Faber's Bold Prediction: Both The US And Europe Will Default On Their Debt

Tyler Durden's picture

Picking up where he left off in his prior Bloomberg interview earlier this week, the author of the "Gloom, Boom and Doom Report" continues his bashing of the governments of all developed and overleveraged nations, which he claims will sooner or later default on their obligations. This could be the most scathing critique of the fiat-money system to date, which is the primary cause for the facility with which governments have accumulated untenable debt loads.

"In the developed world we have huge debt to GDP, in terms of
government debt to GDP and unfunded liabilities that will come due, and these unfunded
liabilities are so huge that eventually these governments will all have
to print money before they default."

Sure enough, CNBC, and especially Dennis Kneale, was not too happy with his assessment.


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DoChenRollingBearing's picture

Faber might very well be right.  It would track with history -- when a country's debt / GDP gets too high, one of several things always happens.  One of those things is often a default on the country's internal debt.

Reinhart & Rogoff's book This Time is Different will tell you everything you need to know.

MarketTruth's picture

" It would track with history -- when a country's debt / GDP gets too high, one of several things always happens." "

The other thing they do is that said country goes to war. Hmm... i hear the beating drums of USA vs Iran....


Near the last few seconds of the video he seems to feel that precious metals will do quite well. Ahhh... where is Chumbawumba when you need him?

hound dog vigilante's picture

"USA vs Iran..."


like Iraq (twice), it's not even a contest. To call this 'war' is giving the "enemy" to much credit. 

This is a modern day religious Crusade, delivered as mercenary/protection services for multinational energy corporations, financed like Enron, and packaged as a 'war on terror'.

MarketTruth's picture

If you are referring to the Petro-Dollar link, you may want to read my post at www.zerohedge.com/article/guest-post-iran-unfazed-congressional-threats-new-energy-sanctions

It appears the USA may do ANYTHING to keep the oil flowing only in dollars.

Anonymous's picture

That is only part of the answer. You have the first part right, but we already have half the oil that the Saudis' claim they own, and that is a lie. All the OPEC members are lying about what they have, so they can sell more according to OPEC rules, and it is actually a lot less that they have. We don't use our own oil thanks to our domestic terrorists in power, in D.C. Call or write your congressman right now on the internet, demanding we 'Drill HERE, Drill NOW!'

jeff montanye's picture

if the energy corporations were so hot for iraq/iran why were so many of the early proponents effectively likudniks with little connection to international oil?

Anonymous's picture

What in the effin craphole are you talking about?

Anonymous's picture

shut up , what religious crusade ? you cant tell who is the offender here. have you heard of the real religious crusade called jihad? wake up you obnoxious moron

Anonymous's picture

Faber Bitches!

I am not Chumabwumba.

AnonymousMonetarist's picture

If memory serves, Faber, in his most recent newsletter, shows a chart adding up all of America's liabilities and pegs the debt at about 600% of GDP.


AnonymousMonetarist's picture

If memory serves, Faber, in his most recent newsletter, shows a chart adding up all of America's liabilities and pegs the debt at about 600% of GDP.


Anonymous's picture

All this crisis originated from the fixed Chinese currency. By keeping the Yuan at fixed rate, imported inflation on Chinese goods stay out, and instead of raising interest rate, the Fed wait for an inflation that never materialized. It stay cristalized in the Yuan. So the Fed keep rate low, and bring to life the cheap mortgage bubble. Faber is right on paper. But what he didn't think is that capital will raise its relative value to debt. So the market will adjust by reducing the price they want to pay for debt. Debt will depreciate relatively to earning producing investment. And then the lastic will go back in their face: who own the most of the worldwide new debt? China!

The Machine

Anonymous's picture

You hit the nail on the head. Do you also realize that's why we're deliberately trying to debase the dollar? Yeah, I know what the FED is saying. Does anyone really think they are telling us what we need to know? Or is it just trying to keep the game running? Reality is that noone apparently wants to really stop China and this way is hurting them really bad. Problem is that they are tough about it, since they are and have been a totalitarian govt.


Mr Lennon Hendrix's picture

"All governments"...hahaha!  Blow to the state!  He will be right, he always is...just watch.

