Dr. Marc Faber, renowned money manager and publisher of the Boom Gloom and Doom,Report sat down with Jonathan Roth of Hard Assets Money Master for an extended interview about his career and outlook on markets. The Swiss born investor now lives in Thailand, sometimes referred to as ‘Dr. Gloom,’ is famous for a long string of prescient market calls including forecasting the decline of the Japanese markets in the early 1990s, the Asian financial crisis in the late 90s, surging commodities prices in the early 2000’s, and many other predictions.
Dr. Faber quite succinctly describes the limitations of the quantitative easing policies that nearly all central banks have undertaken since the 2008 financial crisis:
“This is the problem with money printing, and this has been observed already by Copernicus and by David Hume and the early economists, that when you print money, and as you would say in the words of Mr. Bernanke, if you drop the dollar bills onto the US, what the central bank doesn’t control is what people will do with that money. You know they can buy commodities, they can buy real-estate, they can buy collectables, they can buy stocks, they can buy bonds. That, the Fed doesn’t control really, and the problem with this money printing is that the money flows are not even into all assets and even into all consumer prices. So some prices go up, say healthcare costs, educational costs of your children, they go up much more than your salary, and so people are then squeezed. The affordability becomes an issue. That’s the problem of the economy today. The economy is doing okay, but its doing particularly well for the, not 1%, but the 0.01%. They have moved ahead a lot, and the people, 50% of the American people have no assets. They have no money. They don’t benefit from money printing, actually they are hurt, because their cost of living is going up more than the CPI would indicate… My view is that the recovery, globally, is very weak considering the money creation, in other words the expansion of central banks’ balance sheets, the credit creation, the fiscal deficits everywhere, and the fiscal deficits, if you would account properly for the unfunded liabilities that are growing very rapidly, the deficits would be much larger, and corporate profits would be much lower, because the corporate sector also has unfunded liabilities. In a profit boom they should allocate sufficient profits to the pension funds, but they didn’t, and so my sense is the money printing will have to continue. The moment the economy slows down more obviously than has happened just recently, my view is that the economy is already weak, very weak, at a high level, but weak. It’s not growing anymore… “
Interestingly, with regards to his outlook for Bitcoin, Dr. Faber notes that while it has certain advantages, it is not a replacement for physical assets:
“If you really think about society today, what is our vulnerability? It’s unlikely that someone would invade the US. I mean nobody is as foolish as that. It’s unlikely that someone will go and invade China. They may provoke China, which would lead to some confrontation, say in the East or South China Sea, or say North Korea, which is supported by China. That is possible, but an invasion of China, the way it happened repeatedly in the 19th century and early 20th century, the attempt, is out of the question. So I think the vulnerability of societies is less in direct big world wars, but wars that are fought, not with tanks, they are fought by somebody who could switch off the lights in New York, or the electricity, or the internet. If you switched off the internet, what would happen? First of all, nobody could go shopping, because everybody shops with a credit card… So in these times you want to have access to something actually physical that is a recognized medium of exchange. The Bitcoin, in a situation where the internet collapses would not be good, because you wouldn’t be able to access it.”
There is much more to the interview. The video cannot be embedded but you can find it HERE. Enjoy.