For four years the FOMC has been printing money to keep interest rates low in order to stimulate the economy. For just as long investors have been hand-wringing over the long-term dire implications of such quantitative easing. The basic idea is that the Fed will eventually stop printing and all assets would tumble, priced as they are relative to risk-free money. With the Bank of Japan, Europe, China and seemingly every other major economy now doing variants on this form of stimulus, the "race to debase" currency has become a national phenomenon.
Marc Faber, the editor of the popular Gloom, Boom, Doom Report has been among those critical of central bank stimulus. Now he says the party is REALLY over.
Joining Breakout by phone from Thailand, Faber says the Fed has painted itself into a corner. The Fed can’t keep printing, he says. If and when they stop, asset prices will fall. If the stimulus doesn’t stop it means there is a weak economy for the foreseeable future. In such a scenario the sickness afflicting the world will never be allowed to run its course.
Faber was able to capture a good deal of the rally from the March lows. Now he’s gone to the other side. Faber went bearish on U.S. stocks in September and is urging investors to rotate in European telecom companies and invest in places like Vietnam.
“People can actually open an account in Vietnam or trade through a Singapore broker and purchase Vietnamese shares,” he offers. Once the developed economies are forced to reap what they’ve sewn, the only way to profit will be by going where the meddling of the FOMC had the least direct impact.