While The IMF recognizes the gaping chasm between collapsing global growth expectations and market exuberance, they remain confident that US growth will save the world. This, Marc Faber explains to a wise Bloomberg TV panel, is why stocks around the world (and now in the US) are starting to weaken, "the recognition that global growth is not accelerating," as the narrative would like us all to believe, "but is slowing." Central Bank money-printing has enabled deficit-heavy fiscal policy and, Faber simplifies, "the larger the government, the less growth there will be from a less dynamic economy." Policy-makers have only one tool - money-printing, and QE99 is coming.
In true Keynesian hockey-stick style, each time a current year's growth expectations slide, the following year's expectations are ratcheted higher... and if stocks weaken into that 'ratcheting' then the central banks unleash more QE... As the following chart shows, the gap between the 'efficient' market and fundamental reality has never been wider and - as Faber implies - policy makers simply cannot allow that gap to be filled (and all that created wealth to once again evaporate)... with QE4EVA coming to an end,the market is forcing "someone"'s invisible hand to act - demanding moar money-printing or the Keynesians will once again be proved entirely wrong.
With all that hot money having flooded into stocks, art, and real estate; this week's record high inflows into bonds suggest commission-takers' worst nightmare "great rotation" is about to happen... or The Fed, ECB, BoJ, PBOC will re-open the spigots and print (defending their actions on the back of global growth slowing - a new mandate it would appear) - and up goes gold.
Marc Faber discusses global growth, gold, money printing, China, and inflation in this interview...