Marc Faber and Mish on Inflation, Deflation, Doom and the End of Civilization

by | Mar 14, 2010 | Forecasting, Marc Faber | 23 comments

Do you LOVE America?


    Gloom Boom & Doom Report publisher Marc Faber and economic analyst Mike “Mish” Shedlock join Yahoo’s Tech Ticker on March 12, 2010 to discuss the global economy, where we’re headed and the possibility of the “end of civilization.”
    (Videos follow excerpts and commentary)

    Marc Faber and Mish hold differing views on what we can expect in terms of dollar purchasing power going forward:

    Marc Faber:

    The issue here is quite irrelevant, whether we have deflation first or inflation first. Eventually we’ll have much higher inflation rates, because if deflation comes first they’re going to have even more stimulus packages and even more printing. And as you know, many leading economists, they call for additional stimulus which I think is ludicrous, it’s crazy to even suggest additional stimulus. But, that is what the Keynesians believe is the right thing to do and that will bankrupt Western governments, not just in the US, but everywhere.


    I think he’s wrong. One thing he’s right about is that the threats from Congress here, the stimulus packages. Yet, when I look at this I see what state governors are doing, I see what mayors of some cities are doing, and I am also seeing out of Congress a reluctance to pass more stimulus bills. Look at the last unemployment extension – it was held up for a week by Bunning – where they didn’t even want to extend unemployment benefits. There’s very little room here and very little sentiment here for Congress to go out and do these same massive kinds of programs. Also, I think that these guys think that they fixed the problem. That they think we’re on this road to this miraculous recovery and jobs are coming just down the pike.

    Both Faber and Shedlock make excellent points here, and what the inflation/deflation debate seems to boil down to is what Congress, the Fed and the administration will do going forward.

    It is clear that we are currently in a broader deflationary trend. This is evidenced by what happened with the stock market crash, including commodity prices like oil, copper and even gold, in late 2008 through early 2009. Credit collapsed during this time period – across the board. Essentially, bad debts were being cleared out of the system, just as nature intended. In March of 2009, the Fed and Congress began pumping trillions of dollar into the system in the form of bailouts, stimulus packages, and buyer incentives. This put a floor on the deflationary impact across all asset classes and led to a manufactured rise in those asset classes (arguably inflation) from March 2009 through today.

    If the powers that be were to pull all stimulus and monetary expansion right now, it is evident what would happen to all asset classes, save precious metals; a re-collapse in values. Thus, the future is going to be dependent on what Congress and the Fed do going forward.

    As Mish suggested, our elected representatives may very well believe that we have recovered and it’s smooth sailing going forward.This is one major reason we may be seeing the Fed and Congress pulling back on more talk of stimulus and spending our way out of recession – because it is now over!

    If they are wrong about recovery, which we strongly believe is the case, then the sentiment in our government and quasi-government institutions will change. As we saw in late 2008, when the SHTF people get very irrational and they are no longer driven by logic, but rather, fear. When the system was on “the brink”, as suggested by then Secretary of Treasury Henry Paulson, Congress acted out of fear of the potential for “martial law” across America if the system collapsed, and thus the trillions in spending was justified.

    Never let a good crisis go to waste is the motto of our present administration. If we were to see a relapse in the housing meltdown and a crash in stock markets, those in charge may very well respond irrationally and do what they did in 2008. Keynesians believe, after all, that the reason the Great Depression of the 1930’s wasn’t prevented is because we failed to spend enough money. They will not make the same mistake in this crisis.

    We , therefore, agree with Marc Faber’s long-term position in terms of the deflation/inflation debate. What happens in the short-term, with irrational responses coming from the government, our financial institutions and investors, is really irrelevant, as the long-term trend of dollar destruction is still in tact. Prepare for inflation, maybe not today, or tomorrow, or even this year, but five years from now, expect a significant rise in your cost of living, especially related to commodity driven prices like gas, food and electricity. And, as has been the case since the Fed’s creation in 1913, do not expect wages to keep up with this trend of rising prices, meaning that as prices in essential goods go up, your wages will not keep up, meaning that over time, you will get poorer.

