"If there's one institution in the US that consistently and repeatedly messes up everything, the Federal Reserve is that institution."
So says famed investor Marc Faber in an interview he gave to PeakProsperity.com this week. In it, Chris and he dive deep into the Fed activity (encouraged by Washington and Wall Street) responsible for the current severe health of our economic system. Both feel that once you understand the nature of the critical role the Fed now plays, you have much better clarity into what the most probable outcomes for our economy and financial markets will be.
In this podcast, Marc explains his views on why:
- Government intervention into the free markets has been increasing since the early 1980s (S&Ls, Mexico, LTCM, etc) and is the root cause of our issues, as each intervention brings the system further off track
- The principal vehicle for this intervention, the Fed, has a near-perfect track record of creating unsustainable asset bubbles (to which it is largely blind) when it intervenes
- Since its founding, the Fed has been dedicated to expansionary monetary policy. When looking at history, there's an argument to be made that per capita price management in the US was better under the gold standard we had before the Fed.
- We're on a direct path to higher inflation, despite the Fed's preference for raising the deflation spectre and citing the low (and ridiculously-calculated) CPI.
- While the Fed is printing money with abandon right now (e.g. buying all new Treasury issuances for the next six months), doing so is raising the risk of a hyperinflationary currency collapse.
- US government bonds are a disasterous investment going forward (even if the deflationists are right).
- The revolving door between Wall Street and Washington motivates our leadership to preserve the status quo, which is corrosive to markets because smaller investors are waking up to the fact that the rules are stacked in favor of the big players. Investing as we have historically thought of it is dead.
In Part 2: Prognosis for 2011 (for enrolled PeakProsperity.com members – click here to enroll), Marc details his thinking on how the endgame will play out, as well as his specific outlook for 2011.
Click the play button below to listen to Part 1 of Chris' interview with Marc Faber:
Dr Faber publishes a widely read monthly investment newsletter "The Gloom Boom & Doom Report" report which highlights unusual investment opportunities, and is the author of several books including “TOMORROW'S GOLD – Asia's Age of Discovery” which was first published in 2002 and highlights future investment opportunities around the world. “ TOMORROW'S GOLD” was on Amazon's best seller list for several weeks and is being translated into Japanese, Chinese, Korean, Thai, and German. Dr. Faber is also a regular contributor to several leading financial publications around the world.
Between 1970 and 1978, Dr Faber worked for White Weld & Company Limited in New York, Zurich, and Hong Kong. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED, which acts as an investment advisor and fund manager.
by idoctor