A renowned American investor has cautioned that the global economy is heading towards difficult times. His reason: The US Federal Reserve (Fed) continues with its seemingly endless efforts to kick start the global economy with “printing money” post the 2008 global financial crisis.
Jim Rogers criticised the stance taken by Fed chairman Ben S Bernanke, saying the action has artificially supported the economy and the culmination of the quantitative easing would result in the global economy to face headwinds as the money was not used to spur the economy productively.
He strongly hopes that Bernanke will leave office by January 2014 when his term expires, as his policies damage the global economy in the long run.
Rogers believes the economies of the US and Japan will be hurt very badly when interest rates start to move up again.
Rogers, who currently resides in Singapore, said the domestic saving pattern of Asians would shield them somewhat from a sharp turn in the global economy but it would not leave them completely unscathed.
Rogers also stressed the currencies market will be in turmoil once the quantitative mea sure s put in plac e currently are withdrawn.
He emphasised that the notion of the greenback as a safe currency was over and the Chinese yuan is a stronger currency but trading controls on it should be completely lifted.
When asked by one of the delegates at Invest Malaysia 2013 yesterday about the scenario of the US being a net exporter of oil in the near future especially with the discovery of shale gas, Rogers said that it is not possible as almost 75% of shale gas fields were closed after 18 months as production dropped drastically.
This resulted in the exploration of shale gas as unviable.
The ED of plantation company IOI Corp Bhd Datuk Lee Yeow Chor posed the question on the lobby by enviromental groups that questioned the practices of plantation companies whom they alleged had damaged the environment and displaced aborigines.
Rogers said that it was a case of double standard as the western nations had also cleared their forests to be replaced with factories which had brought them economic prosperity.
Moving forward, Rogers said that the agriculture sector will be a “star” sector.
Rogers opined that the greatest threat to the Malaysian economy is its high household debt which is growing rapidly. Global markets have seen a rise in volatility on the propsects of the Fed launching its tappering action.
Emerging markets have been particularly hit hard with the prospect of outflow of capital to safe havens and advanced markets.
Bursa Malaysia has not been spared either. The benchmark index, the 30- stock FBM KLCI, dropped by 32 points or 1.8% yesterday to close at 1,742 points as the post election sell-off suggests a short term bearish trend.