    In the end, it seems Dr. Faber and Mr. Shedlock agree on the most important aspect of this debate, that we are not in a recovery in any sense of the word:

    Mish: They think we’ve turned the corner. I don’t think we’ve turned the corner. I think more damage is coming.

    Faber: I think it’s beyond repair. It’s too late.

    Rather than leaving you with the the gloom and doom, here are some thoughts from Faber and Shedlock on how you can prepare for the destruction to come:

    Faber: My belief is that you have to accumulate, slowly, some gold every month. Put some savings into gold. If I were living in the US and I couldn’t leave the US, I would build up some assets outside the United States. I would own some property outside of major cities because I believe that the major cities are becoming very dangerous in terms of modern warfare, so you have to become self sufficient.

    Mish: I think the day of reckoning has arrived. The question is how long it takes to play out. Certainly wages in the United States have to drop and wages in Asia have to rise. I think we have the first generation here in the United States where our kids are going to be less affluent than their parents. It has to happen here right now.

    Learning to do more with less is the new paradigm shift in America. Out of control spending by consumers will stop, either voluntarily or by force as credit, jobs and wages continue to contract. This negative feedback loop will continue to spiral downward as our economy essentially becomes unhinged.

    For those losing their jobs or making less money, growing your own food in a micro-garden in suburbia, or repairing kids’ clothing, or fixing your own car will be just some of the skills that are necessary going forward.

    The best investment you can make for what is to come is in yourself.

    Marc Faber: Don’t Expect Another Crash…Bernanke Won’t Allow It (Part 1 of 3)

    The Great Inflation / Deflation Debate (Part 2 of 3):

    Faber and Mish: We’re Doomed and Washington Can’t Do Anything About It (Part 3 of 3):


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      1. The CBO (Congressional Budget Office) has projected that the long term projections that the US will NEVER have a balanced budget ever again. By 2012 our national debt will be 19 trillion(1/3 of the worlds GDP). By 2014 we will spend at least 1/3 of taxpayer dollars just to pay the INTEREST on the debt alone. We are heading towards a debt collapse very soon. We are now at a point where if the U.S. government taxed Americans 100% of their income, the tax receipts generated would not be enough to balance the budget. Likewise, if the U.S. government cut 100% of its spending including defense, but kept paying Social Security, Medicare and Medicaid, we would still have a budget deficit. This is not good at all.the one thing that pisses me off is that the people that say cut spending will not want their benefits be touched or want us stop go to war around the world. this is why we are going to collapse. Americans had 60 yrs of prosperity and have been wired to believe that nothing will change. Not only is our economy collapsing our education system is a mess we can not compete. Dont believe me call an IBM operator and tell me what nationality picks up the phone. We are living on borrowed time. The american people are dumb and frighten easily and will not question their government or political party. We can say cut spending but when you have to tell them they will not get any social security,welfare or unemployment benefits they will riot in the streets. Its going to be very ugly. We have only four years to fix this but there are so many shoes to drop(alt-a option arm resets,commercial real estate resets in 2011,Pension crisis,FDIC,FHA,PBGC bailouts,State debt crisis and bailouts) that we will spend even more until our currency is nothing. as the wise Ludwig Von Mises said “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

      2. Matthew, great comment.. I could swear I’ve read that von Mises quote somewhere before 🙂

        Just like an individual who has over extended him or herself on a credit card, the US government will eventually get to the point that it can no longer service debt. The interest payments alone will make it impossible to pay off our debt, especially if our GDP continues to contract or stays stagnant going forward.

        The fact that most of the GDP is consumer driven, meaning it’s more or less CREDIT driven, means that we are in a world of poop going forward. There is no more credit to be had, which means that consumer spending WILL decline in coming years. Yet, our debt will continue to grow, and with tax revenues falling off a cliff, there is just no way to pay this money back.

