U.S. Inflation to Approach Zimbabwe Level, Faber Says

Discussion in 'Wall St. News' started by S2007S, May 27, 2009.

  1. 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 “hyperinflation” 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 “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

    “I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The 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.”

    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 officials’ 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.

    “There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”

    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.’s main interest rate may need to stay near zero for several years given the recession’s 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 won’t return to the “prosperity” of 2006 and 2007 even as it rebounds from a recession, Faber said.

    Equities in the U.S. won’t fall to new lows, helped by increased money supply, he said. Still, global stocks are “rather overbought” and are “not cheap,” 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. “Of all the regions in the world, Asia is still the most attractive by far,” 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 & Poor’s 500 Index has since climbed 9 percent.

    Faber, who said he’s 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.
  2. So to sum up, Faber believes that inflation in the U.S. will get "close" to 231 million percent?

    Really? How "close"? Give or take 231MM percentage points?

  3. Stefo


    I agree with you on this Ivan, however it is clear to anyone with an ounce of brain

    that you are a very dull cookie on almost all fronts :cool:
  4. 100% sure about the future eh?
  5. Gee, thank you, c-kid :) Coming from you, that's a compliment!
  6. There will be inflation, hard to argue against that, it will likely be significant, but to suggest Zimbabwe like inflation in the US is something else. If there was anything even close to Zimbabwe inflation there would be some sort of dramatic change in world currency.. if not then the world pretty much will come to an end.
  7. As always the great Dr Faber uses a bit of hyperbole but you get the idea.


    I must of read quite a bit of Faber's interviews of these last years available online and really the most bearish call I remember him making not using to much hyperbole is a goldprice of around 3 to 5000$ an ounce on the US government defaulting.

  8. piezoe


    What may be of more interest to some of you are the actual CPI data published by John Williams, as these are comparable to the Government's method of computing the CPI in 1980. These have the U.S. with double digit inflation throughout much of 2006-2007 and the early part of 2008. According to this data, the U.S. is presently, as of 15 May, experiencing about a 7% inflation rate. These numbers are consistent with my own observation, and probably yours too, of what prices are doing in reality.

    Starting in the 1990's the Government began changing its method of computing the CPI so as to reflect a much lower value for inflation and thus save hundreds of billions on inflation indexed entitlements and TIPS. The official method has changed more than once in more recent years, each time producing a lower inflation figure. Using the Government's method from 1990 current inflation rate is roughly 2.5%, and using the current Government method the inflation rate is about negative 0.8%. Thus we are, according the the Official Government figure, currently experiencing mild deflation!

    It may also be of interest to know how the Government is able to obtain such startling CPI figures: they have for some time, i think it was introduced around 1999, been using a geometric weighting scheme, so that items in the index that have inflated the most are given the least weight. Other "exceedingly clever" changes have been introduced as well.

    see: shadowstats.com

  9. Bens' choices : Hyperinflate or default.
  10. pspr


    Third Choice: National Sales Tax + Income Tax

    Obama will tell us, "You won't even notice it."
    #10     May 27, 2009