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Marc Faber Sees Interest Rates, Dollar Rising in Key Market Reversal

Business Intelligence Middle East

Marc Faber the Swiss fund manager and Gloom Boom & Doom editor believes global markets are heading for an "important turning point" as interest rates begin to rise within about three months and the US dollar gains

Speaking to reporters Tuesday during the World Knowledge Forum in Seoul, Faber said investors should buy stocks and sell bonds as a new round of quantitative easing may create a new ‘credit bubble’.

"Instead of interest rates going down, they could start to go up, instead of the dollar being weak, it could strengthen," Bloomberg quoted Faber as saying. "I’m ultra-bearish on everything, but I believe you’ll be better off owning shares than government bonds."

Since September the dollar has lost 8% against a basket of currencies, about 10% against the euro, around 11% against the Australian dollar and about 1.3% this month after Federal Reserve Chairman Ben S. Bernanke signaled he may add money to the economy.

The famed investor has been repeating his long-held views that the Federal Reserve’s expansionist monetary policies are the causes of the financial crisis by creating a large amount of leverage in the system and creating a credit-addicted economy.

While the dollar may rebound in the short term because it’s been oversold, a rally won’t last because the US will be forced to print more money to pay its debt, he recently said.

Faber believes that at some stage, about 50% of tax revenues will be used just to cover the interest payments on the US government debt. He says this is unsustainable and at that point the the Fed will be really forced to print more money.

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© 2010 Business Intelligence Middle East

Dr. Marc Faber [send him mail] lives in Chiangmai, Thailand and is the author of Tomorrow’s Gold.

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