Transcription of Finance News Network Interview with Marc Faber, Editor and Publisher of 'The Gloom, Boom & Doom Report'
Joining me today is Marc Faber, editor and publisher of 'The Gloom, Boom & Doom Report'. Marc, thanks for joining us from Hong Kong. Marc Faber: My pleasure.
The words on everyone’s lips at the moment are debt and stimulus. Debt is seen as the problem and stimulus as the solution. Marc, where do you believe conventional wisdom has gone wrong? Marc Faber: The conventional wisdom went wrong because it has been brainwashed by the media and by the policy makers. What happened is not the failure of the free market but the failure of intervention with monetary and fiscal policies and regulation.
What are your biggest criticisms of the intervention that has taken place? Marc Faber: Well basically if you are over-indebted the one solution is to bring down debt. But, by extending more debt and encouraging more consumption you don't do that, you just postpone the problem but you don't resolve it. And in my view, the problem with money printing is that the money that is being printed or dropped, as Mr Bernanke says, from helicopters, doesn't flow evenly to everybody and doesn't lift all prices at the same rate.
How long do you foresee money printing will continue to prop up global growth? Marc Faber: Well there isn't much global growth at the present time, that's the problem, because the money doesn't flow into economic activity it flows into essentially asset prices, into speculation. And yes, we have a diverging move between essentially equities and other asset prices and economic activity, with economic activity world-wide being depressed.
So Marc, if we are seeing a stimulus induced bubble, when do you see it bursting and who do you believe will be hit the hardest? Marc Faber: Yes, that's a good question. First of all we don't know when it will burst. But I could imagine that every inflation eventually came to an end. The consumer price inflation of the 1970s came to an end, the asset inflation in equities, notably the NASDAQ in 2000 came to an end, then the commodities boom in 2007/2008 came to an end, the housing bubble came to an end.
All the money is flowing essentially into the hands of well-to-do people in the financial sector. I could imagine a situation where suddenly well-to-do people will suffer the most, either through increased taxation or through a decline in asset prices.
And Marc, what do you expect to be the most significant catalyst to this outcome? Marc Faber: Good question again, you don't know where the catalyst will really come from, all I can say is it will eventually happen. But, we don't know exactly what will be the triggering point and what the timing will be of that busting bubble.
Is there any specific price of factual data, figures you can quote or quantitative information that has led you to this conclusion? Marc Faber: Well basically we know one thing for sure is that today the wealth inequality and the income inequality between, say, the 1 per cent wealthiest people and the 99 per cent that are less wealthy is far larger than it was 20 or 30 years ago. And very clearly, money printing, historically, has always benefitted a few at the expense of the many.
Marc, you have predicted a number of financial crashes, what is different about today’s situation? Marc Faber: I think we have the money printing today, which we didn't have before. And so, it's very difficult to predict because it's a political decision. All I can say is, if you look at history, the most powerful people were usually in the end killed, or hanged or crucified. And, the central banks today are the most powerful people. So, you can imagine what I'm thinking about the central banks and what their leading employees will eventually happen too.
Now that's quite a dire prediction there... Marc Faber: No, it's a very optimistic prediction.
Well in that case, what sort of time frame would you expect this scenario to play out? Marc Faber: Well I think the maximum would be 5-10 years. I think once the population becomes impoverished through money printing, there will be some kind of rebellion, or very strong opposition, or there will be blame put on the central bankers and then the monetary system will have to be reorganised.
And which asset classes could we expect would will bear the brunt of the sell-off? Marc Faber: I think financial assets, probably bonds, but also, equities will do slightly better. But, I would say the best performing asset class would probably be real estate and precious metals.
Finally Marc, having predicted the collapse of financial system what asset classes are you putting your money at the moment? Marc Faber: My idea is to be diversified in your investments and to hold some corporate bonds and cash and some precious metal and some equities and some real estate.
Well Marc, thank you for your time and insights today. Marc Faber: It's my pleasure, thank you very much.
Ends
