Monday, May 2, 2016
2008 Financial Crises would have been better if Central Banks hadn’t intervened
… they will always say, if we hadn’t done this and hadn’t done that, it would be much worse. They have no proof for this assertion. In my view, it would have been better to let the crisis, already the first one in 2000, run its course and prevent the colossal credit bubble that was built up that then led to an even bigger crisis, and now they’re doing the same mistake.
According to Faber, credit as a percent of the global economy is up “very strongly” since 2007.
“[M]ost of the credit is now for transfer payments, and that is very negative for long term structural economic growth because it allows, actually, the government to become bigger and bigger and to have more regulations,” Faber said. “And I can tell you, I’m in the financial sector and I talk to people in the financial sector. Half the time is nowadays consumed with filling out forms by regulators.”
The financial crises in 2000 and 2008 would have been better if central banks hadn’t intervened, Faber said. He warns against the upcoming “helicopter money” policies:
“… the magicians at central banks, they always come out with a new trick and these negative interest rates that we have today, this is for the first time in recorded human history from the times of Babylon up to today that we have negative interest rates, and it’s not going to end well. That, I can tell you. But the sequence of how it will not end well, I’m not so sure. But they still have a lot of ammunition. What they can do is helicopter money. In other words, they can send you and Mr. Bloomberg and me and everybody, say a check for $10,000, and that is like throwing gasoline into a fire…. will it help the economy? That is the question. It won’t help in the long run. You cannot grow an economy by just throwing money at people.”
“… the less policies, the better it would be. We all learned at school that the free market and the capitalistic system is the best allocator of resources, and now what we have is the worst allocation of resources because it’s the government that tells you how these resources are allocated and they continuously expand their interventions, and I can tell you, I started to work in 1970. In the 70’s and early 1980’s, central banks actually never came up in discussions. They have now become like the messiah, and everybody watches what the central banks do and in the end, in my view, they will have, from a long term perspective, no impact whatsoever. Now can they move markets short term? Yes, but maybe not in the direction they want to.” - in Goldseek radio
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.
Posted by Nicole Bourbaki