Dr Marc Faber has again urged people in the world to be diversified, own physical gold and to be their own central bank.
In another fascinating interview with Bloomberg, Dr. Marc Faber covered Japan’s massive QE experiment, the slump in oil prices and the importance of diversification and owning physical gold.
The interview was extensive and he covered a lot of ground which helped put the current major economic trends in perspective. The editor of the the Gloom, Boom and Doom Report, is always contrarian but always measured in his insightful analysis.
Japan’s foray into QE as a “ponzi scheme” in that “all the government bonds that the Treasury issues are being bought by the Bank of Japan” according to Faber. He said that in the short term Japan may not have to face consequences because “most countries are engaged in a Ponzi scheme.”
But he warned that “it will not end well.”
When the interviewer put it to him that various economic indicators such as jobs numbers in the US were positive recently he countered that these statistics” are published by the Obama administration, and therefore I would be very careful to take every figure for granted.”
He pointed to first-time home-buyers in the US, the number of which are at thirty year lows.
“A lot of people are being squeezed very badly because the costs of living are rising more than their salaries and wages.” The low home-buying figures show that people simply cannot afford to buy houses anymore demonstrating that no amount of cherry-picked statistics can gloss over the fact the US economy is not in good shape.
He also mentioned his long maintained view that inflation and deflation are not uniform phenomena but that “in some sectors of the economy you can have inflation and in some sectors deflation.” The implication of this is that, again, government statistics are not necessarily an accurate reflection of the state of the economy.
He does not see long term weakness in the oil market. The current low prices, while they may be advantageous to western consumers are damaging those companies in the U.S. who took on large debts to develop oil drilling projects. And Saudi Arabia cannot run it’s social system, he reckons, if prices go below $70 for an extended period.
The consumption of oil in the developing world is increasing from a very low base in comparison to the West.
“So I think the long-term trend for demand is up, but obviously the decline of oil prices, some people blame it on Saudi Arabia and some other blame it on the US and who knows what, the fact is maybe the decline in oil prices tells you that the global economy is not recovering as all the bullish analysts think, but actually it’s weakening. Yes, weakening.”
To support this contention he argued that European economies are stagnant and China is in a slowdown. The knock on effect of this is that industrial countries are not buying commodities from resource-rich countries who in turn are not buying manufactured products from the West.
This means that “you have the potential of a downside spiral.”