Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers said trying to push the problem out to the future by printing more money isn’t going to work.
In a lecture at Oxford University’s Balliol College Thursday, Rogers reiterated his opinion about US Federal Reserve Chairman Ben Bernanke, saying, “all he understands is printing money."
“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance,” Rogers told the audience.
He was referring to Wednesday’s Fed annoucement that it will buy an additional US$600 billion of Treasuries through June, expanding record stimulus in a bid to reduce unemployment and avert deflation.
Peter Schiff, President of Euro Pacific Capital, believes there are other reasons behind the Fed’s announcement.
"At the end of the day, all the deflation talk is a red herring. As global demand for dollar-denominated debt falls, the Fed is looking for an excuse to pick up the slack," Shiff said in his last weekly commentary.
"The true purpose of QE2 is to disguise the decreasing ability of the Treasury to finance its debts," Schiff claims.
"By announcing QE2, it [the fed] can monetize government debt without the markets perceiving a funding problem. If the truth were known, a real panic would ensue. So, the Fed pretends buying treasuries is simply part of its master plan to boost the economy, even though, in reality, it is simply acting as the buyer of last resort," he wrote.
The New York Fed’s operational account — where QE2 purchases will be held — already owns 30% of T-bonds maturing between 2014 and 2020.
Two-thirds of the Fed’s newly created US$600 billion will be spent on T-bonds maturing between those dates, notes Tracy Alloway at the FT’s Alpha blog.
“All he [Dr. Bernanke] understands is printing money,” Rogers said in his Oxford University lecture.
“His whole intellectual career has been based on the study of printing money,” he said. “Give the guy a printing press, he’s going to run it as fast as he can,” Rogers was quoted as saying.
Former Federal Reserve Chairman Alan Greenspan weigh in the debate, commenting on QE2 last night.
Jim Rogers has taught finance at Columbia University’s business school and is a media commentator worldwide. He is the author of Adventure Capitalist, Investment Biker, Hot Commodities, A Gift to My Children, and A Bull in China. See his website.