Monday, December 30, 2013

When is This Bubble Ready to Pop?

Back off on stimulus, Rickards says

“You don’t promote exports with a cheaper currency. You promote exports with value added,” he said.

“Look at Singapore and Germany, which have had very successful export records for decades, with relatively strong currency. They promote exports with technology, innovation, value-added – in other words, with great products.”

He believes the U.S. program of quantitative easing, which involves the Fed buying $85 billion of U.S. bonds each month, is a mistake.

The policy is not stimulating growth, he said. Instead labour participation is dropping and inflation is low and economic growth is anemic.

Besides putting impetus into a currency war, the Fed stimulus program has contributed to a bubble in stock markets, Rickards said.

“The thing about bubbles – they tend to run a lot longer than you expect and they pop at the most unexpected times, so you ask me when it’s ready to pop – whether it’s the beginning of next year, late next year – I don’t know.”

- Source, CBC: