Fed should not interfere with the market and money supply

Marc Faber reaction to US Fed's interest rate hike.

The best would be to have no monetary interventions. In other words, as Milton Friedman pointed out, to have a steady growth in money supply, fixed by the constitution at 2% or 3% per annum. We don't need a central planning authority to intervene and buy assets and boost the money supply or slow down the growth of money supply.

I'm against these constant interventions in the price of credit with monetary policies, but if they're going to do them, they should have raised rates in 2011 and 2012 when economic growth was much stronger than it is now. Right now, the global economy is slowing down meaningfully, so they should not have increased interest rates. But they did so to maintain some credibility.

The global economy is probably already in recession now. It will be more obvious in the U.S. in March or June of next year. At that time, the Fed will say, "Well, we didn't want to increase interest rates, but there was pressure on us to do so. So we increased them, and now we have a recession, and now we have to cut them again and flood the market with QE4."

They'll use whatever happens as an excuse to cut rates again and engage, as [ECB President] Draghi is currently doing, in unlimited purchases of assets.

Fed should have raised interest rates few years ago instead of now

They [Fed] kept interest rates near zero for seven years. This has never existed before, such a long period of next to zero interest rates. Now they increased rates a quarter percent exactly at the time the global economy is weakening dramatically. The global economy has decelerated very badly, and many countries are already in recession, or going into recession

They are increasing interest rates at precisely the wrong time. 

Potential fed rate hike is not important

In my view the likely Fed rate hike is not very important. The most important is the global economy has decelerated very badly and many countries are in a recession or going in a recession.

If they raise rates, in theory, it's precisely the wrong time.

Best countries to store Gold physically are Dubai, Singapore, Hong Kong

I think the US government, when gold really starts to move, will take it away. They will pay something. Say like in 1933, they paid $25 per ounce of gold that people held, and after they have collected most of the gold – of course not the gold that was held by government officials, or to precisely say “by corrupt government officials,” because they’re all corrupt – they revalued the gold to $35. So the investor lost out. And I think what will happen, the US will eventually, under some kind of an excuse, whether it’s terrorism or whatever it is, expropriate gold. They’ll pay, say, at today’s price, $1220 an ounce, and then they’ll go to the ECB.

The ECB and the Federal Reserve are one and the same. The Bank of England also. They talk to each other every day. They’re the chief manipulators of everything. And then they say to the ECB, “Well, because we do it, you also should do it,” and the Draghi-type of – I don’t want to say what I think of him, but I say, Draghi-type of personalities, they’re saying, “Yeah. Yeah. We’ll do it also,” and then the Bank of England, of course, will do it also. Then they knock on the doors of the thrifts and say, “You thrifts, you also have to do it,” and the thrifts, they have no backbones anymore. The thrifts will say, “Okay. We’ll also do it.”

And so the threat is really for an investor, is where do you store your gold? Because if you have it in a bank or in an ETF, it may be taken away. And whereas I think that the Sprott Physical Gold are the best ones. When the US knocks on the door of Canada and says, “You have to do the same,” the Canadians will also say, “Yeah. Okay.” And so the best, probably, to store gold in Dubai, in Hong Kong, Singapore, physically.

Summary of December 2015 Monthly Market commentary

Ezekiel J. Emanuel, a well-known oncologist and a vice provost at the University of Pennsylvania argues that in the field of healthcare “more care can produce worse health outcomes.” Emanuel opines that “We - both physicians and patients - usually think more treatment means better treatment. We often forget that every test and treatment can go wrong, produce side effects or lead to additional interventions that themselves can go wrong. We have learned this lesson with treatments like antibiotics for simple medical problems from sore throats to ear infections. Despite often repeating the mantra ‘First, do no harm,’ doctors have difficulty with doing less - even nothing. We find it hard to refrain from trying another drug, blood test, imaging study or surgery.” 

Translating this simple wisdom into economics would surmise as follows: We both economists and fund managers - usually think more interventions mean better outcomes. We often forget that every experiment and intervention with fiscal and monetary policies can go wrong, produce side effects or lead to additional interventions that themselves can go wrong. 

We have learned this lesson with central planners in the former Soviet Union and in China under Mao Zedong. Despite often repeating the mantra “First, do no harm to the market and to the capitalistic system,” economic decision makers have difficulty with doing less - even nothing. They find it hard to refrain from trying another QE, government spending spree, bailout, new regulation, transfer payments, or outright wealth confiscation through negative interest rates.”

British physician, homeopath and bacteriologist Edward Bach suggested that, “The main reason for the failure of modern medical science is that it is dealing with results and not causes.” I think that the same is true of economics, and that to paraphrase Moliere, nearly all economies die of their fiscal and monetary “remedies” and not of their illnesses.

I wish my readers a wonderful festive season and excellent physical, mental and financial health in 2016. 



via Gloomboomdoom.com

Why academics and economicts never criticize the Fed

Just in the last say twelve months, I have observed an increasing number of academics who are questioning monetary policies.

I mean some academics that have been quite mainstream in the past. I mean John Taylor has been critical for a long time as well as Ana Schwartz but she passed away and as Milton Freedman who also passed away a long time ago. But basically now I see more and more academics and influential people, also among the Republicans that are actually questioning the Fed and also the integrity of the Fed. That is a crack and as you said the credibility of the ECB is in my view badly tarnished already because people say how could they lend so much money to Greece?

But you understand, they never ask ordinary people, they ask academics, or economists and they all also get paid somewhere because they are either in the one or the other commission, so they are not going.......... it’s like if you go into a hospital and a doctor has killed a few patients unintentionally, another doctor will never testify against him. He will shut up because he is afraid one day other people will turn against him. Mistakes happen. And so among academic circles you will very seldom find criticism of central banks.