A prominent PhD economist has slammed the latest round of bank
bailouts and argued that they will not work because the financial
crisis was caused and prolonged by such activity in the first
Marc Faber, founder and managing director of Hong
Kong-based Marc Faber Ltd., has argued that propping up weak
companies with taxpayer money is foolhardy.
"The financial crisis has occurred because
of government interventions," Faber told CNBC's "Squawk
"Specifically central banks, or specifically
the US Fed, by keeping interest rates artificially low for too
long, they created a huge leverage in the system. So the people
who created the problem now are in charge to bail out the system
and that's why I am very skeptical that it would work,"
"The contractions actually serve to build for the future
growth, because the weak competitors are eliminated. If you
support the weak competitors you essentially penalize the strong
competitors and therefore I am very much against these bailout
packages." he added.
Faber, who accurately predicted both the financial crash of
1987 and the current crisis, also warned that U.S. government
bonds may be "the shoe to drop some time in 2009 or maybe
next year," warning that they will lose value as foreign
investors lose confidence.
He cited gold and other commodities as sound investments and
described the U.S. dollar as "a disastrous currency",
but pointed out that other paper currencies are even worse.
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Faber, editor & publisher of the Gloom, Boom
and Doom Report, has previously said that he believes that there
will be a bear rally for a couple of months, and then a further