The Federal Reserve’s reckless monetary policies have created a colossal asset bubble, which could trigger a stock market crash and global economic collapse in 2016. At least, that’s the opinion of famed market commentator Marc Faber.
In an interview with CNBC on Wednesday, the editor and publisher at The Gloom, Boom & Doom Report says central banks shouldn’t have pushed interest rates to the current artificially low levels. Excessive money printing, he argues, has resulted in rapid inflation that has not been reported through official statistics. (Source: Faber: Fed should have raised rates long ago, CNBC, September 16, 2015.)
“If you look at rentals in London where you live or in New York or in other cities in the U.S., they have of course been going up much more than the CPI [consumer price index] would suggest,” he explains. “Even the day before yesterday, Donald Trump was interviewed. He said, Obamacare is a disaster because the premiums have gone up close to 50% for some people.”
“We have to define what inflation is,” Faber continues. “Inflation is basically the increase in the supply of money and credit. There are symptoms. You can have wage inflation. You can have commodity inflation.”
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Where has all the money been going? Asset prices.
“What we have since essentially March 2009, when the S&P 500 bottomed out at 666 is a colossal asset inflation. […] Art prices went up. Property prices went up.”
“I don’t believe that money printing and artificial low interest rates have actually helped much except for asset prices. But the concentration of assets is very limited. It’s not among the broad public. It’s among wealthy people like you, me and the financial people you just interviewed at the Milken Institute.”
Faber concludes by saying the great asset bubble could end with an economic collapse and global stock market crash in 2016. Only a constant influx of cheap money, he believes, can support high valuations. Any shock to the system, such as higher interest rates or a slowing economy, could trigger a financial crisis.
“The Fed and other central banks have misjudged the global economy. The global economy is not accelerating as the other economies were expecting. It’s badly decelerating. In many countries, we’re already in recession.”