Marc Faber: Money printing dicates market movements

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The following is a partial transcript of Jim Puplava‘s great interview on Financial Sense with Marc Faber, author of the Gloom Boom & Doom Report. In a wide-ranging interview, they discuss inflation, China, gold, war, resource scarcity, democracy, education, market volatility and the importance of diversification. Click here to listen to the audio interview.

Jim Puplava: Marc, I want to begin our discussion with a topic you have addressed in several recent newsletters, which is the decline in morality and ethics within the financial system and within society. In your opinion, is this the result or consequence of cheap money and currency debasement.

Dr. Marc Faber: Well I think to some extent yes, because it’s created a tremendous wealth inequality and at the same time, it created tremendous power in the financial sector. So the combination of the two was certainly a contributing factor. And if you read about the history of hyperinflation in the world, in each case there was a tremendous decline in morality.

Jim Puplava: Marc, I have known you for several years now since we first met at the San Francisco Gold Show. And since I have known you, you have been very consistent on your views on inflation. Given the severity of the financial crisis, and the deflating asset prices that we have seen—for example, real estate in the United States, and now we have seen even the pull back and decline in a merging markets—have you altered your views or changed them in any way, given the recent downturn in many of the emerging markets.

Dr. Marc Faber: Well if we understand inflation as a monetary cause, in other words, you increase the quantity of money and of debt, then obviously, we have inflation in the system. Now Mr. Bernanke, he was under the impression that he could just drop dollar bills onto the United States and revise the housing bubble. But the problem with this view is that if you drop the dollar bills, in other words if you increase the quantity of money, it does not necessarily have to revive all asset prices, and all prices at the same time. So housing did not respond, but as you know since March 2009 equities have rebounded on the S&P from 666 to now 1200, and at the same time we have significant price increases in the system in insurance costs and in educational costs. There was a statistic recently published that the turkey this year for Thanksgiving would cost 13.4% more than a year ago. Nobody can tell me that they think there is deflation in the system. And I see that myself, because I travel a lot that there are leakages—when you print money in the U.S. it does not have to generate inflation in the U.S., it can generate inflation in India or China, or in Vietnam or in Hong Kong, or in Singapore. In that sense, there was a lot of inflation.

Jim Puplava: You know, as a believer in devaluation and currencies, I was recently reminded of this last Wednesday. Tuesday evening Marc, I read several well-known respected technicians like John Rokes, Stan Winestein, and Paul Desmond. And they were talking about the breakdown of the markets. And before I went to bed Tuesday night, the futures were down. Lo and behold, I wake up the next morning to the news of China lowering its bank reserve requirements, and then we got a love-fest to Central Bankers and new money printing. I thought of something I heard you say, that whenever markets fall, 20% or more, Central Bankers will immediately engage in a new round of money printing. And that’s exactly what happened.

Dr. Marc Faber: Yes, I mean the market keeps going up at the present time because of easing measures and today because of the rumors or the statements that the ECB is one way or the other, in one form or the other would essentially bailout Europe. So this has not really to do with economic fundamentals, which are not particularly good, but it has to do with money printing.

Click here for the full transcript.

Source: Jim Puplava, Financial Sense, December 7, 2011.

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