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Economist Marc Faber has Bad News and Good News

27 Feb

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On February 21st, Alex Jones interviewed economist Marc Faber concerning the current state of the US and global economies and where we’re headed.  That interview is recorded in two videos at YouTube under the headline:

Marc Faber:  The Total Financial Collapse of America is Here! – Alex Jones Tv 1/2”.

In fact, that headline is disingenuous.  It might be a misstatement.  It might be an exaggeration.  It might be fear-mongering.

In fact, Mr. Faber did not expressly say the “collapse” is here—as in “right now” or nearly “right now”.

Faber did say that we are in the “end game” right now.  And he implied that an economic collapse is inevitable. But he repeatedly implied that the US and global economic systems could hold together for another three to seven years.

•  For example, according to Mr. Faber, our federal gov-co’s budget deficits are likely to exceed $1trillion per year for the next 5 years.

The bad news in Mr. Faber’s prediction concerning deficits is that, given that the US economy is roughly $14 trillion per year, Faber implicitly predicts that we’ll experience  at least 8 -10% inflation per year for the next 5 years.

The good news, on the other hand, is that Faber implies that the economy will hold together for another 5 years.  I.e., if the economy collapses, it’s virtually certain that the dollar will die and there’ll be ability to continue to print/inflate more paper currency.

•  Later, when asked by Alex Jones if we’re headed for gradual devaluation or hyper-inflation, Faber predicts that inflation (as a consequence of printing more currency) is virtually certain, but sees “high” (rather than “hyper”) inflation for the next 3 to 5 years.

Again, Faber thereby implicitly predicted no collapse for 3 to 5 years.

•  At the end of the program, Alex Jones asked, “Are we in or headed towards a global depression?”

Marc Faber replied answered that we are in the “end game”.  We are currently in a “crack-up boom” where a significant recession is postponed by currency printing/inflation.

AJ:  Is the crash due in 2 to 4 years?

MF: By printing more currency (inflation), government can postpone the end game by 7 to 10 years.

Again, Faber implies that the crash is not imminent. Assuming the most recent crash started in A.D. 2008, Faber implies that printing more and more fiat dollars (inflation) might postpone the collapse until about A.D. 2015.

I don’t believe that’ll happen, but I hope it’s true.

I see the world’s economy as so unstable and fragile that the US gov-co and Federal Reserve no longer even appear to be in control.  For me, the fundamental realities of massive, unpayable debt and a global system of fiat currencies (fraud) make collapse unavoidable.

More, events of the sort currently unfolding in the middle-east and Europe could trigger another global economic “decline” in the next month or next year.  Such decline might be enough to precipitate a US economic collapse.

America is already facing domestic problems of the sort seen in Wisconsin’s government/governmental-employee conflict or in Faber’s prediction of a possible 10-15% correction in the stock market.  These internal conflicts, individually or in concert, might be enough to precipitate a US economic collapse.

I’m inclined to see current economic circumstances as both dire and accelerating.  I’m inclined to think of a collapse as both inevitable and likely to happen within a year or two (at most).

But I also think that if Faber is right and the gov-co can postpone a collapse for another 4 years, it might be able to postpone the collapse forever.  If my inclinations are wrong and the current conditions are not as dire as I suppose—if the collapse is not “inevitable” within the next two years—then maybe the collapse isn’t “inevitable” at all.

Given enough time, perhaps the treasonous whores in the cathouse on the Potomac can contrive to prevent a collapse.  I can’t see how.  I don’t believe it will happen.  But nothing’s impossible

More, I recognize Marc Faber as an experienced and brilliant professional (I am merely a gifted or at least opinionated amateur).  So, if Mr. Faber implies that the economy might hold together for another 3 to 7 years, I’m skeptical, but I respect his opinion.

More, I’d like to hope the economy could hold together for another 3-7 years.  That much time simply leaves more opportunity to prepare and more time to watch the prices of gold and silver move upward.  And no one should be lusting for the collapse since, if it happens, it will almost certainly cause widespread death and chaos.

•  What should you do in whatever time remains to prepare?

Faber primarily recommends that you accumulate gold.  He claims that to not own gold is to trust the US gov-co—which he apparently regards as stupid.  I agree.

He also recommends buying farmland to preserve your wealth and provide a place of retreat in the event of collapse.

Faber even observed that now might not be such a bad time to buy a house.  In certain markets, the value of the house could not be expected to rise, but in times of rising monetary inflation, the house’s price might rise enough to at least preserve your wealth.  (Generally, I find that recommendation far-fetched.  Yes, maybe a particular house in a particular neighborhood being sold for a very low price might be a spectacular investment but, in general, I expect home prices to keep falling for at least another year or two.  How can home prices even stabilize so long as unemployment remains high?)

Faber recommended that investors avoid US gov-co bonds.  Their value will be ruined by the government’s determination to inflate the currency.

That leaves investors with a choice between the generic investment classes of stocks, commodities and precious metals.

Faber claims investors should be generally wary of stocks (equities) because they’re “over-bought” and due for a 10-15% “correction”.

He pointed out that most commodity shortages are short-lived.  I.e., this year’s wheat shortage will almost certainly be corrected by next year’s crop.  Therefore, while a fortune can be made (or lost) speculating in the immediate price swings of commodities, commodities are generally poor long-term investments.

That leaves precious metals (gold, silver, platinum & palladium) as today’s premier investment.  Why?  Because, unlike most commodities, precious metals can’t be produced quickly (if ever) to match growing demands.  Thus, insofar as there’s a growing demand to purchase more gold, the price must rise because the supply is essentially fixed.

Insofar as the dollar in particular and fiat currencies in general appear to be slowly dying, the demand for precious metals as real money is growing.  The precious metal supplies can’t increase as rapidly as the demands.  Therefore, for the moment, gold and silver are almost risk-free investments that should at least preserve your wealth and will probably appreciate in value so as to generate real profits.

The complete Marc Faber interview can be seen at:

Part One; video 00:15:05

http://www.youtube.com/watch?v=P0-_Q1I0bu0&feature=player_embedded

Part Two; video  00:10:49

http://www.youtube.com/watch?v=pe2vfDRWHSs&feature=related

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