While we're all aware of the danger associated with printing too much fiat money, Faber challenges that the world's fiat currencies tend to be in greater danger than any of us understand.
Here's how Faber views rising cost of living: If you start to print, it has the biggest impact. Then you print more - it has a lesser effect, unless you increase the rate of money printing very significantly. And, the third money printing has even less impact. And the problem is such as the Fed: They printed cash because they wanted to lift the housing industry, but the housing market is the only asset that didn’t go up considerably.
In general, I think that the buying power of money has diminished very considerably over the last ten, twenty, 30 years, and will continue to do so. So being in cash as well as government bonds is not a safety against this depreciation in the value of cash.
Additionally, Faber explains how the Fed can't possibly forecast the actual economy with accuracy because they're “academics,”
Essentially, these people lack the experience to understand the large picture. They aren't businessmen managing books; they don't go shopping as well as spend time at the local pub; they do not need to sell products or services to make a living for themselves. They are compensated by the government and lack an insider's understanding of the way the actual U.S. economy genuinely functions. Perhaps this is why these people print money and their trusting idealism lets them believe it will bring prosperity back into our nation. Regrettably, that's simply not true. If it were, every country in the planet would thrive in prosperity as well as live happily ever after. Free shipping on all Tracfones http://cellmobiledeals.com
There are no Utopian societies. Printing limitless amounts of paper money will not change that fact. And the unintended effects of firing up the printing presses time and again may lead to unprecedented hardships in the United States - and across the globe.
Once again, Marc Faber tackles this issue stating: We all know one unintended consequence, and this is the middle class and the lower classes of society, say 50% of the US, has instead been hurt by the increase in the amount of money in the sense that commodity prices in particular food and energy have gone up very considerably. And, since below 50% of income recipients in the US spend a lot, a much larger part of their income on meals and energy than, say, the actual 10% richest people in America as well as highest income earners, they have already been hurt by monetary policy. In addition, the lower income groups, if they have savings, traditionally these people keep them in safe deposits and in money because they don’t have much money to invest in the first place. So the increase in the value of the S&P hasn’t helped all of them, but it helped the 5% or even 10% or 1% of the population that is the owner of equities. So it's created a broader wealth inequality, and that is a negative from the society point of view.
Amidst severe currency devaluation, this turmoil has the potential to lead to malinvestment that will, in turn, produce asset bubbles that'll blow up in chaos when the bubbles burst open. Meanwhile, the lower classes may embark on a treacherous trip as they are unfairly punished through the printing frenzy.
All of these elements considered, it's very likely the nation will undergo risky as well as volatile social and political dilemmas if this market adjustment ensues. Capitalism would be a breath of fresh air for America right now, but the Fed is gradually taking that way of life away from all of us during present tumultuous economic times. Experts and analysts recommend buying gold and buying silver for the long term. How High Will Silver Go? Learn More >> http://silver-