Mr. Faber weighs in on the impact of Fed policies on market valuations, bubbles, bitcoin, physical gold and silver in 2014. This video was produced and edited by the guest speaker. Do you agree with Marc Faber?
The Diverse Impacts of Federal Reserve Policies
Marc Faber, author of “The Gloom, Boom, and Doom Report” newsletter weighs in on various current issues including his take on the impact of Fed policies, market valuations, and whether he backs bitcoin in relation to physical gold and silver. Mr. Faber argues that long standing Federal Reserve policies have perpetuated the two-class system and further contributed to the development of “a lot of problems around the world.” A primary consequence of these policies includes a considerable hike in energy prices (i.e. from $10 in 1999 up to $100 per barrel in 2014). At present, low-income households can spend up to 30% on energy related expenses (e.g. transportation, electricity, and gasoline). Mr. Faber’s response to this observation includes an economic system structured to “lift the standard of living of most people, [because] you can’t lift everybody.” In addition, he points out that the significant expansion of local, state, and federal governments (i.e. currently occupying 50% of the economy) has contributed to elevated levels of corruption and patterns of slowed economic growth. “The US Treasury, the Federal Reserve, and the government is one in the same. The Fed, they finance the treasury so the government can go to war in Iraq and Afghanistan. Then they finance transfer payments to essentially buy votes so you can get elected.”
Mr. Faber identifies the current market sentiment as increasingly bullish, with rising investor confidence perpetuating these valuations. This trend, he explains, is largely attributed to the falling of interest rates that further boost corporate profits and contribute to the common assumption that “the economy will accelerate on the upside.” But Mr. Faber strongly disagrees with this widespread sentiment, arguing that the global economy is actually slowing down (a function of local economies and exports in emerging economies with no growth) as we find ourselves in the midst of a “gigantic financial bubble, one that is very stretched” and could “burst any day now.”