“The question is not tapering. The
question is at what point will they increase the asset purchases to say
$150-B, $200-B, or $1-T a month,” Mr. Faber said Monday in a TV
interview.
The Fed is now
buying $85-B of Treasury and mortgage bonds a month in what is known as
quantitative easing is now dubbed (QE-Infinity).
When the Fed
started buying long-term bonds, in what was called QE-1, it said the
program would last 6 months. But it started another round of assets
purchases, and then another, without setting a firm ending dated. That
is why the latest reiteration of the program is called QE Infinity.
“Look,
every government program that is introduced under urgency and as a
temporary measure is always permanent,” Mr. Faber explained. “The Fed
has boxed itself into a position where there is no exit strategy.”
The continuing QE is counterproductive, he noted, stating benefits flow only to a limited number of people.
And, although inflation continues to remain subdued, Mr. Faber sees “a colossal asset bubble” as well as a debt bubble.
“The
quantitative easing is wind at the back of the economy,” he said. “But
when they unwind quantitative easing, which they will ultimately have to
do, it will be a head wind in the face of the economy. And then it will
not be so much fun.”
Few believe the Fed will increase QE or
make it permanent, more experts are predicting the central bank will
maintain its current level of bond purchases into next year because of
growth disruptions caused by the government shutdown.
A survey of
40 economists indicated the Fed will decide to reduce its purchases to
$70-B a month in March 2014, to $25-B by July and end the purchases in
October 2014.
The shutdown cut economic growth by 0.3 percentage
points in Q-4, the economists said. It also suspended data collection
the Fed uses to set policies.
It is going to be harder to signals
from the data, Fed’s policies are tied to the data, they waiting for
more confirmation the economy is moving in the direction of the Fed’s
outlook, and they do not have data or the data is inconclusive, then the
Fed will not feel confident enough in the outlook to make a clear
determination to pare or not pare. This is a continuing story, stay
tuned…
- Source, Live Trading News:
Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.
