Mark Faber says root problem of artificially low interest rates and increasing the money supply will cause inflation; but inflation can be spread out over many sectors, or manifest itself as a bubble – a misallocation of capital. Low interest rates cause speculation into asset classes as investors seek to generate a return on their capital, especially when anticipation of inflation is high. Recently, China has started to restrict capital flows as it’s massive stimulus package fueled commercial and residential in certain cities.
Negative Interest Rates:
The US Government may raise interest rates, but continue to expand the money supply at a faster rate in order to service government obligations. Likely that the US will not default on all debts, but may default on certain foreign debts while utilizing inflation (increasing the money supply) to service current and future obligations.
Written by Ken de Silva
Houston, TX.
In the process of fine tuning my blog – www.kendesilva.blogspot.com. Give me some useful feedback on it.
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