Gold Silver Worlds: After the press communication of the US Fed to delay the tapering of their asset purchases, Marc Faber was asked by Bloomberg to comment on the decision and announcement of Mr. Bernanke. This is the link to the interview. We provide the highlights of Faber’s thoughts in this article.
Apart from the fact that Mr. Faber did expect a formal confirmation of tapering, he said he was not surprised because “we are in QE unlimited.” He points out that the Fed is run by academics who never worked a single day of their life in a business. They don’t understand that if you print money, it benefits basically a handful of people maybe 3% or 5% of the population. The markets moved higher on the news with stocks up 1%, silver up more than 6%, gold up more than 4%, copper 2.9%, crude oil 2.68%. So the Fed pushes the prices of items that people need in their daily lives; asset prices go up. Mind that the majority of people do not own stocks; only 11% of Americans own directly shares.
Are interest rates held down when the Fed continues this type of policy?
Marc Faber: ”On September 14, 2012, when the Fed announced QE3, that was then extended into QE4, and now basically QE unlimited, the bond markets had peaked out. Interest rates had bottomed out on July 25, 2012–a year ago–at 1.43% on the 10-year Treasury note. Mr. Bernanke said at that time at a press conference, the objective of the Fed is to lower interest rates. Since then, they have doubled. Thank you very much. Great success.”
What are unintended consequences of money printing (or, what is the endgame)?
Marc Faber: ”Well, the endgame is a total collapse, but from a higher diving board. The Fed will continue to print and if the stock market goes down 10%, they will print even more. And they don’t know anything else to do. And quite frankly, they have boxed themselves into a corner where they are now kind of desperate.”
Where is gold heading?
Marc Faber: ”When I look at the market action today, I would like to see the next few days, because it may be a one-day event.