Â Marc Faber appears on Bloomberg TV to discuss the state of our economy including the current problems with Europe.
It’s not just the banks that have a problem. what happened is in Eastern Europe, most countries have very large current account deficits. so they financed these deficits with foreign borrowings in Euros, in Dollars and in Swiss Francs. Those individuals who bought homes went and borrowed in foreign currencies.
When the global economy weakend, these economies were hit hard and their currencies tumbled. There was a huge mismatch of assets which were in local currency and liabilities which were in foreign currencies that essentialy appreciated against local currencies. So now these countries have payment difficulties.
So despite all the hoopla about how Americans took out excessive loans, it looks like the Europeans did exactly the same thing!
The currencies are high. Austria is on the hook for so much money that essentially if they don’t get paid by Eastern Europe, they’ll go bust. So The European Union will have to help Austria one way or the other.
France, Germany and Austria are in serious trouble and we can see this play out in the next few months.
Faber also gives us a look into what he thinks the markets will do in the near-term:
Some technical indicators are much better than they were in November. the next few days will be very important. The markets should right away start to rally, otherwise we can break the November lows and have a big selling wave right away.