Benedicte Gravrand, Opalesque London:
Fiscal deficits and monetary policies are at the top of the U.S. and Europe's agendas at the moment. But according to Dr Marc Faber, aka Dr Doom, there are unintended consequences to large fiscal deficits and to expansionary monetary policies. He claims the real crisis has yet to come, and in the mean time, puts his money in Asia and in commodities.
Marc Faber, an investment advisor and fund manager based in Hong Kong and the author of the famed Gloom Boom and Doom monthly report and of several books, was speaking at the CFA annual conference in London last week.
Just as a reminder, expansionary monetary policy seeks to increase the size of the money supply, using tools such monetary base, reserve requirements, discount window lending and interest rates - which are usually lowered. Neoclassical and Keynesian economics disagree on the effectiveness of monetary policy in influencing the real economy, and Keynesian economics advocates active policy responses by the public sector, including monetary policy and fiscal policy actions.
Fiscal deficit is a government's total expenditures that exceed the revenue that it generates (excluding borrowings). Keynes believed that such deficits help countries climb out of economic recession.
Easy money leads to unintended consequences
According to Faber, artificially ......................
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