Marc Faber, Banking system doomed to collapse

“The Market Forces Will Destroy Central Banks”
In this conversation for Matterhorn Asset Management, financial journalist Lars Schall talked with internationally known investment advisor/fund manager Marc Faber about, inter alia: the main beneficiaries of the current monetary policies undertaken by central banks around the globe; the Fed’s tapering; why Faber does still believe in gold; and his bullish view on crude oil. By Lars Schall Dr. Faber, what do you think is the most important question in our days in the world of finance that is rarely raised? M.F.: Well I think we have unprecedented government interventions with fiscal and monetary policies. For me it’s not really a question, it won’t work but miracles do happen, and maybe based on the bailouts and huge monetary inflation that the central bankers have created, maybe it is possible that the financial system heals and that the global economy resumes a, say, trend line growth such that we had in the 90’s and the early parts in 2000 and 2005. But I very much doubt that. L.S.: Who are the main beneficiaries? M.F.: That’s pretty much a philosophical question whether the intervention by the government will have a long-term positive or rather negative impact on the global economy. L.S.: Yes, but who are the main beneficiaries of the current monetary policies undertaken by central banks around the globe? M.F.: Very clearly – and this was already observed by Copernicus and later by David Hume and Adam Smith and also Irving Fisher – when you change money, when you have essentially an increase in the balance sheet of central banks and an increase in the quantity of money, the problem is that the money doesn’t flow evenly into the system but it flows into some sectors at different times and it creates booms in some sectors of the economy. thewall The major beneficiaries of the most recent monetary inflation based in 2008 have been people closest to the source of the liquidity. In other words the financial sector, hedge fund and bond managers, private equity firms and large asset holders; because if you look at, say, who owns shares in the U.S.; the majority of people have no shareholding to speak of. It’s the minority, maybe five percent of the population, that holds the majority of shares. So the money printing has actually been very beneficial to well-to-do people. That’s why some high-end property prices are at record highs. It’s been also beneficial to people with money in emerging economies because a lot of funds flow into emerging economies due to the huge U.S. trade and current account deficits and it has been rather detrimental to the middle class and the working class because their costs of living have risen more than their wages. L.S.: What could be done to solve a systemic crisis? Continue reading

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