The unintended consequences of printing money, which favours gold

Leading investor Marc Faber thinks money printing brings more and unpredictable volatility and believes that it is a must, going forward, for every individual and investor to own gold.

Marc Faber is one of the very successful investors on earth. He recently explained his view on the monetary policies of the developed regions in the world. Obviously he is no fan of the Keynesian way of thinking which is applied by the central banks in the developed regions.

The Keynesian policy considers easy money as a way out of economic recession and deflation. They argue that money creation smoothens out the business cycle. In his presentation, Marc Faber demonstrates that these kind of interventions achieve exactly the opposite: they make the business cycles much more violent, create extreme fluctuations in economic activity and result in far more financial volatility. In his opinion, the essential problem is that the Keynesian way of thinking tries to solve long term structural problems with short term fixes, with an emphasis to create bubbles to help the economy. However, Mr Faber notes that bubbles usually hurt the majority of market participants.

Based on the US Fed philosophy you can’t identify bubbles, but if they burst you can take measures to support asset prices by flooding the markets with liquidity (read: by “dropping dollar bills from an helicopter” in order to prevent deflation). In line with that way of thinking, the Fed has slashed interest rates and created liquidity over the last 30 years on a continuing basis.

For full release, click here


  • No comments so far

Comments on this article are closed.

JSE ALSI54,055-0.13%2015-05-23 07:12 +0000
Hang Seng27,9931.65%2015-05-23 07:13 +0000
Nikkei20,2640.30%2015-05-23 07:13 +0000
NASDAQ5,089-0.03%2015-05-23 07:13 +0000
Dow Jones close18,2862015-05-23 07:13 +0000
S&P 500 close2,1312015-05-23 07:13 +0000
Gold1,206.21-0.03%2015-05-23 07:12 +0000
Silver17.11-0.29%2015-05-23 07:13 +0000
Platinum1,146.25-0.67%2015-05-23 07:13 +0000
Palladium789.970.00%2015-05-23 07:13 +0000
Gold ZAR/oz14,300.10-0.25%2015-05-23 07:13 +0000
Brent Crude65.37-0.34%2015-05-23 07:13 +0000
USD / Euro0.9080.87%2015-05-23 07:12 +0000
CAD / USD0.814-0.63%2015-05-23 07:14 +0000
ZAR / USD0.084-0.34%2015-05-23 07:12 +0000
UAD / USD0.782-0.91%2015-05-23 07:14 +0000


Verification Image