        Sure, we can print money, but at some point no one will want to lend to us anymore. And we are either paying our existing debt back in hyperinflated dollars or we will flat out default on said debt. This is an idea already being floated in the mainstream. Sounds like a great solution — default and let the Chinese figure out what to do next….

        This is how wars are started, and in my view, the end result of this is going to be an all out global war…

        Of course, my view is probably considered extremist fringe, because we are a much for civilized world now, right? (let’s pretend like the 50 or so armed conflicts currently taking place around the globe are not really happening – we’re a more peaceful plant than ever before…).

        Matthew, your statement “We are living on borrowed time” is literally right on target.

      3. The old saying “the numbers don’t lie” is very appropriate. A person  can lie because; a) they will profit from it  b) they view the situation from a different vantage point than you  c) they are seeking protection from the lie (hoping the time gained from the lie will help resolve the situation). What are the numbers saying? They are telling me there are unresolved issues that are being pushed out a little farther each day. As the numbers continue to grow, they become harder and harder to move. But they do buy time for those who wish to feather their nest with money that does not necessarily belong to them. Witness the large bonuses for the upper level of management in the “favored Institutions” in our country. Witness the lack of addressing the OTC derivatives debacle, that continues unabated by the very companies that required bail-out money. This appears to be a train heading downhill and picking up speed. Do the best you can to brace yourself for impact. These tracks cannot go on forever.  

      4. I have two questions for you guys:

        1. How long do you guys think this inevitable crash will be delayed? I heard the latest thing is again the cash for clunkers for appliances this time.

        2. One of the preparations I have been hearing about lately is getting out of debt. Why should one pay off their credit cards now instead of maxing them out on longterm food storage/guns and ammo?? When the collapse happens and the dollar crashes what will happen to our existing credit lines? What if we go to a one world currency?

      5. Tony,  I too have wondered why anyone who is confident of a collapse would be concerned with paying down debt. That is totally counterintuitive! Food,sure. Gold and silver yes. Guns and ammo, yea. Your credit rating wtf ?  

      6. One thought about being in debt. There is no way of knowing how “the Powers That Be”  will react to those who cannot pay their debt. If you have land, will they come and take it? If you have other items of value, will they come and take those, as well? If you have children, will they be required to work off your debt? Why would those who are interested in making themselves wealthy and you poor, forgive your debt? Will inflation eat away at the debt or will there be a deflationary spiral down? Why give someone the chance to have more control over you? Freedom from debt means more freedom. 

      7. It’s not a matter of credit rating to me. It’s keeping up with the bills and trying to prep. If you are employed and can make your house payment, then maxing your CC to get beans and bullets might be a good idea. If you do want to pay the debt, when you can, then do so, with inflated dollars. Even if the CC interest rate is 25% then if you time it right, the gun you bought would appreciate even more than that in dollar value, but be priceless in an emergency. The rub is timing. Just like the stock market timing is everything, but hardly anyone gets it right.

        On the other hand if all you owe is unsecured debt like CC, and you don’t care about bad credit, well go for it. Some would say this is dishonest and fraudulent, I tend to agree with them, but I’m not going to judge what you think is important to your survival. You could say that the CC companies are dishonest, and that the Gov’t is stealing from you by printing so much money, so why not go for it?

        Disclaimer: I am debt free. I have no CC, car payment or mortgage.

      8. legalize weed and their will be no deficit

      9. Mathew,
        This whole thing had puzzled me for years… why would ‘intelligent’ people allow the seemingly idiotic financial dealings of our country to not only continue but to shift them into high gear??? That is until I discovered a little known strategy  socialists have embraced now called the “Cloward-Piven strategy”. When you view all of these ‘insane’ actions by this organized group who have seized power in our country these actions make a whole lot of sense. Let me assure you, this is not a mistake, this is a well planned and executed plan.

        In a nut shell, the Cloward-Piven strategy is as follows:
        First proposed in 1966 and named after Columbia University sociologists Richard Andrew Cloward and Frances Fox Piven, the “Cloward-Piven Strategy” seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

        A collapsing economy will cause rioting and an overthrow of our republic… just guess what is waiting in the wings to replace it?????

