A Quote by Marc Faber
The fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won't. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols... Very happy. Very good for the Fed. Congratulations, Mr. Bernanke.
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Hank Paulson, obviously, had spent his career on Wall Street, had a deep knowledge of the Street, and also was a very forceful personality, had a very good relationship with the president, and was in a very different place, for example, than Ben Bernanke, who is an academic, quiet guy: spent most of his time thinking about monetary policy.
There is no doubt that the Fed's large-scale asset purchases have caused major increases in a number of asset prices in the economy. This is especially true of mortgage backed securities and corporate bonds, and quite possibly of equities as well. For those people and institutions holding those things, the run up in prices has been a wealth bonanza.
During the Greenspan-Bernanke era, the Fed has embraced the view that stability in the economy and stability in prices are mutually consistent. As long as inflation remains at or below its target level, the Fed's modus operandi is to panic at the sight of real or perceived economic trouble and provide emergency relief.
We have a raising wages agenda. And that includes tax policy, trade policy. TPP is a very bad agreement. Covers 40 percent of the world's economy, and it will cost us jobs. It's not well-drafted. It's an agreement, an investment agreement that will benefit Wall Street a lot, but not working people.
The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
As financial markets continue to broaden and deepen, the behavior of asset prices will play an important role in the formulation of monetary policy going forward, perhaps a more important role than in the past.
Now, McDonald's is a very good indicator of the global economy. If McDonald's doesn't increase its sales, it tells you that the monetary policies have largely failed in the sense that prices are going up more than disposable income, and so people have less purchasing power.
I've lived through periods of illiquidity before. Asset prices come down. The economy slows or even goes into recession. Then the cycle re-starts. We buy at lower prices with less leverage.
Well, I think as long as people are talking about stimulus, I think the Fed will be thinking about cutting rates because monetary policy is the better way to go because you can turn it on and turn it off.
Asset bubbles have happened even without not-so-easy money. And, in a depressed economy, where alternative uses of money are not great, people are going to bid up the prices of profitable corporations and stuff like that.
Inflation is certainly low and stable and, measured in unemployment and labour-market slack, the economy has made a lot of progress. The pace of growth is disappointingly slow, mostly because productivity growth has been very slow, which is not really something amenable to monetary policy. It comes from changes in technology, changes in worker skills and a variety of other things, but not monetary policy, in particular.
The theoretician of the Marxist revolution in Cuba certainly wasn't Castro. It was Don Carlos Rafaelo Rodriguez. He was the theoretician and very often people say he will take over. But I don't believe it. I think that it's a very good combination - the Catholic man working together with a man like that who has everything pretty well planned.
Credit expansion and money printing hasn't filtered much to ordinary people. It's boosted asset markets, real estate and stocks. So well-to-do-people have done very well.
If you have a traditional view of economics, you're probably thinking of Ben Bernanke making Fed policy, or the guys creating financial derivatives at Goldman Sachs.
Interest rates are to asset prices what gravity is to the apple. When there are low interest rates, there is a very low gravitational pull on asset prices.
If the public understands the central bank's views on the economy and monetary policy, then households and businesses will take those views into account in making their spending and investment plans; policy will be more effective as a result.
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