Marc Faber Blog

Wednesday, September 17, 2014

Western countries such as US heavily indebted

Well, my view is that the current monetary arrangements are not sustainable in the long run. We have sensitive, overly indebted Western economies in the US and Europe. It is not visible yet, because the unfunded liabilities are probably not accounted for. 

A company under GAAP would have to account for them, but governments don’t have to. What this means is that the benefits of people will eventually have to be cut either through inflation and adjustments that are below the true cost of living increases or through reduced payments to the individuals. With benefits going down or through outright expropriation over the last two or three years, more and more voices have come up talking about wealth inequality. 

I previously discussed the problem of wealth inequality brought about by expansionary monetary policies where the main beneficiaries become the asset holders. Wealth inequality should be largely addressed through monetary policies in the sense that you should have an interest rate structure that does not favor the kind of asset inflation we have. 

Monday, September 15, 2014

Rich have gotten richer

Credit expansion and money printing hasn't filtered much to ordinary people. It's boosted asset markets, real estate and stocks.

So well-to-do-people have done very well. High-end restaurants are packed. Now, some money flows to people who are serving there, because well-to-do people give generous tips, but ordinary people have a much higher cost of living increase than 2 percent.

Wednesday, September 10, 2014

Financial markets should pay attention to middle east crisis

Today, we find ourselves with the same anti-free market interventionists who set up the Federal Reserve, the US Treasury and the US government. These same incompetent professors and academics also run foreign policy in America and then go and intervene in the affairs of Libya, Syria, Egypt, Iraq or Afghanistan. And as can be expected, they mess up just about everything. 

We have this Wolfowitz Doctrine that says they don’t want to tolerate any other major power such as the Soviet Union or China. So they want to contain these countries. When these countries become economically more and more important, the tensions, in my view, are only going to increase. 

I think it’s unlikely that the West will take any action. 

First of all, they don’t have the money. 

Second, a survey done by the US military stated that over 71% of their youth are unqualified to join the military for a number of reasons, including educational, behavioral and health conditions. So, if 71% of American youth are not qualified, it means the US doesn’t have the labor force to actually implement its foreign policies. And so they resort to private contracting companies that create more problems than solutions. I’m very negative about the Middle East. I think the whole region will blow up. Eventually Iraq will be divided into three different countries: the Kurds, the Sunni in the North and the Shiites in the South. All I can say is that, in general, financial markets are not paying sufficient attention to this.

Monday, September 8, 2014

Water and Food investments can be big in future in emerging economies

I think there is an opportunity in real estate in some emerging markets because they are depressed and so forth. But in terms of industries, I tend to stay away from the new industries until they've gone through a bubble stage and then the bubble bursts and then they become cheap. At the present time, I want to be rather in liquid investments than in these kind of sectors. I think an underappreciated sector is probably water and food. I think this will be a big issue in the future.