Perma-bear investor Marc Faber warns that central banks around the globe—from the Bank of Japan (BoJ) to the European Central Bank (ECB)—are buying almost all financial assets, which might eventually create universal socialism.
The Thailand-based Swiss investor said asset buying by global central banks is not working to stimulate the economy, expecting these policies will expand.
“The central banks aren’t interested in what works, they’re interested in their own prestige,” Faber, the publisher of The Gloom, Boom & Doom Report newsletter, told CNBC on Sunday. (Source: “Faber: Central banks will create global socialism,” CNBC, March 13, 2016.)
“I could see a situation where at the end the government owns all the corporations and all the government bonds and then we are back into socialism, into a planning economy,” 70-year-old Faber said.
The BoJ announced plans in December to increase purchases of exchange-traded funds (ETFs) and lengthening the maturity of bonds it purchases to encourage investment in the economy. In January, it adopted negative interest rates for the first time ever. The BoJ today downgraded its view of the economy and maintained interest rates at -0.1%.
The U.S. Federal Reserve started its once-in-a-lifetime bond-buying program, called quantitative easing (QE), in 2009, on the heels of the 2008 financial crisis. It began tapering the program in 2013 and officially ended it in late 2014.
On Thursday, the ECB announced further easing measures, including expanding the size of its bond-buying program to 80 billion euros (US$89.23 billion) worth of assets a month, to include corporate bonds.
Marc Faber said he expects these programs will only increase: “The governments in my view, with their agents the Federal Reserve and other central banks and with the treasury department, they will do anything not to let asset prices go down,” said Faber, who is the director of Marc Faber Ltd, which acts as an investment advisor and fund manager.
“If the stock markets go down, I’m convinced all the central banks will buy stocks…all of them,” he said, citing Hong Kong’s purchase of stocks during the Asian Financial Crisis in the late 1990s.
In an interview with Bloomberg last month, Marc Faber advised investors to own gold and silver because these zero-yielding metals become a high-yield asset in a negative interest rate environment. (Source: “Gold Bulls Feast as More Central Banks Drive Rates Below Zero,” Bloomberg, February 18, 2016.)
Gold is still the best-performing investment so far this year with a 16% gain.