Thursday, February 17, 2011

Central banks-The super-fiction

During the MPS 2011 Asia Regional Meeting, I met Dr. Jim Walker, who is an Austrian economist and CEO of Asianomics Ltd.

The following is from his interview with ET:

Is the US economic recovery real? Will more money flow back from Indian stocks to the US this year? 

No, the US recovery is weak, because it's based on artificial stimulus. Once that fades, there would be problems again. But money may still flow back from India if risk-aversion rises. It will go into bonds and gold in 2011. I will remain bullish on gold till central banks change the way they operate. Most central banks are losing their credibility, be-cause of the way they are handling the crisis by pumping in more and more money. For Ben Bernanke, the best thing is to quit the job, because he is not really solving the crisis. 

Do you think the spike in oil price is justified when the US is yet to recover and emerging markets are slowing? 

The jump in oil is an outcome of the loose US monetary policy. There is no shortage of oil supply at the moment. The real problem is Ben Bernanke here. The real economy doesn't want the money he is pumping. So, it is spilling into other assets. A lot of commodities are at least 20-30% higher than what they should be.

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