Jim Rogers: Fed's Tapering Tactics Will End in Financial 'Disaster'

Tuesday, 24 Dec 2013 02:32 PM

By Dan Weil

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The Federal Reserve may have begun to taper its quantitative easing, but don't expect the policy to last, says international investor Jim Rogers, chairman of Rogers Holdings.

The central bank announced last week that it's curbing its monthly bond purchases by $10 billion, leaving the total at $75 billion.

"The Fed will taper, do some more," he told the BBC. At that point, "markets will get scared and go down all over the world," Rogers said.

"And then the bureaucrats and academics at the Fed will panic and start printing money again, and then everyone will say, phew it's OK."

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

But it's not OK, Rogers says. "It's a disaster for the world," he said. This is the first time that all the central banks are printing staggering amounts of money at the same time. There's an artificial sea of liquidity. . . . This is going to be a disaster in the end."

Eventually the Fed's massive easing will have to come to an end, likely forced by financial markets, Rogers says. "It may not be 2015 or 2016, but this can't go on," he said.

A top Federal Reserve official who opposed tapering said the U.S. central bank may have jumped the gun in deciding to reduce its bond-buying stimulus, given too-high unemployment and too-low inflation.

Boston Federal Reserve Bank President Eric Rosengren said he didn’t “yet have sufficient confidence in this outlook to risk the removal of any monetary accommodation at this time."

Rosengren, long one of the Fed's most dovish officials, expressed discomfort with what he called a "premature" start to the wind-down.

"I would prefer to wait until the economic improvement that I am forecasting is clearly evident in the data before reducing the size of the asset-purchase program," Rosengren said.

"In my view, a highly accommodative policy remains both necessary and appropriate."

Peter Schiff, CEO of Euro Pacific Capital, agrees with Rogers that the Fed is unlikely to stay committed to its tapering policy.

"I suspect that when the economic data begins to disappoint, the Fed will quickly reverse course and increase the size of its monthly purchases," he wrote on Yahoo.

Editor’s Note:
5 Reasons Stocks Will Collapse . . .

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