The U.S. government will spend beyond its means and the Federal Reserve will print money to juice up the economy as part of an election-year popularity ploy, says international investor Jim Rogers.
"You have to remember two things — election in America in November, so you are going to see a lot of good news. Of course you have the American government spending staggering amounts of money right now, printing a lot of money and getting ready for the election," Rogers tells The Economic Times, an Indian English-language daily newspaper.
"It happens every four years in America. They do their best to get the economy juiced up so they can win the election."
The Federal Reserve has carried out two rounds of quantitative easing, which are asset purchases from banks with freshly printed money designed to pump up the economy, and some Fed officials have said a third round may be needed this year.
Under such a scenario, investors should invest in the commodities, which strengthen amid a weakening dollar, the side effect of accommodative monetary policies.
"If the world economy gets better, then obviously commodity prices will do well because of the shortages," Rogers says.
"If the world economy does not get better, they are going to print a lot of money and you need to own real assets when they print money and yes there are 40 elections this year and yes they are going to print more money."
Some Federal Reserve officials say encouraging economic indicators, such as December's jobs report that showed the economy added a net 200,000 nonfarm payrolls, make further quantitative easing unlikely at this time.
"Hopefully, we will keep this momentum going in 2012," says Federal Reserve Bank of St. Louis President James Bullard, according to Bloomberg.
"The tone of the data has been very strong" and the central bank "probably could wait and see for now" before deciding whether there is a need for more accommodation.
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