Marc Faber: Invest Where Fed Has Least Impact

Now that the Federal Reserve has painted itself into a counter it will have difficulty getting out of, it's uncertain how long it will continue to stimulate and keep interest rates at artificial lows.

Also part of the larger problem is the decision for other major economies to print money as well, with ECB, Bank of Japan and China all using their central banks as an attempted means to boost their economies. None of it is working, and so the question now is where should investors place their money in a world of economic stimulus.

Marc Faber believes he has the answer, as he says the stimulus party is now over because asset prices will drop if stimulus efforts are stopped, and if the central banks continue stimulating, which they will for some time, the economies of the countries or regions will remain weak.

The problem is these countries refuse to allow the economy to heal itself; attempting to prop them up wit funny money while their respective currencies continue to plunge in value because of the resultant debasement. It's no different than the giant banks being allowed to fail when the opportunity arose for them to do so.

Faber recommends investors to look for areas where the Federal Reserve especially has minimum effect. Interestingly, one suggestion is telecom companies in Europe, and companies residing in places like Vietnam.

One the fallout comes from the stimulus measures, Faber sees nowhere to go for profits except places where there is lower impact from the actions of the central banks.

Currency Wars the New Normal

Even though some people such as International Monetary Fund chief economist Olivier Blanchard have attempted to downplay the stimulus released into economies by central banks around the world, which has resulting in currency wars, the reality is that more countries will respond to the aggressive actions of the Federal Reserve, which has been the institution that fired the first, gigantic salvo, which has instigated the wars.

Bizarrely, Douglas McWilliams, who is over the Centre for Economics and Business Research, based in London, blames the Bank of Japan as the entity that launched the currency wars, even though the United States has aggressively debased the U.S. dollar for several years.

Most other developed nations are looking closely at the value of their currencies versus the U.S. dollar, especially China, Germany, and the European Union, as they will respond in kind if it looks like exports, and thus growth, will be seriously hampered by the easy-money policies of America and the Federal Reserve.

It's unlikely these practices will end any time soon, as the Federal Reserve is committed to creating money out of thin air in order to attempt to grow the U.S. economy, even though the practice continues to fail to reach that goal, even while the debt continues to pile up.

Currency Wars Heating Up

With domestic economic health at stake of a number of countries at stake because of the Federal Reserve's continual debasing of the U.S. dollar by printing an almost endless stream of money, a currency war has quietly broken out as nations attempt to devalue their own currencies in order to keep exports competitive on the world market.

Of course the currency war has been going on since the Federal Reserve implemented QE2 in August 2010, but it's ramping up because of the continual plunge in value of the U.S. dollar against a number of currencies, which in turn makes exports from other countries more expensive.

Japan is the latest player in the stimulus fiasco to boost their part in the money wars, with new Prime Minister Shinzo Abe committing to printing billions in yen to lower the value of the currency.

This will put pressure on other Asian players, who will be sure to respond in kind.

Other central banks printing money recently, along with the Federal Reserve and the Bank of Japan, have been the Swiss National Bank, the Bank of England, and the ECB.

To give an idea of how the Federal Reserve has attacked the U.S. dollar, it has plummeted by approximately 11 percent in value since the first round of quantitative easing in 2009.

Expectations are many other countries will debase their currencies through central bank stimulus in order to protect their exports.

This should be very positive for commodities, and investors need to take a close look at this, especially in regard to how Asian nations outside of Japan respond to the unfolding circumstances.

Over the long term this will be a disaster as the central banks attempt to unwind their positions.

Japan Approves 20 Trillion Yen Stimulus

Following the faltering and failing Keynesian practices of America and Europe, Japan announced it has approved yet another stimulus package, this one valued at over 20 trillion yen ($224 billion).

New Japanese Prime Minister Shinzo Abe said the goal of the stimulus is to boost annual economic growth in Japan by two percent. He also wants to add 600,000 new jobs in the process.

The usual but tired idea of government infrastructure projects as the method to grow the Japanese economy our of its ongoing recession.

Most of the money will allegedly be used in relationship to the recent tsunami and earthquake of 2011, where reconstructing the areas hit the hardest by it will be the priority.

In reality this has a lot to do with the battle of central banks, where the decision by the Federal Reserve to have open-ended stimulus has caused other competing nations to respond in kind so their currencies don't rise too high against the U.S. dollar.

That means they don't want exports to plunge, which would hurt the domestic markets of Japan and other nations.

The new prime minister, who also served in that capacity in 2006-2007, told the central bank of Japan to take whatever steps are necessary to raise the inflation rate to two percent.