MARC FABER: THIS IS “ZERO HOUR” FOR THE UNITED STATES
8 February 2010 by Cullen Roche
6 Comments
No one has had his finger on the pulse of the macro and micro market outlook quite like Marc Faber has in recent years. In this interview with Bloomberg today, he discusses the continuing problem of debt in the United States (claiming the U.S. is “junk” status) and the outlook for China and real estate:
Marc is brilliant, but seems he and other famous hyperinflationists always have an anti US bias. I am not saying he is wrong, but if they don’t use double standard, they should look at a country no ther than China in search of hyperinflation caused by abused monetary policies.
You know my stance. I think all of these hyperinflationists are wrong. These guys all seem to understand the problem of debt, but can’t seem to connect the dots between printing money and inflation. Inflation is very benign and deflation remains the bigger risk as of now.
I agree that deflation continues to be the real threat. Japan has printed and spent quite a bit of money without escaping its deflationary black hole.
It’s not a terribly complex argument. I just think most people are having trouble wrapping their heads around the fact that this is a balance sheet recession.
http://pragcap.com/why-deflation-remains-the-greater-risk
Well, the simple answer is that the US is not a company–and making the analogy won’t turn the US to junk. I mean seriously, does all he do is give interviews. I’ve got my own bearish tendencies–and I agree that when Germany hit its crisis, there was hyperinflation followed by war (the tea partyers, though, are trying a rerun of that, but the second time it’s farce, let us not forget!!). What I see him doing is running some familiar scripts over and over again to the point that I have to kind of be sceptical.
Mr. Faber is an absolutist in the sense that he looks at US debt in isolation and not relative to global dynamics. Take the eurozone. RELATIVE to the EU, the US future is quite bright. So what if nobody is triple A? What if we were triple B and the EU was triple B minus. The dollar would be supported relative to the euro in Forex. And China? Relative to Japan who built bridges to nowhere, the Chinese are building REAL INFRASTRUCTURE, so why wouldn’t that have an imputed ROI relative to the Japanese? Mr. Faber is quite smart, but I think he needs to think about the fact that every economy is a prisoner of our planet, and relatively speaking, a less uglier scenario can actually appear positive, even though compared to prior epochs, it wouldn’t. In that sense, I vote Mr. Faber’s opinion as a data point that must be evaluated with the balance of perspective available, even though he may have predicted something in the past. Times change.