Zero Interest Rate forces Investors to Speculate

Marc Faber: Well basically we have unprecedented intervention in the free market. So fiscal measures, in other words, fiscal deficits and regulatory intervention, and we have unprecedented monetary intervention with artificial low interest rates that created an environment of negative real interest rates. Every citizen in the world has to realize that if he deposits money with the bank, after one year, the money has lost purchasing power; because the cost of living has increased, and the return on each deposit is basically 0% after paying the deposit fee to the bank and all the other fees, he has got a negative interest rate. And in this environment, you force people to speculate. And they speculate, they will go into one asset class for a while, and then into the next one and then most people will lose money by speculating. But it creates enormous volatility. And my advice is look, you and I, we do not know how the world will look in five years time if we are realistic. Okay we may get paid as financial commentator and so forth, but we do not know how the world will look like and we have to kind of invest in such a way that we do not lose everything. And so my advice is to have say 25% in gold, 25% in cash and bonds, 25% in equity, and 25% in real estate. Now when I tell people in America that real estate is now relatively inexpensive, relatively compared to other asset classes, they look at me as if I am coming from the moon. But four years ago they were buying real estate like crazy and if you told them that real estate is in a bubble, they would not have believed it. I think now that time is coming to allocate some money to real estate and with the 25% cash you just wait until there is a great big break either in stock or in gold. And then you add to positions. And I am also recommending to have allocations to income producing investments in the sense that if you have dividend paying stocks and in the U.S. stocks do not have a high yield, but say in Asia, I can still provide you a portfolio that have equities that will yield between 5% and 7%. But with that kind of a yield, you have a cash flow and you can reinvest your dividends. So in the long run you should be okay. But then again, not only about gold do I have a concern, I also have a concern, generally speaking, about our capitalistic system. For sure, people with assets, they will be taxed more heavily, that is for sure. - in FSN
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US government fiscal and monetary intervention benefited China and other emerging economies

Marc Faber : .... the problem with government intervention both fiscally and monetary, is that there are always unintended consequences. And all I am saying is basically, through the Fed’s intervention—monetary intervention—the U.S. has not progressed in 12 years. Now someone will tell you oh, we have Google and this and that. Yes correct, in that sense, some sectors of the economy have done well, but these sectors belong to say 3% or 1% of the population. If someone wins the lottery in ten years he can say, look I have a method how to win the lottery, once or even twice and so forth, but the majority eventually loses out. But the big winners of this monetary policy were essentially China and other emerging economies because the capital spending and the industrial production shifted to these countries and lifted commodity prices and so on balance, it actually damaged the U.S. and the entire Western World dramatically. - in the Financial sense Newshoure Interview
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We are going to see a Slowdown in India

Marc Faber : All the emerging economies are slowing down, not only India; also the exports are being impaired. We are going to see a slowdown in India in terms of economic activity and this is natural that an economy has phases of rapid growth and then low growth and recession. The government should not intervene in the normal business cycle, but it has always intervened. However, it did not intervene when there was a boom in terms of accumulating savings. So, you have essential asymmetrical monetary policy. - in NDTV 14 Dec 2011