rate of about 20 percent to avoid future social problems, he said.

Tobacco Fortune

Richemont’s brands include Jaeger-LeCoultre watches and Cartier jewelry. It’s the second-largest luxury goods maker in the world, trailing only LMVH Moet Hennessy Louis Vuitton SA.

Rupert has become increasingly outspoken since he assumed sole control over Richemont following the death of his father Anton three years ago. Last October, he said investment bankers too young to remember a serious recession helped cause the financial crisis.

Rupert himself worked in banking at Chase Manhattan Bank and Lazard Freres in New York before founding South Africa’s Rand Merchant Bank in 1979. He set up Richemont in 1988, which was built on proceeds from his family’s Rembrandt Tobacco Corp.

Governments should promote economic growth, which is the only way to improve states’ finances, Rupert said today. Protectionism and increased tariff barriers between countries could lead to a “second Depression,” he added.

“All of the excess leverage in the system is being assumed by governments, in some way or other,” he said. “They’re going to have to de-lever sometime.”

Rupert said some former schoolmates and friends from his time in South Africa’s Navy won’t be able to afford to retire, as their money managers lost their savings in the bear market.

“People should be put in jail for their lack of maintenance of purchasing power in the pensions and retirement funds that they managed,” Rupert said. “People are simply not going to have the retirement funds at their disposal.”

The Rupert family’s fortune declined by more than half in dollar terms to $1.2 billion, ranking them no. 601 in the world, according to the most recent Forbes list of billionaires, as Richemont shares retreated and the rand fell against the dollar.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net.
Last Updated: May 14, 2009 11:24 EDT

 

Bailout commitments surpassed 15 Trillion last week.

That's an ungodly sum lumped in next to the national debt (11 Trillion).

That makes the "Stratospheric" money printing that brought oil to 150$ ---- pre-crash ----- look like a fart in the wind.

15 Trillion in handouts will unequivocally effect the economy in a very negative way. Another bubble, more inflation, T-bill crash, whatever.

The equation will balance itself.

 

Fed is between a rock and a hard place, having to buy hundreds of billions more in trash no one wants while pulling auctions lest they face another embarrasment.

I can't believe that there is so much complacency out there in the face of the Fed essentially and quite obviously trying to prop the whole system up. It can't last, something will have to give, rates, the dollar, or asset prices, the balancing act they are attempting is not only not sustainable but it is destabilizing.

 

Well said.

If we could print ourselves into prosperity, why stop at 15 Trillion? Why not 30 Trillion? Or 100 Trillion? Or 500 Trillion?

Then we'd all be rich! (sarcasm)

Since the leveraged and intertwined nature of banking and markets exacerbates the fundamental undercurrents - up or down - the question becomes: at which point will total money supply reach "critical mass" and set off a chain reaction in bonds and currencies?

Hard to figure that one, since M3 is just a base denominator thats multiplied by commercial banks through loan creation. Anyway, at 15 Trillion in handouts that are banked and booked, the monetary base just grew by that much. Whence consumer borrowing takes off after the banks get well, it should be another rally (than Crash) for the Ages.

Great time to be a speculator. Bad time to be a Patriot.

 

South Africa has one of the worst crime and murder rates globally and is socially unstable in "normal times" -- riots, rape and brutal murders are daily headlines people got accustomed to. This guy must be wetting his pants thinking about the scenes playing out in the streets of Capetown and Johannesburg once his economic forecast comes true.

Those "anti-immigrant riots" were scary -- they burned foreigners alive in the streets. Makes you wonder what's going to happen once times get tougher on them.