2024年3月29日星期五
 
專家論市
Martin Hennecke
Martin Hennecke
Chief economist at The Henley Group mwh@thehenleygroup.com.hk
"In his most recent address to Congress, Federal Reserve chairman Ben Bernanke was seen by markets as getting tough on inflation, after indicating that an inflation-targeting goal may be introduced shortly."

Bernanke must keep sharp eye on inflation
12/03/2012


In his most recent address to Congress, Federal Reserve chairman Ben Bernanke was seen by markets as getting tough on inflation, after indicating that an inflation-targeting goal may be introduced shortly.

This may in theory be a good thing to do, but is Bernanke just paying lip-service to tackling inflation to pre-empt any concerns about the Fed's strong desire to keep interest rates at historically low level still at least the end of 2014?

In this regard, lets not forget there is much at stake for the United States.

Against the backdrop of an expected 1 trillion plus US budget deficit for the fourth year running, former US comptroller general David M Walker last month warned: "Were about two years away from where Greece was when it had its debt crisis."

China !V America's largest creditor !V appears to be getting nervous. The nation sold over US$100 billion (HK$780 billion) in Treasuries in December alone, bringing its total holding to US$1.152 trillion !V its first annual reduction in its US T-bill holdings in a decade.

So, the last thing the US can afford now is rising fears of inflation, which would hike Treasury yields, thereby worsening the nation's debt and budget deficit levels.

Accordingly, we better not take Bernanke !V incidentally nicknamed Helicopter Ben for addressing crises by doling easy money as if from a helicopter !V too seriously on tackling inflation.

Rather, we should fear a possible third round of quantitative easing !V that is !V yet another expansion of the Fed's balance sheet.

Without more quantitative easing, the United States can not address its out-of-control debt and unfunded liabilities.

After all, central bankers all-too-often say everything is okay just when its not. For example, Bernanke in March 2007 said that the impact of the subprime markets seems likely to be contained just before the crisis really got underway.

And with regard to the euro zone, the headlines are full with the success of cheap European Central Bank loans to banks !V LTRO tenders !V boosting sentiment and a fresh bailout for Greece.

But the euro zone economy keeps deteriorating.

The Markit Manufacturing Purchasing Managers Index for Greece for example, fell to a low of 37.7 points in February from 41 in January as production and new order volumes declined at the sharpest pace in the survey's nearly 13-year history. Any figure below 50 denotes contraction.

Economic and debt indicators of Portugal, Spain and Italy are all worsening as well.

All that has been achieved is easy ECB money in ever larger quantities is being thrown at the problem in return for any junk as collateral being handed back to the ECB.

This policy is as inflationary as quantitative easing, as it sacrifices currency stability and purchasing power in order to prevent or postpone a domino-style sovereign debt defaults across Europe.

So we believe the positive outlook on gold/precious metals demand as an inflation hedge should remain unchanged, if not intensify.

At the same time, strengthening physical demand from China !V expected to overtake India this year as the world's top gold consumer !V appears likely to lend further support to prices.
 


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