Faber: "Fiscal Grand Canyon" is Looming
Thursday afternoon, the Federal Reserve said they would buy $40 billion in mortgage backed securities each month until there are some substantial improvements in the labor market. Currently, employment is still hovering just above the eight-percent range.
Basically, this means quantitative easing will ensue until further notice in hopes of improving asset prices. QE may truly go on to infinity and beyond...
Nor surprisingly, this pushed gold and equities up quite nicely. Gold even climbed to a six-month-high on Friday. Overall, stock markets rose solely based on the Fed's QE announcements... not on any real signs of true confidence in our nation's economic recovery.
In response to these happenings, Gloom Boom and Doom publisher Marc Faber says he won't be selling any of his gold holdings until people like Ben Bernanke are done running the world's central banks.
Furthermore, Faber told CNBC, “If I had messed up as badly as Bernanke I would for sure resign. The mandate of the Fed to boost asset prices and thereby create wealth is ludicrous — it doesn’t work that way. It’s a temporary boost followed by a crash.”
Ah, if only we could be so lucky to have our monetary policy makers and legislators resign when they did a poor job resulting in economic chaos...
Alas, Faber is sure that this latest round of quantitative easing is going to do nothing to help the “man on the street.” It'll likely have some positive impacts on the wealthiest Americans, but it'll do little else to stimulate any sort of sustainable economic growth. It won't help the average American family.
Unfortunately, Faber doesn't believe the problem starts and stops with Bernanke and his money-printing madness. He believes whomever is in charge of our central banks after the election will print more money. He also believes Europe will print more money, and China will print more money...
Everyone is going to continue printing more money and the purchasing power of fiat (paper) money will plummet.
If the mad-money printers don't simmer down and brainstorm an alternative monetary policy, “we won’t be facing a fiscal cliff it will be a fiscal grand canyon,” Faber warned.
Therefore, he is advising investors to hedge the coming collapse with gold, land, and even equities. Although he's not particularly fond of equities, he says they are far more appealing than bonds in today's market forecast.
Nonetheless, Faber does have some corporate bonds in his portfolio – he recently bought some from Kazakhstan. He is confident that their economy is much more stable and sufficient than our U.S. economy. Faber is also maintaining equities from Asia, Portugal, Italy and France in his portfolio.
As a wealthy man himself, Faber says the Fed's policy of putting more money in the economy at a time like this won't do anything for the middle class. It will put money in his pocket eventually, but with more government involvement in the economy it'll actually stifle economic and job growth. Instead of the wealthy people like Faber starting new businesses with the latest influx of paper money, they will instead look around the world for distressed assets and buy them.
Faber concludes his argument in his traditional pessimistic fashion: “If we have an economic crisis in the Western world it’s because the government makes up 50 percent or more of the economy. This is a cancer that is taking away people’s freedom.”
According to Faber, the best bet you have in protecting your wealth before the next major market collapse would to invest in gold, land, foreign market equities, and distressed assets.
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