Don’t Expect a Rate Hike, because the Fed Is Clueless (Video)

Marc Faber told Kitco News the same thing Peter Schiff has been warning — the United States economy is too weak for the Federal Reserve to raise interest rates in June. Faber believes that eventually the markets will wake up to just how ignorant and powerless global central banks are. When that happens, investors will abandon paper money and flee to precious metals.

While he’s reluctant to tell investors what to buy when, Faber does think that $1,200 is a “reasonably good” price point to start buying gold. Faber looks at gold investment as a long-term commitment. He started buying gold in the 1990s and continues to buy regularly.

Highlights from the interview:

“We live in an environment where the main driving force of asset markets are central banks’ money-printing activity. Some people talk about currency wars. I don’t believe for the a minute that there is a currency war, because the central banks of the Western world — the Bank of England, the ECB, the Federal Reserve, and the Bank of Japan — they all talk to each other every day. They print money, and then after a while they pass on the baton to someone else…

“Any prediction is very difficult, but my sense is that we have today a very high level of confidence in the system of financial markets. That’s why yields are so low and stocks are so elevated; very high valuations in the US and elsewhere… I believe that one day the space in paper money and in the power of central bankers will be undone. At that stage, precious metals in physical form will perform very well…

“I think [$1200] is a reasonably good entry point. I’m still buying gold…

“I don’t want to say buy now. I’ve owned gold since the mid-1990s, when it was trading around $300. I buy some every month. When there’s a significant decline, when there’s significant weakness, I add more to my gold position…

“[The Swiss National Bank had to unpeg from the euro], because otherwise they would have incurred even larger losses. The SNB, just to show you the stupidity of central bankers, managed to lose within 4 years, 6,000 Swiss francs for every man, woman, and child in Switzerland. That’s quite an achievement…

“My view is that given the dollar strength and that most recent economic statistics in the US have been on the weak side, I don’t think the Fed has any intention whatsoever to increase rates. If they do at some point, it would be because some really visible inflationary pressures would come up. At that point, they would increase rates. But they would make sure rates stay below the cost of living increases. In other words, we’d still have negative real interest rates…

“I think June is off the table, quite frankly. The Fed always says it’s data dependent. I’m telling you data dependent means ‘I don’t know.’ So they don’t know either. They pretend they are the smartest people on earth; people who haven’t worked a day in their lives in the private sector. They’re academics. They have no clue of what is going on in the world… Personally, I don’t think the Fed or Janet Yellen are really running the Fed. I think someone is telling them what to do, but I don’t know who is…

“When oil was over $100, all the analysts thought it would stay there or go to $150 a barrel. Then it dropped to $40. When the euro was around $1.50, $1.60, everyone thought the euro would continue to strengthen. What happened is that it dropped to a low of $1.05, $1.06. And now everybody worries about the euro. But the fact is that the eurozone already has significant adjustments. In Spain, wages have fallen. The cost of production as diminished. Asset prices have gone down significantly. At this level of euro-US dollar exchange rate, Europe is actually quite cheap. Over the last six months, all I heard was, ‘The US is the only game in town.’ That made me very suspicious, because the European markets on valuations were much lower than the US. What happened this year, most of the European markets [not all] are up something like 10% in dollar terms… I think in 2015 we’ll see a year where Europe outperforms the US massively.”

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