Marc Faber: Central Banks Will Not Tighten Rates Ever Again

The Business Insider ^ | 5-25-2010 | Joe Weisenthal

[blam]

Marc Faber: Central Banks Will Not Tighten Rates Ever Again

Joe Weisenthal
May 25, 2010, 4:42 PM

Marc Faber gave a presentation at the Mises Institute Conference in Manhattan today, and Andrew Mellon at BigGovernment.com (via The Daily Crux) was on hand to take notes.

Among his points:

* Central banks will never tighten monetary policy again, merely print, print, print

* Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended

* “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”

* “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004

* As for the top one, it seems extreme, but we're beginning to believe that, as both the ECB and the Fed are probably both in loosening mode, and markets are predicting rate cuts in Australia. Maybe "never" is strong, but we're certainly inclined to think rate hikes won't be coming for a long long time.

[snip]

[rabscuttle385]

*Ping!*

[stephenjohnbanker]

Why not?

What is wrong with 25% unemployment?

[equalitybeforethelaw]

Whoopee, free money. That will fix everything!!!

[Nervous Tick]

Central banks will never tighten monetary policy again

Mark Faber... faber... now where have I heard that name? Oh yeah, the guy that emphatically stated that gold will never, ever, ever again drop below $1000/oz!

[muawiyah]

I spent 10 years focusing on a single stock index ~ and everytime the Fed raised the rates 1/4 pt. that index dropped. When they lowered the rates 1/4 pt. the index went up.

Realistically stock indexes should reflect the prosperty, or lack thereof, of the group of stock selected for the index ~ NOT the fed funds rate!

Further, if I can delve deeper into the arcana of stock trading and discount rates, the "invisible hand" of the market place should reward those who make wise judgments and punish those who are injudicious.

Instead, the Federal Reserve turns otherwise correct judgments into gross stupidities, and vice versa.

So, how to eliminate the problem? Well, if the Fed doesn't change rates anymore then there goes that problem!

[vets son]

Gold very well may never go below 1000.00 again and if it ever does today’s dollar will be worth less 1/10 of a cent.

Other than his ponytail I love this guy

[stephenjohnbanker]

“Further, if I can delve deeper into the arcana of stock trading and discount rates, the “invisible hand” of the market place should reward those who make wise judgments and punish those who are injudicious. “

I agree.

[Nervous Tick]

>> Gold very well may never go below 1000.00 again

Or, then again, it may.

>> if it ever does today’s dollar will be worth less 1/10 of a cent.

Lost me there! Say what?

>> Other than his ponytail I love this guy

I don’t have anything against him, myself... I think he’s a hoot (ponytail and all).

[throwback]

The thing I never get is this bit of magic that central banks “decide” what the interest rate will be. I understand they can print money, but it only has value if people think it does. So if I'm holding a $20 because I mowed someone’s lawn and received it as payment, it's worth something. I can loan it to someone else for x% interest. Now along comes central bank Ben he decides to print his $20 and it represents nothing, but he'll loan it at 0% to the same guy. Isn't Ben just destroying the value of my money and hoking up what the real interest rate should be?

[KoRn]

He’s probably right, as long as we’re willing to ‘print’ money in order to buy bonds from ourselves while Bondzilla is chained up/encased in concrete at the bottom of the Mariana Trench. The game could go on indefinitely. lol

[vets son]

What I mean there is if deflation hits rather than inflation gold will go down as well.

[Zakeet]

Actually, the idiots will destroy the dollar through hyperinflation; the US dollar will be replaced by a new currency; the new monetary unit will be fixed to a set commodity beyond the control of the government (probably gold); interest rates will again adjust to the point where they reflect a true cost of capital.

This event has happened hundreds of times throughout history to every economy that has adopted a fiat currency and/or debased it money. Neither Helicopter Ben, nor Tippy Tim, nor the Big Wee Wee can change it.

Always remember, those who fail to learn from history are doomed to repeat it.

[Nervous Tick]

>> What I mean there is if deflation hits rather than inflation gold will go down as well.

I agree about gold — but if deflation hits, your cash dollars will be worth MORE, not less. That’s what deflation means.

After deflation, today’s dollar would be worth more in terms of gold, or any other good or service.

[tired1]

The money never really exists, however getting someone to borrow it puts the borrower on the hook if/when he defaults.

[Nervous Tick]

>> Bondzilla is chained up/encased in concrete at the bottom of the Mariana Trench

An interesting metaphor. And thanks a lot, I’m sure I’ll be seeing Bondzilla soon, in one of my financial nightmares! :-)

[Fred]

awesome thxs for the ping

[Fred]

Dude, Faber calls the bottoms and he calls the tops. That is good enough for me...

and, he also was asked if he listens to Obama..answer...Whenever Obama talks, I switch to Lady Gaga..

[Vince Ferrer]

* Central banks will never tighten monetary policy again, merely print, print, print

This is probably true, because the fed cannot raise the interest rate when the US is running such a huge deficit. If the fed raised rates, the US could not service its own debt, and would default.

[vets son]

Thanks for the clarification. I tend to get that mixed up.