Skip to main content

Marc Faber: rate cuts no help

Marc Faber spoke with Bloomberg News (audio) in Manila today to address the question of whether today's historic global rate cuts will help the financial markets, particularly global equities.

Bloomberg - "Faber says rate cuts will fail to stem equities rout":

"Investor Marc Faber said a series of coordinated interest-rate cuts by central banks including the Federal Reserve to ease the economic effects of the global financial crisis won't halt a worldwide slide in equities.

``Artificially low interest rates'' that encouraged consumers and banks to take on more debt were the main cause of the credit-market turmoil that caused the failure of Bear Stearns Cos. and Lehman Brothers Holdings Inc., according to Faber, who predicted the 1987 stock-market crash.

``The slashing of interest rates will not help very much,'' Faber, who manages $300 million, said in an interview in Manila. `They may cushion somewhat the decline but make matters worse.''"

In fact, not only will this coordinated easing of monetary policy not help, it is likely to make the economic problems worse. As Faber points out, the root of our current problems lie in the previous cycle of overly accomadative monetary policy (artificially cheap money).

Would you attempt to solve a crisis with more of what brought it on in the first place? Central bankers would, and did today.

"...The Fed cut its key rate to 1.5 percent, a level last seen in September 2004. Low interest rates on deposits have pushed consumers to speculate on higher yields in other assets including stocks, real estate and commodities, Faber said.

``Had central banks around the world kept interest rates that encourage saving we won't have these problems today,'' the investor said. ""

For an opposing view, see almost any cable news channel anytime tonight. I'm sure the usual panoply of government/Wall Street shills will be praising these moves to the sky.

Related posts:

1. "Global rate cuts have arrived" - Finance Trends Matter.

2. "Coordinated central bank action fails to relieve money markets" - Naked Capitalism.

3. "Timeline: Fed actions to boost liquidity" - Reuters.

4. "How's that bailout bill working out?" - Bear Mountain Bull.

5. "Faber believes market is oversold" - Stock Market Advantage.

Popular posts from this blog

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi