Cover of MoneyWeek issue no 516

How to play the currency markets

10 December 2010 / Issue 516

Make big profits in the world's fastest-moving market

PLUS:

  • A ground-breaking drug stock to buy now
  • The best way to cash in on bargain small-caps
  • The prankster who knocked back $6bn from Google

Excerpt

Profit from US tax cuts

So now we know what the second batch of quantitative easing (QE2) is really for. Federal Reserve chief Ben Bernanke hasn’t really been very forthcoming about his precise aims in buying yet more US government bonds with yet more phantom money.

But it seems his goal is simply to fund the US government’s future spending. With his plans to extend tax cuts from the George Bush era, and add some of his own, President Barack Obama has thrown any pretence of caution to the winds. Despite recent talk of budget reform, the US has no intention of becoming fiscally responsible. It doesn’t have to.

Europe has embraced austerity because it’s been forced to by the markets battering its weaker members. But the US – although hugely indebted – still holds the world’s reserve currency. It can have its cake and eat it (for now at least). And if you’re going to be splurging money anyway, better it goes into the pockets of consumers in the form of tax cuts, than to investment banks, which just use it to swap assets between themselves and the central bank, and then pocket the profits as bonuses.

So what should investors do?

• Read the full editor’s letter here:
Profit from US tax cuts

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