Existing monetary policy destabilising US eco: Marc Faber

On US economy

The Federal Bank has slashed interest rates which should have been economically supportive. But as oil prices went up, it was like an additional tax on the consumers and that must have pushed the consumer in America over the edge. So all I want to emphasize that the monetary policy assets—as structured in the US has a destabilising impact on the economy and also on the assets’ markets.

Fed’s costly mistake

If we agree that excessive credit and excessive leverage led to the crisis, then what the Federal Reserve is doing is giving a wrong medicine to the patient—they are giving the drug addicts more drug instead of sending them to rehabilitation, which is not good for the economy. So I think that the whole policy will eventually end in another disaster but we don’t know when and many things can happen in between.

Asia: A growth story

Asia can grow without the US and without the consumption increasing in the US. Secondly, one of the drivers for economic growth in Asia, particularly in India, is the real estate market. But, in many countries including India, Vietnam and China there is hardly any mortgage market. So that can be expanded very dramatically. From within the country they can easily grow around 5- 6% without foreign trade and with foreign trade in my opinion around 7-8%.

Emerging market opportunities

In aggregate all emerging markets (EMs) combined are larger than the developing countries of western Europe, the US and Japan—they have many indicators that show how big the emerging markets have become and also the big difference is that the EMs have the money unlike the US and they also have much less leverage.

For Marc Farber’s complete comments, watch video.