Marc Faber
was interviewed on the Financial Sense Newshour. It’s a long
one, but it’s definitely worth a listen. As usual, we’ve
included a summary below for our readers who don’t have the
time to sit through the entire video.
In the deflationist
scenario, you don’t want to be in US govt. bonds & cash.
In that scenario, the fiscal deficit would deteriorate greatly.
If the Dow went below 1000, we would be in a total economic collapse
where tax revenues would fall off a cliff. So even in the deflationist
scenario you don’t want to be in the long end of the government
bond market.
In the
50s and 60s, people were more free. Now, we have police states
in the West, where restrictions are rather onerous. Also, back
in the 50s & 60s, the Bretton Woods System restricted the
potential for severe inflation.
‘What
is money?’ is a big question. Generally speaking, it’s
a medium of exchange, a store of value and a unit of account.
Gold is a much better store of value than the dollar. As a unit
of account, the dollar is poor. Has the US really been growing
at 3% per annum?
The standard
of living for the average US household has gone down over the
past 20 years. Relative to the rest of the World, the peak of
US prosperity occurred in the 1950s. It’s very difficult
to measure economic growth and prosperity.
The Emerging
Markets used to be way behind the US. Now, the infrastructure
in the Emerging Markets is way better than in the US. The US have
grossly underinvested in infrastructure.
The US
has survived on the continued expansion of borrowing to offset
declining income in real terms. Now the power to borrow is gone.
Europeans
& Americans are generally complaining about onerous regulations.
On the
one hand you have money printing & expansionary fiscal policies.
On the other, you have more and more regulation. The small businessman,
who can’t employ an army of lawyers and accountants have
no appetite to hire. They say that the more tax they pay, the
more the government will harass them!
In Asia,
there exists the opposite scenario: There is relative economic
freedom insofar as you don’t criticise the government. A
great quality of the US is that you can pretty much say what you
want.
The likelihood
of a hyperinflation has increased. If you go back to Jan 2011,
would you have thought that the Middle East would blow up as it
has? Would you have thought that the NATO countries would go to
war against an idiot in Libya? He’s just one of many idiots,
if you go after a country like Libya, you may as well go against
180 countries in the world!
The Western
press is focussed on how to ‘contain’ China. One way
is to control oil in the middle east; for then they can switch
on the tap, or close it. The Allies have gone to the Middle East
to attempt to gain control of the Oil. But this costs a lot! They’re
not in a position to finance the war unless they print money.
So we’re likely to see higher inflation.
