We have a government bureaucracy class that essentially pursues its own interests and within that class you have the treasury department and you have the central banks.
The thing is, I know quite a few members and former members of the Fed, this is an institution, it’s a club of, say on paper, educated people but with no business experience. They are not familiar with the problems of the businessmen and they have developed group thinking. All of them are money traders.
Now, some are maybe larger money traders like Eric Rosengren of Boston Fed or Yellen[Janet], and some are maybe less money traders.
Basically they all trade money or intervene with monetary measures if the economy slows down or has a recession, a recession of degree.
And my sense is that the government and the central bank will not solve the problem of central banks, only a major crisis that completely discredits the central bankers and the banking system will solve the problem.
(Pictured above: Janet Yellen, Eric Rosengren)
Source: Marc Faber Interview
"I would say basically we have democracies but it should be clear to anyone who lives in Western Europe or in the U.S. that the individual on paper he has plenty of rights but in reality he can be stopped by an authority at the airport and kept in custody for a day or two and harassed and so forth and so on. So his rights are actually very limited. And we have today governments in Brussels and also in Germany and in Switzerland, basically everywhere, where they do not represent the will of the people. In other words they don’t care about the people. They care about themselves."
Source: MARC FABER Interview
Marc Faber reaction today during a Bloomberg TV interview is even more prescient. Fearing that Janet Yellen "would make Bernanke look like a hawk," Faber explains that he is not entirely surprised by today's no-taper news since he believes we are now in QE-unlimited and the people at the Fed "never worked a single-day in the business of ordinary people," adding that "they don't understand that if you print money, it benefits basically a handful of people." Following today's action, Faber is waiting to seeing if there is any follow-through but notes that "Feds have already lost control of the bond market. The question is when will it lose control of the stock market." The Fed, he warns, has boxed themselves in and "the endgame is a total collapse, but from a higher diving board."
Faber on Janet Yellen's No taper for now:
"My view was that they would taper by about $10 billion to $15 billion, but I'm not surprised that they don't do it for the simple reason that I think we are in QE unlimited. The people at the Fed are professors, academics. They never worked a single life in the business of ordinary people. And they don't understand that if you print money, it benefits basically a handful of people maybe--not even 5% of the population, 3% of the population. And when you look today at the market action, ok, stocks are up 1%. Silver is up more than 6%, gold up more than 4%, copper 2.9%, crude oil 2.68%, and so forth. Crude oil, gasoline are things people need, ordinary people buy everyday. Thank you very much, the Fed boosts these items that people need to go to their work, to heat their homes, and so forth and at the same time, asset prices go up, but the majority of people do not own stocks. Only 11% of Americans own directly shares."
On interest rates policy:
"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."
On what the endgame is:
"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."
On Janet Yellen:
"She will make Mr. Bernanke look like a hawk. She, in 2010, said if could vote for negative interest rates, in other words, you would have a deposit with the bank of $100,000 at the beginning of the year and at the end, you would only get $95,000 back, that she would be voting for that. And that basically her view will be to keep interest rates in real terms, in other words, inflation-adjusted. And don't believe a minute the inflation figures published by the bureau of labor statistics. You live in New York. You should know very well how much costs of living are increasing every day. Now, the consequences of these monetary policies and artificially low interest rates is of course that the government becomes bigger and bigger and you have less and less freedom and you have people like Mr. De Blasio, who comes in and says let's tax people who have high incomes more. And, of course, immediately, because in a democracy, there are more poor people than rich people, they all applaud and vote for him. That is the consequence."
We’ve lived beyond our means in most countries and to solve that problem is not going to be without significant pain. But effecting the right direction would be to take the depression away from central bankers to increase and cut the money supply and to intervene into the free market essentially with monetary measures.
I think that would be the first step in the right direction because if you look at what has happened in the economy, one of the safest goals of central banks is price stability.
Well where has there been price stability over the last 15 years? We had a colossal NASDAQ problem and then a collapse and then a colossal credit bubble and housing bubble and then a collapse and then we had a colossal bubble in commodities in 2008 when the oil price went to 147 Dollars, and so if the goal is price stability, basically the fiscal and in particular the monetary interventions have actually led to more instability rather than stability.
Well, the problem with zero interest rate policies and money printing is that it distorts all evaluation models, it’s very difficult to value something. I could say, okay, this house in Mayfair or on Park Avenue or Madison Avenue in New York is expensive if I compare it to, say a quantity of money that’s been floating around the world, but maybe it isn’t. Is a Warhol painting expensive or cheap? Well it’s up, say 12 times over the last ten years, so it’s gone up a lot but the quantity of money has also gone up a lot and the number of billionaires around the world has also expanded and so forth and so on. So I can say, maybe gold relative to a Warhol painting or relative to the U.S. stock market is not that expensive or relative to Hampton property. Obviously those are up from 250 Dollars in 1999 to now over 1.300, so, expensive or cheap is a very difficult concept in the present environment.
