Sunday, March 25, 2012

Marc Faber : Money printing leads to unintended consequences

Marc Faber : But Chris, what you say that it hasn’t been working. In my opinion it's not entirely correct. In the short term, it has been working to some extent in the sense that equity prices are up and interest rates are down. And, so companies can issue bonds at extremely low rates. But every money printing exercise in the world leads to unintended consequences at a later point. And, this is the important issue to remember. We don’t know yet for sure what the unintended consequences are. For sure, we know one unintended consequence and this is that the middle class and the lower classes of society, say fifty percent of the U.S. has rather been hurt by the increase in the quantity of money in the sense that commodity prices in particular food and energy have gone up very substantially. And, since below fifty percent of income recipients in the U.S. spend a lot, a much larger portion of their income on food and energy than to say the ten percent richest people in America and highest income earners, they have been hurt by monetary policy. In addition, say the lower income groups if they have savings traditionally they keep them in saay deposits and in cash because they don’t have much money to invest in the first place. So the increase in the value of the S&P hasn’t helped them but it helped the five or ten percent or one percent of the population that owns equities. So it's created a wider wealth inequality and wealth inequality and that is a negative from a society point of view. - in Chris Martenson interview
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