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By Benedicte Gravrand, Opalesque London:
"A year ago, the world was coming to an end. Then the governments got together and saved the world," said William Browder, founder of Hermitage Capital, a London-based investment advisory firm specializing in emerging markets, at the HEDGE 2009 conference in London yesterday.
"But there are new problems sitting right in front of our face," he continued. As indeed, saving the world is not free: an estimated $4.7tn has to be found somewhere to pay for this exercise. This money could be found from either (1) taxations; (2) borrowing; or (3) printing money.
Bowder raised the question on whether governments could actually raise enough money through taxes. "Tax is not going to work," he said, "there will be very aggressive taxes in every country but it won't solve the problem."
As for borrowing, more bonds on offer will bring prices down, interest rates up and economic growth contraction. This is not good from a political point of view, if there is hope for re-election.
So the third option, printing money, will be the one the governments (especially U.S.) will go for if they want to avoid taxes and borrowing at all costs.
Analysts at Hermitage found that, when looking at historical data of countries which have printed money, there was an 80% correlation between printing and price levels: printing periods usually led to inflation, after a t...................... To view our full article Click here
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