In the following video, the Bloomberg interviews Gloom Boom and Doom report’s Dr. Marc Faber on the US Federal Reserve’s largely unexpected dithering from the Taper
Dr Faber quotes (via the Zero Hedge)
Taper as the Wall Street-Government Subsidy
My view was that they would taper by about $10 billion to $15 billion, but I'm not surprised that they don't do it for the simple reason that I think we are in QE unlimited. The people at the Fed are professors, academics. They never worked a single life in the business of ordinary people. And they don't understand that if you print money, it benefits basically a handful of people maybe--not even 5% of the population, 3% of the population. And when you look today at the market action, ok, stocks are up 1%. Silver is up more than 6%, gold up more than 4%, copper 2.9%, crude oil 2.68%, and so forth. Crude oil, gasoline are things people need, ordinary people buy everyday. Thank you very much, the Fed boosts these items that people need to go to their work, to heat their homes, and so forth and at the same time, asset prices go up, but the majority of people do not own stocks. Only 11% of Americans own directly shares.
Same logic applies elsewhere as in the Philippines
In a deft rebuttal to the issue raised by the interviewer who cited that mortgage and car activities as supposed beneficiaries from the FED’s actions, Dr. Faber didn’t mince words
On September 14, 2012, when the Fed announced QE3, that was then extended into QE4, and now basically QE unlimited, the bond markets had peaked out. Interest rates had bottomed out on July 25, 2012--a year ago--at 1.43% on the 10-year Treasury note. Mr. Bernanke said at that time at a press conference, the objective of the Fed is to lower interest rates. Since then, they have doubled. Thank you very much. Great success.
In short the bond vigilantes has been the unintended consequence from Fed QE3
On the endgame or consequence from total dependence on QE:
Well, the endgame is a total collapse, but from a higher diving board. The Fed will continue to print and if the stock market goes down 10%, they will print even more. And they don't know anything else to do. And quite frankly, they have boxed themselves into a corner where they are now kind of desperate.
The FED will continue to engage in Poker bluffing but will refrain from acting out ‘exit’ or even tapering measures because they have been cognizant of the dangers or the risks of high interest rates on a debt laden and debt dependent economy
On Janet Yellen as successor to Bernanke:
She will make Mr. Bernanke look like a hawk. She, in 2010, said if could vote for negative interest rates, in other words, you would have a deposit with the bank of $100,000 at the beginning of the year and at the end, you would only get $95,000 back, that she would be voting for that. And that basically her view will be to keep interest rates in real terms, in other words, inflation-adjusted. And don't believe a minute the inflation figures published by the bureau of labor statistics. You live in New York. You should know very well how much costs of living are increasing every day. Now, the consequences of these monetary policies and artificially low interest rates is of course that the government becomes bigger and bigger and you have less and less freedom and you have people like Mr. De Blasio, who comes in and says let's tax people who have high incomes more. And, of course, immediately, because in a democracy, there are more poor people than rich people, they all applaud and vote for him. That is the consequence.
Inflationism represents just one of the many slippery slope towards more interventionism (price controls, foreign exchange and capital controls, wage and labor controls, trade controls, border controls and more) and even risks of wars.
On the direction of gold prices:
When I look at the market action today, I would like to see the next few days, because it may be a one-day event. The markets are overbought. The Feds have already lost control of the bond market. The question is when will it lose control of the stock market. So, I'm a little bit apprehensive. I would like to wait a few days to see how the markets react after the initial reaction."
On the direction of the 10-year yields:
I will confess to you, longer-term, I am of course, negative about government bonds and i think that yields will go up and that eventually there will be sovereign default. But in the last few days, when yields went to 2.9% and 3% on the 10-year for the first time in years i bought some treasuries because I have the view that they overshot and that they could ease down to around 2.2% to 2.5% because the economy is much weaker than people think…I think in the next three months or so.
My take is that if the “Feds have already lost control of the bond market” and if bond markets may not just be signaling the conditions of the economy but also as backlash from FED (and other major central bank) policies “the objective of the Fed is to lower interest rates. Since then, they have doubled”, then muting the actions of bond vigilantes (which has become a global phenomenon) may not be as deep as Dr. Faber thinks.
On why the need to buy gold:
I always buy gold and I own gold. I don't even value it. I regard it as an insurance policy. I think responsible citizens should own gold, period.
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