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Money Printing leads to a widening Wealth Gap

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I own equities, and I should thank Mr. Bernanke. The Fed has been flooding the system with money.

The problem is the money doesn't flow into the system evenly. It doesn't increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999 - 2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market - things like stocks, bonds, art, wine, jewelry, and luxury real estate. The art-auction houses are seeing record sales. Property prices in the Hamptons rose 35% last year. Sandy Weill - the former head of Citigroup - bought a Manhattan condominium in 2007 for USD 43.7 million. He sold it last year for USD 88 million.

Money-printing boosts the economy of the people closest to the money flow. But it doesn't help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins. Although I have been a beneficiary of this policy, I can't approve as an economist and social observer.

(Marc Faber in Barron's)

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