LAS VEGAS–Already-weak economic growth is hampered by countries that impose punitive tax policies and engage in runaway deficit spending, according to speakers who opened the FreedomFest conference’s Global Financial Summit here yesterday.
The situation applies to countries such as the United States, as well as to others in Europe. However, certain nations in Central and Eastern Europe, as well some in Asia, are trying to sidestep those pitfalls.
Keys to putting the United States on the path toward prosperity include using a “sound currency” and remedying the tax problem, said Steve Forbes, editor-in-chief of Forbes magazine.
“When this country gets it right, the rest of the world gets it right,” Forbes said. “When we falter, the rest of the world falters.”
Central and Eastern Europe are making economic progress, particularly those with flat taxes, Forbes said.
Forbes is not an advocate of investing in commodities, even though the prices of gold and silver have fallen significantly in recent months.
“When you invest in commodities, you are not investing in the future,” Forbes said. “You are investing in protecting your assets.”
Nor is Forbes a fan of central bank quantitative easing (QE).
“Instead of calling quantitative easing QE,” Forbes said someone from Great Britain told him each round of the Fed’s moves aimed at spurring the economy should be called “Titanic 1, Titanic 2 and Titanic 3.”
Forbes compared quantitative easing and to the fallacy of trying to help people by imposing rent control only to distort the pricing of assets.
“Any time a central bank controls interest rates, it is like rent control,” Forbes said.
To let individual citizens safeguard their own retirement assets from the government, Forbes said he supported having the government let Americans create their own retirement accounts to replace federal programs that are not properly funded for the long term.
A critical view of central bankers in the United States and Europe came from Barbara Kolm, managing director and president of the Friedrich A. v. Hayek Institute in Vienna, Austria.
Europeans are following the same “stupidities” as the United States. Kolm said. As a result, the future of the euro is at risk, since no structural reforms are taking place in Southern European countries.
The use of a single currency in most of Europe prevents individual countries from inflating and deflating their way out of current economic problems there, Kolm said.
When euro-zone countries bailed out Greece, they allowed the fiscally faltering country to avoid “consequences” for its free-spending ways, Kolm said.
“The euro will not remain the way we see it right now,” Kolm predicted.
One problem is that French workers can retire with a government pension at the ages of 50-55, while German workers generally stay employed until 67. Kolm said.
“The question is how long Germany can bail out the rest of Europe,” Kolm said.
The next generation in Europe understands that their “welfare policies” cannot continue, Kolm said.
However, all may not be lost in Europe, if the more fiscally responsible views of young people start to take hold in the continent, Kolm said. They understand that the governments and politicians will not solve their problems, he added.
The reality is hitting a new generation of Europeans who are trying to enter the workforce, Kolm said. For example, Spain has a youth unemployment rate of more than 50%, she added.
“I think we are Rome when it comes to Europe,” Kolm said.
But Kolm added that the decline of the traditional political parties in Southern European countries offers hope that Europe will be able to “reinvent itself.”
British young people increasingly are libertarians who have lost faith in their political parties, said Richard Rahn, a senior fellow from the Cato Institute.
The biggest problem for investors right now is that the world economy is in a stall, Rahn said. Major causes are too much government regulation and spending, as well as too much taxation, he added.
The result is an “enormous” debt problem, Rahn said.
Demographically, certain countries are facing economic problems due to the low birth rates and aging populations.
For instance, Japan, as a country, sold more adult diapers than baby diapers last year, Rahn said.
Jim Rogers, an international investor and financial commentator, warned that when the current central bank-driven, “huge flood of liquidity” ends, it will be a mess for everybody in the world.
“This madness of debt and money printing cannot last,” Rogers said.
Currency and interest rate “turmoil” is ahead, Rogers cautioned.
Investors can help to protect themselves by owning real assets, Rogers said. Commodities that might be worth considering as investments include rice, sugar and silver, he added.
Rogers also made clear that he is no backer of central banks. He took a verbal swipe at the U.S. central bank by mentioning that America has had three central banks and that the first two “disappeared.”
“This central bank will disappear, too,” Rogers predicted.
Rogers did not shy away from his previously expressed view the Asia is on an economic upswing compared to the rest of the world.
“America is the largest debtor nation in the history of the world,” Rogers said. “Asian nations are becoming the creditor countries.”
Paul Dykewicz is a seasoned journalist who is the editorial director of the Financial Publications Group at Eagle Publishing and the editor of the Eagle Daily Investor website. He also edits five monthly investment newsletters, Forecasts & Strategies, Successful Investing, High Monthly Income, Alpha Investor Letter and PowerTrend Profits, as well as a number of time-sensitive trading services.