Marc Faber on money, gold and commodities Bearish About Everything, But Quite Happy to Hold Physical Gold Marc Faber, the legendary investor and the author of Gloom, Boom & Doom Report shares his outlook on various asset classes including gold, agri-commodities and equities. Marc Faber : "In my view, the Federal Reserve has effectively demonstrated it is willing to risk hyperinflation in order to beat back the deflationary forces." "Stocks could go up and the economy can deteriorate...Government official should stay out of the economy... Mr. Obama and his clowns around him don't understand... they're going to destroy the economy." âItâs a race in the purchasing power of paper money to the bottom, and the only assets that will, for sure, keep their purchasing power are precious metals.â âIn the long term, as I always said, we are all doomed, but in the meantime, because of the volatility in the markets, you can make money. The key is to know when to stop, and when you stop, how and where to allocate assets.â http://networkedblogs.com/4sNCp
The template for this is 1967-1982. In late 1967, the UK was forced to devalue the pound. In 1968, the dollar de facto went off gold when the London Gold Pool was broken up. The French cackled, and were promptly reminded that pride goes before a fall: they were forced to devalue in 1969. The result of that devaluation was mild, and so gold settled back to its old 35 per ounce value, and everyone thought it was all over. Then, the whole thing started up again in 1971. By August, Nixon de jure took the dollar off gold. The rest of the seventies followed. The PIIGS Euro debacle is the analog to the French devaluation: Trichet, standing in for de Gaulle, is being forced to deal with the same forces that swept through the US in 2008. As of now, it looks like the situation's been stabilized, and I'm sure everyone's breathing a sigh of relief. In a few years, something will happen to start the whole thing up again. The irony is, when it's all over the dollar will still be the reserve currency. Also, the problem this time will be deflation, not inflation, because the problem this time isn't that there's too much money sloshing around, but that what there is is disappearing rapidly into the black hole of deleveraging. Whether gold will do well I don't know, but my guess is that it will do well until the resolution, and then do poorly. What will do better is first buying volatility over this time period, and then selling it into the resolution of the crisis. This isn't easy. For 99% of the folks reading this, the best advice is to sit and wait it all out. The other 1%, who understand statistics, volatility, greed and fear, the difference between risk and uncertainty, and, most importantly, vanity (read Ecclesiastes, and look at Taleb: he understands all of this except vanity), will be able to profit. If you don't understand ALL of these things, just stay out.
As inflation jumped to 2.2% here in europe here are 10 things that increased in cost considerably: Strawberries +36,90% flowers +16,38% Fresh fruit+14,48% motor vehicle inspection +14,48% Veterinary consultation +13,54% Roundup garbage +3,72% Foreign traveling +2,78% Milk chocolate +2,81% Heating oil +2,79% Diesel +2,31% Things that got cheaper: Renting a vacation home: -5.6% Talking on a cel phone: -3.6%
Yeah, central banks just love the electronica sector as it provides much of the deflationary forces they so desperately seek or so they claim. For your information, computer memory, portable music players etc got slapped with a 10% tax to set right what illegal downloading has done wrong which all the more makes it clear if deflation is truly the name of the game have no fear, the government will step in an tax whatever improvement in purchasing power your currency has achieved to make up for their loss in revenue.
this is nuts and only nutters believe this. i just do not see how these conclusions followed from theory of endogenous money (which i agree with btw). but it is funny to see that many pseudo-economists (a la hugh hendry who even can't trade/invest) still think that they have much to preach to others. debt does not drive inflation/deflation! it is a supply vs demand that matters. full stop. as long as supply is accommodative of demand (think China's cheap stuff in the past 15 years) the inflation does not reign (and vice versa). did we have inflation during years of huge private debt creation? NO. we had asset inflation. the two thinks are not independent but they are not the same! now think about 20% decline in asset value - well that is bad but that does not mean people have to pay 20% of debt. on average everybody still have much more assets than liabilities anyway. what do you do after a year of the initial "asset reduction" shock? after a year you do not recall how many assets you had a year ago - and you chime along with your comfortable consumer behavior. ok - people will likely pay off some debt to maintain the household leverage acceptable (which we saw happening in the data) but this is more a psychology driven ("look, I am doing something about the changed circumstances"), i.e. temporary redirection of disposable income. note that they will do debt repayments also from freed cash flow due to lowered interest rate cost. in turn low interest are increasing disposable income as soon as people say "fuck reducing my debt, we live only once after all - and i saw my neighbor buying a new car just yesterday"... now comes the argument of sending cheques to people (or government spending if you wish). if you do this faster than you can adjust supply you get a price pressure. this is first visible in commodities sector because it is the first factor in the supply chain - that's why you watch commodities. nobody knows how fast is "not too fast". i do not know if we have inflation or deflation going forward. it depends on US unemployment, chinese price level and chinese domestic demand among many. but the debt argument is a bullshit.
A lot of economics do not invest. At least not stocks. A wise decision is to avoid investment when you are unsure of what is going on. Does anyone know what is going on currently. It is the cross over of one school to another but people do not know what it is yet.
Worst case scenario, The government could print bills and start emergency money airdrops in our cities. Think of it like the Berlin airlift. Bags of cash just being dumped in cities. People go and grab money and start spending.
Do you remember the 'Happy Monday' stimulus that Japan executed without effect. They gave every citizen a government check, and they gave them a day off from work with instruction to go shopping...on government sponsored 'Happy Monday'...much like the air drop above...and yet prices continue to decline in Japan. Assuming the money has any value by the time you drop it from planes...more value than toilet paper or stove fuel...what do you think the people in the streets will spend it on? Beer and potato chips? Drugs? Used toyotas? A 'power night' at a DC disco? How does this spending expand production again? Maybe increased staffing of the emergency rooms in Newark hospitals as occurs evey time the welfare checks are delivered.
It doesn't. Goverment wants to believe that what's needed is a "kick start" or a "pump priming", and the economy will take off on its own once again. Either they're once again trying to dupe the public with BS and false hope, or they don't understand the situation themselves.