Tuesday, September 3, 2013

The Financial Sector The major beneficiary of the current Monetary Policies


L.S.: Who are the main beneficiaries?
 
Marc Faber : That’s pretty much a philosophical question whether the intervention by the government will have a long-term positive or rather negative impact on the global economy.

L.S.: Yes, but who are the main beneficiaries of the current monetary policies undertaken by central banks around the globe? 

Marc Faber : Very clearly – and this was already observed by Copernicus and later by David Hume and Adam Smith and also Irving Fisher – when you change money, when you have essentially an increase in the balance sheet of central banks and an increase in the quantity of money, the problem is that the money doesn’t flow evenly into the system but it flows into some sectors at different times and it creates booms in some sectors of the economy.
The major beneficiaries of the most recent monetary inflation based in 2008 have been people closest to the source of the liquidity. In other words the financial sector, hedge fund and bond managers, private equity firms and large asset holders; because if you look at, say, who owns shares in the U.S.; the majority of people have no shareholding to speak of. It’s the minority, maybe five percent of the population, that holds the majority of shares. So the money printing has actually been very beneficial to well-to-do people.
That’s why some high-end property prices are at record highs. It’s been also beneficial to people with money in emerging economies because a lot of funds flow into emerging economies due to the huge U.S. trade and current account deficits and it has been rather detrimental to the middle class and the working class because their costs of living have risen more than their wages.

- in an interview with By Lars Schall of the online platform " Gold Switzerland 1st September, 2013

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

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