Friday, October 25, 2013

Bond Burglars to Bring Bears Out of Hibernation

By Marc Faber, The Daily Reckoning Oct 25, 2013, 11:20 AM 

Although the Fed may realize (though I doubt it) that the current asset purchases have minimal impact on the real economy of the majority of American people, they probably think that continuous monetary stimulus is the lesser of two evils. This is a wrong assumption, in my opinion, because prices are rising far more than wages and salaries.
Moreover, the Fed wants to stimulate credit growth with its artificially low interest rates. But again, credit growth has largely lost its impact on the real economy. The multiplier on GDP of an additional dollar of debt is now negligible.
I suppose that the conclusion we can draw from it is that the larger the debt as a percentage of the economy becomes, the less will be the impact of an additional dollar of debt. I actually think that there is a tipping point where additional debt has a “contractionary” effect on the economy, because at this tipping point, the debt becomes so large that interest rates will increase no matter how much a central bank monetizes the debt. (Subsequently, inflation accelerates and the currency collapses, which leads, contrary to Mr. Bernanke’s view, to a general impoverishment of the population.)

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

Marc Faber : The Collapse of the Financial System is only a matter of time "It is not very pleasant for your children"

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Below an approximate translation from German into English :
Christian Gattringer

The great influence of the central bankers of the same rule of professors who had not worked a day in her life. For the academic standing of the Federal Reserve in monetary policy little at stake. After all, they bet with other people's money and might by the end of their term commitment to reckon with lucrative speaking and consulting services in the financial sector , as revenge for the favors of central bankers during their period of service.

Marc Faber presents his opinion about Federal Reserve Chairman Ben Bernanke and his colleagues in pithy words - and the audience acknowledged this with enthusiastic applause. The 67 -year-old Faber, known as the author of the " Gloom , Boom & Doom » Reports , has long promoted the brand. In their appeal , the organizers of this year's Structured Products Forum have rightly counted again . Faber's Unit fills the panorama hall of the Zurich Kongresshaus almost to the last place, even if the certificate fails Fair this year significantly smaller than usual.

Through the intervention of politicians and central bankers to the private sector over the past decades , Faber is convinced , have increased the volatility in the financial markets . The main problem is the view of the U.S. Federal Reserve , bubbles can not be seen. This leads to an asymmetry in monetary policy . The Fed remains in the boom idly in the crisis, it leads the market excessive liquidity . But this could not be without consequences , because not the central bankers were withdrawing due time, particularly their actions . After the bursting of the dot - com bubble in the early 2000s , the Fed has kept interest rates low until mid-2004 , although the economy had already started three years ago to grow again. Now the fourth year the interest was even too deep.

The negative consequences of these false monetary policy on the one hand is a bubble in many real terms. In addition, the debt in industrial countries explode . The credit growth surpasses the economic growth significantly . Faber does not take Europe out of the line of fire , but in his analysis focused primarily on the United States. There, the total debt would become more than 400 % of economic output . This system would eventually collapse, he repeated his forecast valid for years . The only question is when this will happen . In any case, it will but " not very pleasant for your children ." - Investors Faber advises against this background in general to investments in stocks and real estate . And also a bit of gold could - in physical form - portfolio and not missing . Government bonds are already off limits in the light of the many upcoming state bankruptcies .

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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