Marc Faber was on CNBC talking about the intersection of asset markets with monetary policy. His view is that the Fed will be accommodative for the indefinite future, resulting in a move into riskier assets by investors starved for real returns in fixed income. This could be a boon for asset markets in nominal terms. He believes that, while the Fed may raise rates, it will continue to be behind the curve. This policy will act as a tax on consumers as price inflation of basic necessities will run well ahead of the rise in wages.
I should note that the discussion of hard-working rich people versus lazy poor people is not a view I share. You can see Becky Quick’s viscerally negative reaction to his comments at about the 9 minute mark. I applaud her pushback on this score. All too often wealth is accumulated illegitimately through connections.
Faber makes an argument that enables the deception I have dubbed corporatism masquerading as liberty. Moreover, the undertones are offensive. Faber is making a manifest destiny type of argument based on a belief in the so-called protestant work ethic. Essentially, Faber is implying that wealth is usually the visible manifestation of a strong work ethic whereas poverty could be considered a visible manifestation of the opposite. Am I reading this wrong? And if so, how do we explain the bailouts based on this? The logic simply doesn’t hold together.
I agree with Faber, however, that inflating the money supply acts as a hidden tax that redistributes wealth via asset markets.
On the whole, this has to rate as one of Faber’s worst performances, in my view.