Marc Faber Says QE2 Will Not Work Precisely Because Excessive Monetary Growth Caused the Crisis
Marc Faber the Swiss fund manager and Gloom Boom & Doom editor sees the Federal Reserve’s monetary policies risking the creation of other asset bubbles similar to the ones that led to the financial system collapse.
He says it is important to understand the causes of the crisis, insinuating that you can’t use the same tools to solve the crisis as the ones that caused it.
Speaking to CNBC on Tuesday, Faber attributed the cause of the crisis to excessive monetary growth.
"The cause of the crisis is excessive monetary growth leading to excessive debt growth, to the Nasdaq bubble, to the housing bubble that then led to overconsumption in the US and a symptom of over consumption in the country is always growth in trade deficit that then shifts production overseas because one trade deficit in one country is offset by trade surplus somewhere else. And to simplify matters lets say it was China," Faber said.
Asked if the global criticism of Mr Bernanke and the central bank following the announcement last week that the Fed will buy an additional US$600 billion of Treasuries through June, in a bid to reduce unemployment and avert deflation, Faber said foreign leaders ought to be thanking the Fed for its weak-dollar policies.
"Actually, the US monetary policies have been very good for Asia, specifically for China because it fostered industrial production growth in China, employment growth, wage increases, domestic consumption, increased demand for raw materials, that then lifted commodity prices," he said
"For that actually the developing world, the emerging economies including China, India , Vietnam, Brazil and so forth should all send a thank you note to Bernanke, Faber added.