Jim Rogers: Obama Re-election Will Spark Soaring Inflation

Wednesday, 07 Nov 2012 09:25 AM

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A newly re-elected President Barack Obama will continue encouraging loose monetary policies that will fuel inflation rates down the road, and investors need to get ready now, said famed commodities investor Jim Rogers.

Under Obama's first term in office, the Federal Reserve slashed interest rates to near zero and pumped the economy with trillions of dollars in fresh liquidity via a monetary policy tool known as quantitative easing, under which the U.S. central bank buys bonds from banks and floods the economy with excess money supply to encourage investing and hiring.

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

Republican challenger Mitt Romney has said he opposes such policy and suggested he would not renew Fed Chairman Ben Bernanke's term when it expires in January 2014.

Now that Obama is set to preside for another four years, expect the Fed to keep monetary policy loose with the aim of spurring investing and hiring, when in reality, inflation rates are on the rise.

“It’s going to be more inflation, more money printing, more debt, more spending,” Rogers told CNBC just prior to Obama's re-election.

Investors should avoid U.S. government debt and the dollar and stock up on gold.

“It’s not going to be good for you me or anybody else,” Rogers said.

The Federal Reserve recently announced it plans to spend $40 billion a month buying mortgage-backed securities from banks to pump liquidity into the financial system in a way that pushes down interest rates to spur recovery, the U.S. central bank's third round of quantitative easing.

Side effects to such a policy tool — branded by many as printing money out of thin air — include a weaker dollar, rising stock and commodity prices, all of which stoking inflationary pressures considering the excess amounts of liquidity floating in the system.

Past quantitative easing measures rolled out in 2008 and again in 2010 injected a combined $2.3 trillion in inflation-fueling liquidity into the economy on top of other stimulus tools.

“It looks to me like the money printing is going to run amok now, and spending is going to run amok now,” Rogers said.

“I have to invest based on what’s happening and not what I would like.”

Rogers also told CNBC that he didn’t vote for either Romney or Obama, saying that “they’re both evil as far as I’m concerned.”

While many Americans are worried how the president will navigate the country away from a series of tax hikes and spending cuts due to strike the country at the same time early next year — a dreaded combo known as a fiscal cliff that could throw the country into recession next year — loose monetary policies merit attention as well, others agreed.

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

"As pundits will shift the focus on the fiscal cliff, the market appears firmly focused on what may be more relevant: an Obama win favors a continuation of the current easy money policy," said Axel Merk, president and chief investment officer at Merk Investments, according to CNNMoney.


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