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DEEP THOUGHTS FROM MARC FABER

16 July 2009 by TPC 5 Comments

Excellent two part interview here with Marc Faber.

Part 1:

Part 2:

* Thanks to reader Dean

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5 Comments »

  • Dean said:

    This might be supportive of the Faber thesis:

    http://seekingalpha.com/article/148526-washington-s-dilemma-this-isn-t-a-recession-it-s-a-collapse?source=article_sb_popular

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    # 16 July 2009 at 6:04 PM
  • prescient11 said:

    Marc Faber is quite an intelligent man and a joy to listen to. I love his comments on how the U.S. government is deranged and the never ending stimulii packages will do nothing.

    However, with all due respect, he, like many others, simply misunderstands the inflation/deflation argument.

    How exactly will inflation be caused? More than $20T of individual wealth has been wiped it in little over a year.

    What he fails to account for is the fact that the government simply does not have the power to force the inflation he is concerned about. There are four sources of money: 1) reserves/hard money; 2) bank loans; 3) securitizations; and 4)CDS’ and the like.

    2-4 are dead. Sure, they can print money and increase 1), but if you look at the sheer numbers here, with 2-4 dwarf 1) by a factor of about 9 to 1. It’s as if BB and TTT were burning everything they were printing, plus a ton of extra money.

    You simply cannot get inflation in these types of circumstances. You cannot. That is the deflationary argument and is the only one that fits the facts.

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    # 16 July 2009 at 9:10 PM
  • percolator said:

    I agree, prescient11. I thought this interview was especially entertaining.

    I was laughing when he was getting worked up about Greenspan then goes for his smokes, fires one up while NewsMax anchor asked his next question and tries discreetly to put the cigarette away though smoke still fills the air.

    I hate taking the other side of a trade of Mr. Faber, but I think deflation is going to last a lot longer because credit/debt destruction is dwarfing money creation, though eventually it will cycle through and we’ll have some sort of nasty hyper-stagflation.

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    # 17 July 2009 at 2:23 PM
  • prescient11 said:

    Percolator, I will take the other side of Faber any day here because deflation is all we have seen. Even the quantitative easing we have seen from the Fed. is nowhere near compensating for the destruction of wealth that has occurred and is continuing.

    If they ever do take steps to match the destruction of money/credit then we will truly be a banana republic.

    They are just trying to manage the blood letting and infusing the patient whenever absolutely needed.

    And was that a cigarette? Saw the clouds but thought it could be coffee or something. Now I like Faber even more!

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    # 17 July 2009 at 9:18 PM
  • permabear said:

    For those predicting deflation, we should already be in deflation if you’re right. And last year during the deleveraging calamity hitting all asset classes, deflation ruled the day. But since then, TARP, trillions in Fed generosity, and hundreds of billions in stimulus in the U.S. alone, not to mention all the stimulus occurring in China, Europe and the rest of the world, have all contributed to a rescue of the world’s financial system, a stabilization of economic activity, and a revival of the world’s stock markets. In short deflation has been tamed. So where do we go from here? Does the government just shut off the relief valve. While the Fed has stopped the money spigot, it won’t take much to turn it back on. Only a small percentage of the stimulus money has been spent. The dollar is heading down not up. In short, the reflation trend is back in fashion. My personal view is that we are now in the eye of the storm, where reflation is acting as a positive force. I don’t know how long benevolent inflation will last. Some bearish commentators I follow, including Faber in one interview I saw, suggest that the stock market is now in a cyclical bull market that can run another year or two. Others aren’t nearly that optimistic. Personally I’m not taking any chances with stocks. There are other inflation hedges out there that are much better. In any case, inflation has only just begun. Get on board or miss out.

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    # 24 July 2009 at 4:35 PM