"We're all doomed"

[bik0]

Just one man's view but chilling nonetheless...

Marc Faber:


" Listening to all of you, I have come to the conclusion that we are all doomed. The Fed and certain academics in the U.S. don't understand the instability brought about by excessive credit growth and artificially low interest rates. In a 7,000-word article in the New York Times several months ago, entitled "How Did Economists Get It So Wrong?," Paul Krugman nowhere mentions that excessive credit growth or leverage was the cause of monetary instability and brought about the financial crisis. In a Jan. 3 speech in which Mr. Bernanke talked about monetary policy and house-price inflation, he never once mentioned excessive credit growth. The Fed has learned precious little and will keep interest rates at zero forever. Even if it raises rates, they will be below zero in real terms. If I had been a professor, I would have let Mr. Bernanke pass his exams, but I would have told him never to become a central banker.

The deficit will be above a trillion dollars a year as far as the eye can see. One day, Mr. Bernanke or whoever is at the Fed will have to increase short-term interest rates. When that happens, America's interest burden will go up dramatically. Interest payments could go to 35% of tax revenue in 10 years' time, but that is an optimistic assumption. I'm inclined to think 50% of tax revenue will go toward interest payments on government debt in 10 years. Then you are bankrupt. There is only one way out -- the Zimbabwe way. You will have to print and print and print.

Jobs lead to consumption, but what leads to jobs? Capital spending. For the past 25 years, policies in the U.S. have been driven by the desire to stimulate consumption instead of capital formation. And capital formation isn’t just building factories. It is education, research and development, infrastructure and company plants and equipment."

http://goo.gl/hlsT

Faber was born in Zürich and schooled in Geneva, Switzerland where he raced for the Swiss National Ski Team. He studied Economics at the University of Zurich and, at the age of 24, obtained a Ph.D. degree in Economics magna cum laude.<1>

Faber is famous for advising his clients to get out of the stock market one week before the October 1987 crash.<10><11>
Faber has gotten the trend right, but the timing wrong in some cases. The prime example was his calling a NASDAQ top and advising investors go long commodities, including gold, in 1999. He lost money shorting US stocks since 1999. He admits that market timing is very difficult. Nevertheless his market advice since 2000 is quite accurate. Faber predicted the rise of oil, precious metals, other commodities, emerging markets and especially China in his book Tomorrow's Gold: Asia's Age of Discovery. He also correctly predicted the slide of the U.S. dollar since 2002<12> and the 5/06 and 2/07 mini-corrections. He stated that there are few value investments available, except for farmland and real estate in some emerging markets like Russia, Paraguay, and Uruguay.<8> He believed in early 2007 that a major market correction was "imminent." (Fox News, 2-2007); however, by 5/2007 he was saying that U.S. equities were moderately overvalued — less so than those of emerging markets.
In a June 2008 interview with Bloomberg, he goes over his bearish views on a wide spectrum of investments: stocks, real estate and commodities. He is extremely critical of the Fed's inflationary actions. However, his views for the short-run were almost entirely deflationary except for holding precious metals; Faber still views hyperinflation as a certainty within the next 10 years. He also correctly expressed temporary bullishness for the U.S. dollar in the middle of 2008 before it dramatically recovered and positive expectations for holding the Japanese yen.<13> On March 9 2009, Faber correctly predicted a U.S. stock market bottom.<14>

http://goo.gl/74BD

[Turbineguy]

1. I'm not an economist

but I've noticed that there are "natural" rates of return from various endeavors. If you go higher than those you get out of balance. Finance created derivatives to artificially inflate the returns above their natural level. It would be like the oil industry creating phantom oil and selling it. They would instantly multiply their profits to the degree the phantom oil was created. It would work great until you tried to use the phantom oil in your car. The financial industry has no such constraints.