        A link for all of you to review to challenge your thinking about the the attack on our economy utilizing this strategy is below:

        To quote an old saying. “forwarned is forarmed”

        Now, it is our duty as voting patriots to remove those who support this strategy.. republicans and democrats alike… replace them with those who uphold the constitution that our founding fathers designed.

      10. holding assetts outside of the USA? where? europe? don’t think so. Central or south american? can’t see that happening, esp if your german descent.
        asia? russia? where? i am puzzeled.

      11. holding assetts outside the USA? I ask where? Europe? Asia? I don’t see that happening. I see that states dis-banding from the union. and/or  the states combining with each other. perhaps dividision of the union into several regions all independent of the fed. after all, the states created the fed.  

      12. Robert61:   If you have extra assets, Canada or Switzerland are both good places to stash them. The Swiss have a serious history as a safe haven for your assets, but they require real money, so Canada is a better bet, and closer.  If you are fluent in Port / Spanish Brazil is a good idea too. Australia and New Zealand are a bit far for me.

        Tony:   The Foundation for the Study of Cycles is predicting the middle of 2012 for the bottom, as I recall.  Princeton Economics, which also studies cycles, believes the middle to late 2011 is the bottom; also as I recall. Check ’em out.

        I find the Bible Codes interesting. They predict the BIG ONE hits LA in 2010. That could be the “trigger” that brings down the house of cards. Think Haiti/Chile times five.

        Seismologists can distinguish between natural earthquakes and those caused by nuclear testing. If Iran tests a nuclear device, the world will know. Israel will know, and Iran will be toast.

        Alanisimus: “Forwarned is forarmed” is the old saying. The new saying is: “Forwarned is well armed!” Get with the program! 🙂

      13. The way things are going I think the end game will probably be 2015. By then the Fed will be forced to raise interest rates. It will be impossible to pay the debt so they will they default or will they hyper inflate. At that time we will not cut spending instead we will accelerate the spending. I think when things head south they will panic and hyperinflate the debt. We are almost at the point of no return. And I think many want this to happen to seize power. The thing is what will our nation will look like? We could possibly become a warlord/civil war state like Somalia. At some point we will collapse and become a third rate nation.

      14. Thanks for the responses to my previous questions.

        As far as the timeline goes, I also see mid-late 2012 as the time frame for the complete collapse where all hell breaks loose.  From now until then, things will slowly get worse.

        I heard the Obama administration is saving some bailout money to unload before the 2012 election.  They want to spruce things up right before their election. If there is a terrorist attack, natural disaster, or something else along the “wildcard” line I would assume that extra bailout money would get used up pretty quick.

      15. Getting debt-free is important to free up your earnings.  Even in the short term we are already seeing substantial increases in food cost and utilities.  If you have to send money to credit card companies every month and are the typical blue collar American where’s the leftover funds to buy the rice and beans?
        As for simply not paying what you owe…If you’re willing to be unethical in small things you’re probably willing to be unethical in large things as well.

      16. To those commenters asking why bother to pay down debt now if you can with inflated dollars later, I say don’t count on being able to do so. Unless you’re completely stocked up on everything NOW, which is doubtful particularly if you have large debts, it may not be a very good idea. Why? Because if inflation really kicks in later and you don’t have that extra store of food/gasoline/clothes/etc., you will be paying more and more of your income or savings just to live. In such an environment your wages probably will not be keeping up with price inflation, so you will actually have less real dollars to pay down debt.

        My advice would be to continue to pay down debts as you’ve been doing all along. But don’t overextend and don’t cut back. We simply don’t know what tricks the government or Federal Reserve will use to influence monetary policy in the near term. Miscalculating what you’ll need based on actions yet to be taken by our leaders could prove tragic in the long run.

