Gloom Boom & Doom editor and published Marc Faber joins the Money Show to discuss the economy, short term financial market forecasts, long-term inflation, and global trends.
Some excerpts from the Marc Faber Interview:
Marc Faber on the financial markets
Q: How high can the market go before, if I read your work correctly, America falls apart and takes everything down with it?
A: I’m not sure that the risk/reward now is particularly favorable. The inflationary school of thought says the Federal Reserve has no other option but to print money, and that will lift asset prices. The Standard & Poorâ€™s 500 could get to 1,000 or 1,100 or depending on how much money they print, possibly even higher than that.
Between March and today, the S&P is up 40%, and in an environment of zero interest rates, that’s a huge gain. Many of the resource stocks we were recommending in November and December have tripled. So, maybe we have for two or three months now a reversal in expectations, where people suddenly realize that maybe the economy doesn’t recover a lot and that deflationary pressures are still there. But if the S&P was to come down to 800 or 750, the Fed would probably increase its money printing activity. So, I kind of doubt that we’ll see new lows.
Marc Faber discusses inflation
Q. You’ve warned that US risks Zimbabwe-style hyperinflation and then more recently said US inflation could reach 10% to 20% in five to ten years. Isn’t there a big gap between those outcomes?
A. We have the worst recession since the Second World War and actually the prices of necessities are still rising, including food and energy. So, one day within the next ten years, when the economy slowly recovers and when further dollar weakness occurs, inflationary pressures will increase. And once you have inflation increasing, it’s not easy to stop it unless you implement tight monetary conditions, which would imply very high real interest rates. And I don’t think that Mr. Bernanke or the US government have any intention whatsoever of having positive real interest rates. Combine easy monetary policies with large fiscal deficits, and the likelihood of much higher inflation is there. Once we go to 10% inflation, 20% becomes quite likely and once we go to 20%, we can easily go into hyperinflation.
My comments: For those following the recent inflation/deflation discussion here at SHTFÂ you might find of interest that Marc Faber suggests that the time frame of inflation is some time in the next ten years, but more importantly, that the trigger will be real green shoot recovery in the economy.
Read the full Marc Faber interview at the moneyshow.com where Dr. Faber also discusses:
- a shifting of wealth and assets from the middle class to the rich class
- Why he would buy Asian stocks on a correction
- Japan, Germany, Europe and cyclical economies
- his disgust for American politicians and crony capitalism