Love the way he renders Dennis "on his knees" Kneale's comments utterly worthless.  Faber makes money and looks good doing it too, biotch!

Buy Silver tonight if you know whats good for you.

Let them all fail's picture

God that dude is such a tool - Him and that older guy in the mornings should just have a three-way with Bernanke and get it over with

cougar_w's picture

No! You Visigoth! Now I will NEVER get that mental image out of my head!

Hope you are satisfied.


knukles's picture

"All" is a mighty strong statement, pilgrims.  Somewhere, somebodies will be buying something of a medium of exchange, a store of value.  And not all shall likely be physical, hard assets.  Like the last one to which folks flock, a la Switzerland in the post war era.  A "Somewhere" will survive.  If the broad "all" comes to fruition, these comments are immaterial evidence of eggregious false pride, self-will and egomaniacial delusion run riot.  Mere amusement whilst Rome burns.

TheGoodDoctor's picture

I thought Sue used to be hot? I thought it funny when Faber said, "All governments" they all freaked out. They mildly freaked out when he was talking about bonds and then precious metals too.

It's almost like it was, "Who the fuck booked Faber?"

Anonymous's picture

do you remember a painting titled..."Pride before the Fall". Recall the meaning of that and then read the posts...the world has a very different view of the States as it blows it's own horn in the dust of Iraq, Afganistan and now maybe Iraq? How much does this self puffery cost in real dollars and reputation. C'mon guys (and gals) the US used to be the shining light in a darker world...get it back there!

Shiznit Diggity's picture

Why explicitly default when you can just inflate your debt burden down to size? 

cougar_w's picture

Currency manipulations can lead to hurt feelings.

35Pete's picture

And latent emotional resentfulness that could later manifest itself in insurrection, civil war, and political revolution.

cougar_w's picture

It all ends in tears, I just know it.

faustian bargain's picture

Thursday afternoon, a very special episode of Hallmark Theater: "Not Without My Currency!"

Brought to you by iPad.

Anonymous's picture

Inflate is the plan. I hear Ben has asked that several thousand helicopters be made ready for money drops. But should the current World War III expand into WW IV, defaulting on debt held by your enemy would be a no brainer. One should be prepared to live without cheap crap made in China.

Anonymous's picture

And Hank Paulson spent alot of time dealing with the Chinense banks while at Goldman and as Treasary. At Goldman he made over 60 trips to China.

Out of the ashes will come the one world currency.


DosZap's picture

"Out of the ashes will come the one world currency."

Did you you catch the Greece edict?.NO  One can pay  cash  for any purchases over 1500 EU, they want the Tax  revenues............and are making damn sure they get em'.

Look  for this coming to the US shortly.

JOHNICON's picture

I don't think it's that simple unless the US federal government starts printing it's own money like in the olden days.  Right now, in order to monetize our debts, we'd have to print up Treasurys and sell them to the Federal Reserve.  The result of that process is that we would still have outstanding Treasurys (held by the Fed) that have to be paid off eventually.  If we do that enough the only buyers of new Treasurys would be the Fed (who else would want them?) and then...?  I don't think anyone wants to see the other side of that particular event horizon...  :(

Anonymous's picture

wrong, and like most americans including many college economics professors, you still wrongly believe that the Fed can only print money via the Treasury's route.

As we speak, the Fed is invoking the Monetary Control Act of 1980 which explicitly allowed the Fed to buy any assets it deems fit, including foreign debt. It is bypassing Congress' debt ceiling on Treasuries issuance. The MBS, GSE toxic wastes were all bought via money printed directly. The MCA of 1980 was incidentally passed under Volcker. Irony that Volcker said last year in Congress hearing that Heli Ben was pushing the envelope of The Fed Reserve Act by buying directly assets by money printing. Ben was only invoking Volcker's MCA of 1980. A quid pro quo for Obama's re-appointment is certainly the requirement for Hei Ben to support the government's requests for direct monetisation in the event the GOP stalls his next "budget(s)".

