Faber: For Sure There Will Be QE3 But Not Right Away
Here is a good 17-minute Bloomberg video with Marc Faber. He talks a lot about Mexico and he is bullish on that economy. As for the US, his view, like mine, is that printing money does give a temporary boost to economic activity. However, in the long run, it doesn’t lead to sustained economic growth because it creates a misallocation of resources by obscuring price mechanisms for those allocating capital. This is what’s happening now in commodities, junk bonds, pre-IPO social media companies and emerging markets. People are drawn to these segments because of a perceived Bernanke put.
As for QE3, Faber expects the Fed to continue down this path if and when the economy and asset prices correct downward. I agree. I see the Fed finishing QE2 and pausing to re-evaluate the state of the economy. If the economy or stocks have a relapse, the Fed will start up another program of quantitative easing. See my recent post on Thomas Hoenig for more in this vein.
Much more in the video below.