Chris Martenson And Marc Faber: The Perils of Money Printing's Unintended Consequencesby Tyler Durden
Mar. 19, 2012
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Marc Faber: The Perils of Money Printing's Unintended Consequences
Marc Faber does not mince words. He believes the money printing policies of the Federal Reserve and its sister central banks around the globe have put the world's currencies on an inexorable, accelerating inflationary down slope.
The dangers of money printing are many in his eyes. But in particular, he worries about the unintended consequences it subjects the populace to. Beyond currency devaluation, it creates malinvestment that leads to asset bubbles that wreak havoc when they burst. And even more nefarious, money printing disproportionately punishes the lower classes, resulting in volatile social and political tensions.
It's no surprise then that he's feeling particularly defensive these days. While he generally advises those looking to protect their purchasing power to invest capital in precious metals and the equity markets (the rationale being inflation should hurt equity prices less than bond prices), he warns that equities appear overbought at this time.
First of all, I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They've gone the path of money printing and once you choose that path you're in it, and you have to print more money.On His Love for Central Bankers
Basically the U.S. had a significant increase in the average household income in real terms from the late 1940s to essentially the mid-1960s. And, then inflation began to bite and real income growth slowed down. Then came the 1980s and in order not to disappoint the household income recipients you essentially printed money and had a huge debt expansion.On The Unintended Consequences of Money Printing
In the short term, it has been working to some extent in the sense that equity prices are up and interest rates are down. And, so companies can issue bonds at extremely low rates. But every money printing exercise in the world leads to unintended consequences at a later point. And, this is the important issue to remember. We don't know yet for sure what the unintended consequences are.Click the play button below to listen to Chris' interview with Marc Faber (runtime 40m:45s):
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