Loose monetary policies pushed through by the Federal Reserve as well as at other central banks will literally "destroy the world" by sending the global economy swelling, bursting and then tanking, said Marc Faber, publisher of the Gloom Boom & Doom Report.
The Fed recently announced plans to stimulate the U.S. economy by purchasing $40 billion a month in mortgage-backed securities from banks, a monetary policy tool known as quantitative easing that pumps liquidity into the economy in a way that pushes down interest rates to encourage investing and hiring.
Critics say the tool basically prints money out of thin air and also plants the seeds for mounting inflationary pressures down the road.
Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans
The policy measure also weakens the dollar while sending stock prices higher, but once the sugar high ends, expect markets and the economy to pop since all that liquidity won’t help the average American and fuel the underlying demand for goods and services that the economy lacks.
“The fallacy of monetary policy in the U.S. is to believe that 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. I’m happy,” Faber told Bloomberg TV.
“My asset values go up but as a responsible citizen I have to say the monetary policies of the U.S. will destroy the world.”
The United States isn’t alone when it comes to expansionary monetary policies.
Other big central banks are pushing through their own policies, as well.
“The Europeans will print money. The Chinese will print money. Everybody will print money and the purchasing power of paper money will go down,” Faber said.
Such policies should send investors opting for stocks over bonds.
“I don’t like bonds. I don’t particularly like equities, but I think equities are a better space to be in than bonds,” Faber added.
Other high profile investors have criticized the Fed’s policies as well.
“The dollar will go down in value and inflation will start rearing its ugly head,” billionaire real estate mogul Donald Trump told CNBC.
Meanwhile, quantitative easing will do little to jolt the one area of the economy that threw the country into recession and continues to dampen recovery — housing.
Interest rates are already low as it is, and the Fed’s liquidity injections won’t spark the demand the sector and the broader economy need to see.
“Mortgage rates are already very low,” Trump said.
“But the banks aren’t lending. So it doesn’t make any difference.”
Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans
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