Cash and Bonds Will Be Very Dangerous

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Cash and Bonds Will Be Very Dangerous: Marc Faber

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Investor Marc Faber said cash and bonds will be “very dangerous” in the next 10 years as governments increase money supply to cover fiscal deficits.

“There’s no other way out but to print money,” Faber, the publisher of the Gloom, Boom & Doom report, said at a forum in Seoul on Wednesday. “In the long run, all paper money will go exactly to its intrinsic value, which is zero.” Faber advised investors to protect themselves with assets such as gold and silver.

Bullion climbed to a record in euros, pounds and Swiss francs on Tuesday as investors sought to preserve their wealth against declining currencies. Risks to the global economic outlook have “risen significantly” and room for policymakers to support growth has become “much more limited and has, in some cases, been exhausted,” International Monetary Fund Deputy managing director Naoyuki Shinohara said in Singapore on Wednesday.

Total assets held by US Federal Reserve banks rose to a record $2.35 trillion on May 19 as central bankers printed money to buy debt and rescue lenders as credit markets froze during the global financial crisis. The European Union last month pledged a E750 billion ($900 billion) aid package to prevent a debt spiral that could spread from Greece to Spain and Italy.

Bill Gross, who runs the world’s biggest mutual fund at Pacific Investment Management, says the best is over for bonds. Record budget deficits and sales of government debt will eventually spur inflation, drawing the almost three-decade bond market rally to a close, the Newport Beach, California-based firm’s co-chief investment officer, said in a March interview.

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Dr. Marc Faber [send him mail] lives in Chiangmai, Thailand and is the author of Tomorrow’s Gold.

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