Money

Investment Bears Warn of Fed Policy Fallout

LAS VEGAS–Easy-money Fed policies should steer investors away from equities and the U.S. dollar and toward buying the euro, the British pound sterling and gold, money manager Alex Merk told attendees at FreedomFest here.

Central bank policies are a key reason for investors to consider currency investing as a way to avoid the risk of equity markets, especially in the United States, said Merk, who is president and chief investment officer of Merk Investments LLC., of Palo Alto, Calif. With the U.S. Federal Reserve Bank’s policies artificially lifting the economy, inflation is starting to rise along with the risk for equities, the admittedly bearish Merk said.

In contrast, Europe’s deflationary pressures and more muted central bank policies, compared to the Fed, are strengthening the value of the euro.

“Last year, the euro was the best-performing currency,” Merk said. “This year, the pound sterling is the best-performing currency among the major currencies.”

The European Central Bank (ECB) is printing less money than other central banks in major economies and thereby boosting the value of the euro, Merk said in a follow-up interview after his presentation. Another plus for the strengthening of the value of the euro is ECB President Mario Draghi’s plan to keep interest rates down while the economy is weak, he added.

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