Wednesday, November 13, 2013

Money printing is a vicious cycle

Marc Faber on the topic of the current fed policies of money printing, bailout of companies and fighting deflation:

 If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.

It is clear that such policies do lead to depreciation of the currency, either against currencies of other countries that resist following the same policies of massive monetization and state bailouts or against gold, commodities and hard assets in general. 

The rise in domestic prices then leads at some point to a “scarcity of the circulating medium,” which necessitates the creation of even more credit and paper money.