Faber is a smart guy who has been wrong and he has been right. He was particularly sharp in February of 2009 when he called the bottom of a market he didn’t want to buy. I remember him doing this so I listen when he speaks.
It’s been an interesting if not fun ride up in the markets. Through a 6-year economic slowdown stock markets have rallied and rallied and rallied. Everyone assumes that the Fed is backstopping the market, that it has to for political reasons. So people have piled in even though earnings and economic indicators have been generally lackluster. Sounds almost like “house prices never go down.”
But not quite.
The economic tide has been going out for quite a while, but the pace has just quickened in emerging markets – big time. Things have become quite unsteady and no one knows whether the current instability will trigger something broader in the developed economies. China is slowing. Japan has horns locked with China economically and increasingly politically. Europe is catching its breath before another wave rolls through.
The first real percolation in the housing industry in the USA, post first bubble, was in Washington DC and New York City. Why? Because that is where the Federal Reserve spigots are. Newly printed money flowed through the system to government contractors and bankers first. Manhattan and DC real estate barely saw the recession, the crony capitalists did quite well over the last 5 years.
Where do modern economic bubbles come from? They come from the world central banking system, chiefly the Fed, the prime mover of crony capitalism.
3 key components to wealth which lasts generations are said to be gold, land, and art. The first 2 classes are somewhat obvious, but art is less so. Yet the rich over the centuries have always invested in paintings and sculpture.
The fed will have trouble brushing this off.
Sure the Community Reinvestment Act (a totally crony law) had something to do with housing’s abrupt rise and fall in this country. And there were other factors besides Fed policy. But the primary reason why the global housing bubble, and before that the tech bubble, blew up and then collapsed is because of the easy money policies of one Alan Greenspan.