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00:00GOOD AFTERNOON, THANK YOU FOR JOINING US. MARC: GOOD AFTERNOON. MARK: CHRISTINE LAGARDE HAS COME OUT TODAY AND SHE HAS SAID THE WORLD ECONOMY WOULD BE WORSE OFF WITHOUT NEGATIVE INTEREST RATES. I KNEW YOU WOULD LAUGH. IS THIS FACTUAL? I SUPPOSE THE YOUR LAUGH TELLS ME WHAT YOU THINK OF THAT COMMENT. MARC: LOOK, I BELIEVE THAT THE INTERVENTION WITH FISCAL POLICY THAN WITH MONETARY POLICIES, THAT IS THEIR EXCUSE. THEY WILL ALWAYS SAY IF WE HAD NOT DONE THIS OR HAD NOT DONE THAT IT WOULD BE MUCH WORSE. THEY HAVE NO PROOF FOR THIS ASSERTION. IN MY VIEW IT WOULD HAVE BEEN BETTER TO LET THE CRISIS, THE FIRST ONE IN 2000 RUN ITS COURSE , AND PREVENT THE COLOSSAL CREDIT BUBBLE THAT WAS BUILT UP THAT THEN LED TO A BIGGER CRISIS. NOW THEY ARE DOING THE SAME MISTAKE. THEY ARE AGAIN ADDING TO CREDIT VOLUMES IN THE WORLD, CREDIT AS A PERCENT OF THE GLOBAL ECONOMY IS UP VERY STRONGLY. SINCE 2007 IN PARTICULAR, IN CHINA. AS WE DISTINGUISH BETWEEN PRODUCTIVE CREDIT AND UNPRODUCTIVE CREDIT, PRODUCTIVE CREDIT IS TO BUILD A FACTORY WITH CREDIT AND HIRE PEOPLE AND ACQUIRE MACHINERY AND THEN PRODUCE SOMETHING, EITHER SERVICES OR GOODS. BUT MOST OF THE CREDIT IS NOW FOR PAYMENTS AND THAT IS VERY NEGATIVE FOR LONG-TERM SOCIAL ECONOMIC GROWTH BECAUSE IT ALLOWS ACTUALLY THE GOVERNMENTS TO BECOME BIGGER AND BIGGER AND BIGGER AND TO HAVE MORE REGULATION. I CAN TELL YOU, I AM IN THE FINANCIAL SECTOR AND I TALKED TO PEOPLE IN THE FINANCIAL SECTOR. NOWADAYS CONSUMED WITH FILLING OUT FORMS BY REGULATORS. MARK: HOW ARE THEY GOING TO FIGHT THE NEXT CRISIS? YOUR PRESCRIPTION WOULD HAVE BEEN MORE FISCAL POLICY, THAT SHOULD HAVE PAID -- PLAYED A MORE ACTIVE ROLE. WILL WE SEE MORE PUBLICLY FUNDED INFRASTRUCTURE WHEN AND IF THE NEXT CRISIS HITS? MARC: THAT IS A VERY GOOD QUESTION BECAUSE THE MAGICIANS AT CENTRAL BANKS, THEY ALWAYS COME OUT WITH A NEW TRICK. THIS NEGATIVE INTEREST RATES THAT WE HAVE TODAY, THIS IS FOR THE FIRST TIME IN RECORDED HUMAN HISTORY FROM THE TIMES OF BABYLON UP TO TODAY THAT WE HAVE NEGATIVE INTEREST RATES. IT IS NOT GOING TO END WELL, THAT I CAN TELL YOU. THE SEQUENCE OF HOW IT WILL NOT END WELL I AM NOT SO SURE, THAT THEY STILL HAVE A LOT OF AMMUNITION. WHAT THEY CAN DO IS THEY CAN SAY YOU AND MR. BLOOMBERG AND EVERYBODY PAY A CHECK FOR $10,000, AND THAT IS LIKE THROWING GASOLINE INTO A FIRE. FOR A WIRE -- FOR A WHILE THE FIRE WILL GROW AND EXPAND AND THEN IT WILL AGAIN GO DOWN, AND THEN YOU NEED ANOTHER DOSE OF HELICOPTER MONEY. THE NEXT TIME AROUND THEY CAN SEND OUT CHECKS FOR $20,000 TO EVERYBODY, AND THIS WILL BE A VERY POPULAR MEASURE BECAUSE EVERYBODY WILL GET $20,000. FOR THE POOR PEOPLE AND FOR THE LOWER MIDDLE CLASS TO GET $20,000 APIECE, WILL BE VERY DESIRABLE SO THEY CAN DO A LOT OF THINGS IF THEY WANT TO. BUT WILL IT HELP THE ECONOMY, THAT IS THE QUESTION. IT WILL NOT HELP IN THE LONG RUN. YOU CANNOT GROW AND ECONOMY BY THROWING MONEY AT PEOPLE. CAROLINE: WHAT SHOULD THEY BE DOING? WHAT POLICIES WOULD YOU LIKE TO SEE AND ACTED? MARC: THE LESS POLICIES, THE BETTER IT WOULD BE. WE ALL LEARNED THAT SCHOOL AT THE FREE MARKET AND CAPITALIST SYSTEM IS THE BEST ALLOCATOR OF RESOURCES. IN OTHER WORDS, WHAT WE HAVE IS THE WORST ALLOCATION OF RESOURCES BECAUSE IT IS THE GOVERNMENT THAT TELLS YOU HOW THESE RESOURCES ARE ALLOCATED AND THEY CONTINUE TO EXPAND THEIR INTERVENTION. I CAN TELL YOU, I STARTED TO WORK IN 1970. IN THE 1970'S AND EARLY 1980'S, CENTRAL BANKS NEVER CAME UP IN DISCUSSIONS. THEY HAVE NOW BECOME LIKE THE MESSIAH AND EVERYBODY WATCHES WITH THE CENTRAL BANKS DO. IN THE END, IN MY VIEW, THEY WILL HAVE FROM A LONG-TERM PERSPECTIVE NO IMPACT

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Marc Faber: Negative Rates Will Not End Well

Marc Faber, publisher of "The Gloom, Boom & Doom Report," discusses the pitfalls of using monetary policy in response to the monetary crisis and his suggestions to spur economic growth. He speaks on "Bloomberg Markets." (Source: Bloomberg)

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