Global money printing will not solve the problem

The central banks around the world have engaged in money printing and it’s not at all a currency war. It is a coordinated effort by central banks that are run by some professors who’ve never worked a single day in their lives in the private sector to kind of bail out the system. Now this bailout will of course fail. And when it fails, the question is what will happen then.

Central banks delaying problems instead of solving them [VIDEO]

It’s not just the Fed that has fueled the bubble, it’s the other central banks. The ECB that has fueled the bubble mostly with sovereign debt and bailed out Greece repeatedly. As they bailed out Greece repeatedly, the problem became bigger and bigger and bigger. This is the problem of central banking today-they do not solve problems, they postpone problems.


[Watch video below from 1:02 minute mark]

Marc Faber vs Mary Jo White

I had to laugh almost as much as when I read that Securities and Exchange chairwoman Mary Jo White announced that the SEC is committed to independently formulating a unified “fiduciary standard” that requires all financial intermediaries to put their clients’ interests before their own.

I wonder when — not just in the age of capitalism, but throughout the entire course of human history — anyone has put his clients’ interests before his own? (I should point out that most hedge funds have their own interests closely aligned with their clients’, because their partners are usually not only large investors in the fund but their earnings are also largely determined by their performance and the related fees.)

Chinese currency will be backed by Gold one day

I think that eventually China will have a gold-backed currency. That could be 5 years from now, it could be 10 years from now. 

My view is that US dollar’s day as the global currency is doomed. Now [with] this scenario, you should own some gold.

Marc Faber has doubts on Janet Yellen

I read from Reuters that Fed chair Janet Yellen had opined: “More research is needed to understand what policies allow people to move up the economic ladder and what holds them back.” More research, she said, may provide evidence of what allows people to get ahead, and to predict how individual circumstances impact income inequality.

Specifically, Ms. Yellen said: “It would also be beneficial to understand whether any policies may hold people back or discourage upward mobility” and “Research could help us better understand how much mobility at the individual level matters for overall growth in productivity and economic output.”

As far as Yellen’s research on wealth and income inequality is concerned, my readers can rest assured that it will be published by some Fed-friendly (read “recipients of Fed consulting fees”) academics, who will conclude that monetary policies haven’t contributed to rising wealth inequality.

I have written about wealth inequality sufficiently in the past and won’t repeat myself here, except to reiterate once again that when asset bubbles burst they impoverish the majority while benefiting a few market participants. 

Furthermore, empirical evidence shows that periods of high monetary inflation (money printing) enrich a tiny minority and not the majority.

Recession to hit USA this year 2016 [VIDEO]

Yellen said very clearly that the rate hikes are data dependent. Data globally is getting worse. It’s not getting any better. We have a meaningful world trade slow down. We have geopolitical issues. We have, in Asia, countries that have exports that are down year-on-year double digits. We have a Brazilian recession. We have Greece… On top of all that, we have a strong dollar…

I think rates should be higher, don’t misunderstand me. I think they should have raised rates two years ago. But I don’t think the US economy is doing particularly well. One of the problems is affordability and cost-of-living increases. For most households, the cost of living has gone up very substantially, and so their spending power is limited. In addition to that, if you look at tax revenues in the US, corporate tax as a percent of GDP is essentially flat. However, what have gone up a lot as a percent of GDP are individual taxes. So it has some negative impacts on the economy. I think we could very well be in a recession in the US in six months.


Watch the full interview below.

Global debt is now significantly higher than before

The U.S. stock market bottomed out in March 6, 2009, so we are more than six years into a bull market. The U.S. economy bottomed out in June 2009, so we are six years into an economic expansion. By any standard, this is a very long bull market and very long expansion.

If you add all the stock market capitalization in the world, and you add the borrowings in the world, yes, today’s global debt as a percentage of the economy are far higher than in 2007. Recently, a Paul Gauguin painting was sold for US$300 million. So, we are in the middle of colossal asset inflation.

Central banks hurting businesses

I would rather wait for a correction. But the problem has been that there is no correction if something begins to move. It just went one way because of the colossal liquidity in the world, such as the Yen weakness, Euro weakness, and oil.

One of the mandates of central banks is price stability. But what they have created is colossal price instability with big moves in markets, which has a negative impact on business.