        From personal experience I went on a buying spree in summer/fall 2008 to stock up on everything I thought I’d need (freeze dried/dehydrated foods, solar equipment, some weapons, water filter/purifier, and PMs). To pay for all that I took out a loan on my 401(k) and also got a new line of credit, expecting not to have to pay it all off when TSHTF. Obviously I miscalculated as here we still are, but fortunately I was able to pay off the line of credit and keep paying the bills despite an unplanned medical procedure and having to buy a new washer.

        Life still goes on, and we need to remember this is a marathon, not a 50-meter dash. Plan for all possible outcomes and you can’t go wrong.

      17. Very good comment Matthew. Making it all worse, like you said, is the public’s insistence that the gravy train is just going to keep sailing, despite record state deficits and high persistent employment. My state, NY, just in fact delayed all income tax refunds till at least April 1 (glad I filed early!). This is a sign of things to come. We will be nickel and dimed as the states continue to battle their budge deficits, until they recognize that larger and more drastic cuts need to be made. I fully expect the MSM to report on many of these problems but nevertheless paper over the full ramifications of this.

        By the way, a lot more than tech support work for IBM from other countries! A good portion of the design work is too! In fact, there may be more workers in foreign countries than in the US now, but I’m not entirely sure.

      18. Hemp will solve all your problems. Legalized hemp will create revenue, jobs, and chill everyone out.
        If you look back. Everything was made from hemp, I mean everything. It was until the cotton gin was invented that they started to criminalize the plant. That’s so the cotton industry could monopolize the textile industry.
        I read here about the 3 Gs of survival. I’m more about the 3 Ws. Whiskey, women, and weed!
        Ha ha! Amen

      19. Spicoli, you’re right.  Legalizing pot would solve, or nearly solve, a lot of our financial problems.  Only thing is, the religious wackos won’t have it.  The get their info on pot by watching “Reefer Madness” over and over.  Republicans consider that movie to be the cutting edge current knowledge about pot.  Democrats are pussies and won’t challenge the issue, and so here we are.

      20. Personally, I don’t care what your drug of choice is. Mine is caffeine. But, just so you know, the latest scientific findings are that prolonged use of pot will make you psychotic …….

        As if we couldn’t tell by the fact you post here on SHTF Plan. 🙂

      21. Prolonged use of pot will cause a severe shortage of cheesy-poofs in your immediate area, and not much else.  People don’t smoke pot and then take off to the grocery store with a shotgun.  People smoke pot and then spend 23 minutes considering the effort required to reach out and grab the remote control.  The best thing is to have the channel tuned to spongebob squarepants BEFORE smoking pot………….

      22. We’re old farts….we’ve paid off our house, no car payments, no credit card debt……but have no idea how to buy a little bit of gold (looked into it a little and have to pay for a vault and someone to watch over it, excuse me????) and what is considered lower in price since it seems off the charts now? So those are the questions how to buy gold and at what prices?

      23. Jerry, check out .

        You can get an idea of “fair” value at this web site.

        You can order online at Apmex (they have a great reputation), but you will be required to pay via a wire transfer, check or credit card, thus your transaction will have footprints.

        If you are fine with that, then go with it.

        If not, use Apmex to give you an idea for fair value on a particular day for specific types of gold instruments (i.e. Gold Eagles, or bullion bars, etc.)

        Then, find a local dealer in your area via Google by typing in your zip code and something like “gold dealer” or “gold exchange”.

        Call that dealer or visit in person and you can acquire your metals this way, off the books.

        By using Apmex you can get an idea of the Spot Price, as well as the premium (essentially a brokerage fee) being charged by the dealer. I’d say if your premium is in the 5% range or less, you’re getting more or less a fair deal.

        Also, for Live “spot” prices for gold, visit Kitco at: . This is basically the “paper” spot price of gold, which should be similar to the Apmex price.

        Insofar as what the “fair” value should be, I cannot give you a specific price, because it varies and depends on your personal investment goals. I would recommend checking out some articles from Howard Katz and Marc Faber interviews:



        hope this helps.


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