Friday, October 26, 2012

U.S. debt will balloon to $25 trillion within four years, believes Felix Zulauf

Swiss investor Felix Zulauf shared his opinion that the path ahead of USA financial stabilization seems very tough. Mr. Zulauf argued that the U.S. government will find further fiscal stimulus unaffordable since we have seen the debt of the States has risen from $10 trillion to $16 trillion and $25 trillion is in sight within four years at this pace.

Zulauf believes that in order to find a cure for the current situation a fiscal restraint is needed, even if at a short-term cost in growth, and added that "Obama has no plan" and that Republican vice presidential candidate Paul Ryan’s plan is "implausible." Minor fixes are the likeliest case, resulting in economic stagnation. Zulauf’s only good news was that households appear to have completed deleveraging.

The Swiss financial guru fears competitive devaluations, pushed initially by the United States. He foresees current firmness in the euro to the U.S. dollar ending soon and parity or even a discount to the U.S. dollar as quite probable, for political reasons.

As with equities, bonds are subject to a downward cycle, hyperinflation is possible in deeply troubled countries, and central banks in other countries would welcome modest inflation, which would be likelier in asset prices than consumer prices. He added that these bankers sold gold at the low point, questioning why anyone would trust them to manage the process competently.

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