India could see a 20 percent correction

In terms of sectors, India’s consumption sector looks good but some valuations are high. Companies which provide services to the infrastructure sector look attractive. I am also bullish about the banking sector—both private and public. If Modi is serious about reforms, he will have to ensure that state banks operate like some private banks and fare even better.

But some Indian stock valuations are stretched by more than 50 percent. A 20 percent correction in India’s stock markets will not surprise me. But I am not going to sell; it is something I can live with. 

Marc Faber expects to make more money from India investments than USA

I came to India in 1973 and went to China later, including Shanghai in 1990. There was nothing there at that point of time. If you look at Mumbai today and compare its infrastructure with that in Singapore, Hong Kong or even Bangkok, it has lagged behind. The infrastructure has improved, but too slowly. The state of roads and railways today is still very poor. 

India tends to build new roads when the old roads cannot handle the traffic. And by the time new roads come up, the traffic increases so much that they do not serve their purpose.

Capital market growth has been positive in 2014-15, with a dollar terms growth of around 25 percent. The India Capital Fund rose by 48 percent because it had large exposure to the financial sector. I was positive on India in 2013 because I was confident that it would rally once the new government came to power. 

In the next five to 10 years, I think I will make more money from Indian markets than the US.

June 2015 Market Commentary

All bubbles are fuelled by artificially low interest rates, and strong money and credit growth. Therefore, prudent savers are no longer compensated sufficiently for their accumulated savings, which lose their purchasing power.

In other words, loose monetary policies (the government’s intervention into the price of money) lead to excessive speculation, bubbles and swindles, and other dubious practices, as an increasing number of people scramble to stay ahead of the ongoing asset inflation. As Walter Bagehot wrote, “Much has been written about panics and manias but one thing is certain, that at particular times a great deal of stupid people have a great deal of stupid money… At intervals … the blind capital … of the country … is particularly large and craving; it seeks someone to devour it, and there is a ‘plethora’; it finds someone, and there is ‘speculation’; it is devoured, and there is panic”

In China, “nothing is normal anymore,” and following the excess credit expansion driven boom over the last few years, the Chinese economy is “running out of air” and “the party is running out of booze.”

In the age of deceit and misinformation, manipulated markets, endless credit, and of increasing geopolitical tensions there is one asset class that clearly stands out as attractive: precious metals and mining stocks. 


VIA Gloomboomdoom.com

Central banks around world to continue buying assets [VIDEO]

When I look at the whole financial sector, I feel like being on the Titanic. We are fighting for the best tables in the ball room. I think its worthwhile to have your own safety boat and your own ladder that will lead you to your safety boat because I think the whole financial system will implode.

[Watch the full interview above]

Dr Faber doesnt trust central banks with money management

I believe that central banks today have much too much power. Basically, central banks are run by bureaucrats, mostly academics. 

They studied at nice universities, and so forth. They crunch numbers. Ninety-nine percent of them never worked in the private sector, and to these people you give the authority, or the largest authority, to run the world with their monetary policies. That I will never understand. And I met many central bankers in my life. I would never give any dollars to them for management.

India stocks - Betting on financial sector out-performance

While my exposure to India is low, it’s through the India Capital Fund where I am the chairman of the fund. The Indian stock market may rise higher in 2015 but not as high as 2014 – at best a 10 per cent rise from the current levels. If the flows ease in the global market then it may even impact India and it can come off. 

Meanwhile, we are overweight on financial stocks in India. The sector looks good despite the problems faced by banks as even today a lot of people don’t have a bank account in India and, therefore, the sector has huge potential to grow.

Marc Faber explains why Stocks could collapse easily

When you print money, and this has been observed by Copernicus already in the 17th century and by David Hume and Irving Fisher, the money does not flow evenly into the system. So when you print money, some things go up, and others don’t. Some things go up, and then there is a bubble, and then collapse, like the NASDAQ in 2000 and the housing bubble in the US in 2007, and so forth and so on. So you just don’t know exactly when the bubble bursts, and not all assets’ prices are touched positively.

I was going to say, if you bought gold in 2011, at the peak, $1921, September, 2011, you lost a lot of money, but the logic would have said, “Oh. There’s money printing; the gold price will go up.

And so the way gold went down by essentially 40% since then and oil prices collapsed by 40% since then, the US stock market could also collapse, easily, by 40%. Actually, I’d be surprised if it only collapses by 40%. But I don’t know precisely from which level. That is the problem.