Marc Faber discusses the global economy, China, economic crisis scenarios, health care, currency printing, gold as the last bastion of wealth preservation, and a generally gloomy outlook for the long-term.
We’ve excerpted Dr. Faber’s comments and posted a couple of interviews below, one on Fox Business, the other with Bloomberg, both conducted in May of 2010.
Faber on money printing (Fox Business):
What you could have, is essentially, one day a Fed Funds rate of 5% or 10%, but by then inflation will be 10% or 15% or 20%. So, in real terms, by holding cash and US government bonds, for sure in the long run you’re bound to lose money. So what’s next, what do people with the rest of the money? If bonds and cash are undesirable, they will buy real estate, commodities, or equities.
Regardless of the short term movements of stock markets, or even interest rates, there will be ramifications for the massive Fed printing of money and government borrowing. Interest rates have only one way to go over the coming decade, and that is up. As global investors realize that the purchasing power of their dollar is going down (See Food Costs up 2.4% In a Single Month), they will only buy US debt if they are paid a high enough interest rate to offset that purchasing power loss. We’ve said it before, with confirmation from many of our readers who were buying at the time : It is not unreasonable to suggest that home mortgage rates a few years from now will be above 10%. In the 1980’s they approached 18%. Anyone want to guess what that will do for real estate sales?
Faber on health care (Fox business):
I think the health care bill is a complete, and I repeat, a complete disaster. It’s going to increase the cost of production in the United States. And, it is like an additional tax on the manufacturers, on the companies, and a disincentive for them to hire people. So, economically, a complete failure.
Right now we have a budget deficit of about $1.4 trillion. I think within the next five years, the fiscal deficit will be, annually, at least $2 trillion.
The annual tax revenue for the US government is roughly $2.5 trillion (2008 figures). We’ve already got $100 trillion in outstanding liabilities (social security, medicare, etc., etc.). Has anyone in Washington considered how we might pay off the existing debt and continue spending $2 trillion a year with tax revenues of $2.5 trillion annually? If the government was an individual, it would already be defaulting on their credit card payments and home mortgage and barely struggling to put food on the table. This is not going to end well, no matter how bad the sheeple “hope” that our benevolent politicians will fix it.
Faber on Currencies and Gold:
In today’s world, all paper currencies are not particularly desirable. All governments will print money. all governments will have fiscal stimulus packages as soon as something goes wrong. And all paper currencies will lose in their purchasing power. So, there’s only one one ultimate currency and these are precious metals, specifically gold.
As governments lose credibility and their currencies lose purchasing power, investors around the world are going to run for safety. And where have people gone to protect their wealth and preserve their purchasing power in times of distress for the last 5000 years?
Marc Faber on Fox Business News May 1, 2010:
Hat tip CK for the Fox News Youtube Link
Marc Faber joins Bloomberg in May 3, 2010: