We are doomed....it's beyond repair....Fed's Record Profit Does Not Change Anything. US Still "Doomed" says Marc Faber
Posted Jan 12, 2010 01:20pm EST by Peter Gorenstein in Investing, Recession, Banking
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Wall Street banks aren't the only ones making money in the aftermath of the financial crisis. The Federal Reserve booked a record profit of $52.1 billion in 2009 -- $46.1 billion of that windfall was thanks to an increase in the value of the securities the Fed bought to rescue the financial system. That money will get turned over to the Treasury Department.
In case you've forgotten, the Fed went on a buying spree in the depths of the crisis, most notably snapping up $300 billion worth of government debt and buying another $1.25 trillion in mortgage debt from Fannie Mae and Freddie Mac. The Fed says it also made over $5 billion on assets it bought in the takeover of Bear Stearns and the government's aid package to AIG.
Before we get too excited, the profit only equates to about a 2 percent profit margin, based on the Fed's balance sheet of about $2 trillion last year.
And, more importantly, Marc Faber, editor of The Gloom, Boom and Doom Report, says it doesn't change the fundamentals. Faber tells Henry Blodget in this clip that Uncle Sam is carrying too much debt and leverage. He calls the situation "beyond repair."
Faber, a long-time critic of U.S. policies, argues the private sector acted rationally after 2008 by deleveraging and increasing its savings. The government, on the other hand, added more debt and leverage. They can get away with it for now because interest rates are low. Eventually, interest rates will rise, causing the public sector debt bubble to burst under the weight of government entitlement programs like Medicare, Medicaid and Social Security.
The only way out is for the government to print more dollars. Of course, that leads to inflation and a weak dollar. And, even worse, he says, "to distract the attention of ordinary people you go to war."
To put it bluntly, Faber says, "we are doomed."
finance.yahoo.com |
