David Mcalavany : I know things have changed since the days of the 1920s in Germany, but money printing was a solution then. Havenstein decided that as prices increased, it made sense to just create more money to accommodate the increase in asset prices so that people could afford more. Of course, that was a self-reinforcing mechanism. At what point do you get off of this particular track, the “exit strategy?” How do you implement that?
Marc Faber : The fact is, already, if we look at the economy of the middle class in the United States and the working classes, then in real terms, in other words, inflation-adjusted, and these are inflation-adjusted figures, as used by the government, which actually understates the cost of living increase, if we look at just these figures since 2000, real per capita income for the median household has gone down.
So it is already evident that the money that is being printed doesn’t flow evenly to everybody. It flows mostly to people close to the source of the money, and these are financial institutions, hedge funds, insurance companies, funds managers, and well-to-do people. That is why last year in the Hamptons real estate prices rose 35% to record highs. That’s why high-end London properties are at records, but in other parts of the U.S., real estate prices, although they have recovered somewhat, are still way below the 2007 peak.
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