Ultra Bearish Marc Faber Says the Whole Derivatives Market Will
One Day Cease To Exist, 'Will Become Zero'
Business Intelligence Middle East
the Swiss fund manager and Gloom Boom & Doom editor recently
discussed his 2012 predictions. In a nutshell, he expects politicians
in the US and the EU to keep on addressing symptoms rather than
dealing with the fundamental problems of the crisis.
He can smell
more money printing and sees less prosperity to the point that
within 5 years many investments could lose 50% of their value.
increase debt but it doesn't increase prosperity or economic growth,"
he says. He predicts the collapse of the derivatives market down
to zero and favors equities and gold.
with Jeanne Yurman of Reuters on the sidelines of the IndexUniverses
4th Annual Inside Commodities conference held on December
8 at the New York Stock Exchange, Faber said: "There is no
doubt that QE3 will come in one form or the other, and in Europe
will monetize," he stressed.
impending additional quantitative easing, Faber, who predicted the
stock market crash in 1987 and turned bearish shortly before the
2007-2009 bear market, is less bearish on equities now.
If the S&P
drops 10%-15% here [the US] and in Europe, "they are going
to print money," he predicted.
symptoms: The limit of Keynesian policies
more can-kicking and more avoidance of real solutions through additional
fiscal deficits and money printing in 2012.
the EU [and the eurozone] were formed, in the Maastricht treaty
it was stated that no country should have a fiscal deficit of more
than 3% and the debt to GDP ratio should not exceed 60%, but nobody
kept that promise, Faber reminded his host.
The first one
to violate [the rules] was Germany, he added.
When you look
at what happened subsequently where countries had huge expansions
in debt/GDP, you have to ask yourself what did these bureaucrats
do all day? asked Faber.
investor clearly disagrees with Keynesian policies that seek to
get out of the crisis caused by too much borrowing and spending
by spending and borrowing even more.
The limit of
these [Keynesian monetary] actions has been reached he said. You
can increase debt but it doesn't increase prosperity or economic
growth, because there is a point where the excessive debt growth
doesn't stimulate economic activity any more, but it does create
bubbles in different sectors of the economy.
were in a global economy, the intended consequences of the
actions may not even happen in the US. "Mr. Bernanke's monetary
policy was designed to lift the housing market. The only asset that
didn't go up since 2008 is housing."
his view on European banks, Faber said they will need more than
US$153 billion to restore confidence. He was referring to documents
from the European banking regulator stating that Europe's banks
will need to raise 114.7 billion euros (US$152.8 billion) in fresh
capital as part of measures introduced to respond to the euro area's
need 13.1 billion euros and Italian banks 15.4 billion euros in
core tier 1 capital, the European Banking Authority (EBA) said in
a document published early December.
are in a very bad shape because they are so leveraged. US banks
are also leveraged through the derivatives markets and so forth,"
Faber told Yurman, adding that he was very bearish.
Central Bank announced December 21 it will lend eurozone banks 489
billion euros (US$645 billion), more than economists forecast, for
three years in its latest attempt to keep credit flowing to the
economy during the sovereign debt crisis.
go down to zero
You can postpone
the problems with monetary measures for a long time, but you can't
solve it, Faber noted.
Adding to his
repertoire of gloomy predictions, Faber said: "I am convinced
that one day the whole derivatives market will cease to exist, will
should have defaulted; it would have sent a message that not all
derivatives are equal because it depends on the counterparty."
the rest of the article
Marc Faber [send him
mail] lives in Chiangmai, Thailand and is the author of Tomorrow's
2011 Business Intelligence Middle
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