Anonymous's picture

I find that fact very interesting (i.e. the purchase of assets under the MCA of 1980). Can you, a) explain this in depth and educate those of us not familiar, and b) where do you see these purchases ? What source data? Also, monetary policy and workings is not my expertise, so please be gentle and assume additional background needed !!

Anonymous's picture

The big scheme now is for our government to tap into those trillions of US citizen's dollars sitting there like ripe apples in retirement accounts. Yeah, they will pay you back just like they have paid back the money they robbed from the Social Security system... when hell freezes over... I think the hedge here is to physically hold some gold & silver and anything else you can barter. When the bottom falls out of this mess, you'll need it. I consigned to the mantra "Better to have it and not need it than to need it and not have it". Folks, the banksters have sold us out. The world's ultra wealthy (all 10 of the Soros' type) are pulling all of the strings and it ain't in our favor.

Tommy's picture

Saying US will default is just as preposterous as those who said the Investment banks were doomed in 2008.

VegasBD's picture

You contradicted your own point? Oh are you counting all those new BHCs as IBs still?

Cognitive Dissonance's picture

Once again CNBC can't count on Faber to stay on message. The poor guy strayed off script and almost had is head handed to him by the news repeaters/readers.

"I'm not interested in any government or sovereign debt because I think that all governments will default, including the US."  

Suddenly everyone acted like they'd just been told they're the ugliest people on TV. They seemed to take what Faber said personally. Now they can't get this loose cannon off the air fast enough.

It's just so obvious that there's an agenda that to say otherwise requires large doses of drugs. When someone says the emperor has no clothes, he or she gets the bum's rush exit stage left.

DosZap's picture

Oh they won't default, they will inflate their way out of it...........

And rest assured, they ARE coming for your 401k's, and IRA's.

Already rules are in place, to not allow you access to your own freaking (out of pay), unless you  quit, or retire.

You MAY( love that wording, ) take a loan,if  for a divorce,or health  issues arise, or education expenses are needed.

But, the bottom line, YOU cannot remove YOUR contributions.


Leo Kolivakis's picture

Faber is bad for your financial health. The game is rigged folks, keep buying them dips, and let Faber, Prechter and the rest of them growl as the market keeps grinding higher.

boiow's picture

seriously, do you work for the CIA

35Pete's picture


Christians in Action. 

Anonymous's picture

The original joke about the meaning of CIA was Central Investment Agency because William Donovan used so many people from the east coast financial establishment. Quite relevant in light of recent events.

Shameful's picture

Hope your right Leo. So what do you figure is the carry limit of debt in the US and when do you expect us to hit it?

Leo Kolivakis's picture

Back in the late 90s, I was working as a fixed income analyst at the Bank Credit Analyst (BCA Research). I remember helping the Managing Editor on a research piece asking whether the US current account deficit was sustainable. It was a hot topic back then. Not only was it sustainable, it got much, much worse. So forgive me if I am not in Faber's gloom & doom camp.

SilverIsKing's picture

It's sustainable...until it's not.  This is a math equation and a very simple one at that.

There's no way out of this without defaulting or inflating unless of course our creditors just wanna be good guys and let us off the hook.

Maybe we give away a few states in exchange for eliminating some of the debt.

cougar_w's picture

My god, it's not even math anymore.

Now it's down to religion. You gotta believe.

The problem with running things from belief is that one blasphemy too many and the illusion evaporates like so much morning mist. Look out when that happens, things can come unhinged.


Shameful's picture

I have been saying that the US economy and dollar was the worlds largest religion since high school. "Everyone in the world believes in it, and everyone in the world has to believe in it or it won't work. From the Queen of England to poor kids in Africa, we all have to believe." Even then I knew that the trade deficits and no manufacturing was a problem. But religious beliefs can hold long after they have been proven wrong and comically false.

Hephasteus's picture

People will get disillusioned and some will get tired of it and go back to the illusion but many will NOT. I won't. You don't ascend. You don't graduate. You don't advance. You simply become to hard to teach bullshit too.

Double down's picture

That quote is my new e-mail signature


TheGoodDoctor's picture

I call it thinking for yourself. Unfortunately, part of this is your own personal BS-O-Meter. Some people don't have them and some people can't think for themselves. Which is scary.