Marc Faber, editor and publisher of the Gloom, Boom & Doom Report, is once again challenging the conventional view of financial markets, declaring Tuesday on “Bloomberg TV’s What’d You Miss?” that the Fed will not raise rates next year but “cut rates once again and launch QE4,” referring to a fourth iteration of quantitative easing.
Faber said the Fed would be reacting to “weakness in the global economy and deceleration of growth in the U.S.,” which is “already entering a recession.”
His analysis flies in the face of recent economic reports showing annual GDP running at about 2% for the year (through the third quarter), a 5% jobless rate, as well as increasing payrolls, rising wages, home sales and consumer confidence. In her press conference earlier this month Fed Chair Janet Yellen said improving economic data, including labor market conditions, led the Fed to hike interest rates for the first time in almost 10 years.
Faber is negative on the global economy, including the U.S., because of high levels of debt. “Excessive credit growth around the world, excessive leverage” caused the Great Recession of 2007-2008, and continues today, said Faber. “That is why we have a very anemic global recovery.… Debt to global GDP is 30% higher [today] than it was in 2007.”
Faber said credit can be divided into two parts: productive credit, used for capital investment in infrastructure and factories, and unproductive credit, used for consumption – government borrowing to distribute to “retirees” and “people that don’t work.”