This page has been archived and commenting is disabled.
Marc Faber: Relax, This Will Hurt A Lot
Marc Faber closed out this week's Agora Financial Symposium with a speech that pretty much recapitulated the view that the end of the world is if not nigh, then surely tremendous dislocations to the existing socio-political and economic landscape are about to take place (with some very dire consequences for the US). His conclusive remarks pretty much summarize his sentiment best: "We've had a trend for most of the past 200 years: GDP of countries like
China and India went down while the West surged. That's now changed.
Emerging economies will go up, and your children in the West will have
a lower standard of living than you did. Absolutely. We won't sink to
the bottom of the sea. But other countries will grow much faster than
us. The world is very competitive, and the odds are stacked against us.
Americans, with their inborn arrogance, will not let it go that easily,
so there will be lots of tension going forward." While long-time fans of Faber will not be surprised by the gloom and doom (not much boom) here, anyone else who still holds a glimmer of hope that at the end of the day the CNBC spin may be right, is advised to steer clear of Faber's most recent thoughts.
And while we do not have the full presentation yet, the salient points have been recreated below courtesy of the Motley Fool. For those who desire a far more in depth presentation from the inimitable Mr. Faber, we direct you to his June 2008 capstone presentation: "Where is the boom, and the doom" - link here.
On reality: My views are not all that negative. I
think they're just realistic. I want to face reality. You have people
like Paul Krugman who thinks we should have another bubble to pull us
out of this. He actually said that. But he said the same thing in 2001.
And you know how that turned out.
On unintended consequences: The Fed doesn't seem to
have learned anything at all from its mistakes. Their current policy of
cutting rates to zero is designed to create sustainable growth, but
they've created larger and larger volatility in markets. There are many
unintended consequences of their actions.
The oil bubble of 2008 is a good example. In 2008, the price of oil
went ballistic, but the U.S. was already in a recession [it began in
Dec. 2007]. There was no rational reason oil should have gone
ballistic. The Fed's easy money just fueled a bubble. It was like a
$500 billion tax on consumers courtesy of the Fed. That's the added
amount that it cost you, and it helped push consumers over a cliff in
late 2008.
On the Fed: The Fed doesn't pay any attention to
asset bubbles when they grow. That's their official policy. But they
flood the system with cash when bubbles burst. They only care about
bubbles when they crash. It's a very asymmetric response and it has
many unintended consequences.
Letting bubbles inflate and then fighting them when they burst
actually worked for a while. That's what makes it dangerous. It worked
in the '90s. But you shouldn't read too much into this: This period was
assisted by unusually favorable conditions. From 1981 until early last
decade, commodities were in a bear market after a bubble in the '70s
and early '80s. And interest rates were falling throughout the '80s and
'90s, too. They almost never stopped falling. That made Fed policy look
like it was working.
Bubbles can still happen without expansionary monetary policy. In
the 19th century, you had bubbles in railroads, for example. But today,
the Fed has created a bubble in everything -- in every single asset
class. This is an achievement even for a central bank. Stocks.
Commodities. Bonds. Real estate. Gold. Everything goes up when the Fed
prints. The only asset that goes down is the U.S. dollar.
On deflation: I'm a believer that the stock market
lows of March 2009 will not be revisited. You have people like Robert
Prechter who think the Dow will collapse to 700 because of debt
deleveraging. Debt deleveraging could happen, but the Dow will not fall
because of monetary policy. The Fed will keep everything inflated in
nominal terms. And if the Dow does go to 700, you'll have more to worry
about than your investments. All the banks will be bust. The government
will be bust. You don't want cash if massive deflation happens. On the
contrary: It will be worthless. You have to think very carefully about
hardcore deflation.
On credit addiction: In a credit-addicted economy,
you don't need credit to actually fall for there to be problems. All
you need is a slowdown in the growth rate, and you get big problems.
Now, the government and the Fed are aware of this, so they are creating
debt through fiscal deficits and monetization. That creates a hugely
volatile environment. In 2008, government credit creation was inferior
to private credit contraction, and asset markets tanked. In 2009,
government credit creation was higher than private contraction, and
asset markets went ballistic. Lately, government credit creation has
slowed, and asset markets have gone down. Now, the Fed is aware of
this, and it's only a matter of time before it throws more money into
the system. I guarantee this.
On what the Fed will do from here on out: The
easiest way to fix our debt problems is with 6% inflation per year.
That bails out everyone in debt. Interest rates will stay at 0% in real
terms forever, in my opinion. If inflation is 5% per year, the Fed will
keep interest rates at 5%; that's how you get 0% real interest rates.
Now, we could have debt contraction in the private sector, but it
doesn't matter. It will be more than an offset with government debt
creation. So it's not a good idea to be all in cash and out of stocks.
Cash is very dangerous when central banks want real interest rates at
0%.
On the rest of the world: The U.S. today is much
worse off than it was 10 or 20 years ago compared with the rest of the
world. The Asians should thank the Federal Reserve for this. The Fed
practically created the emerging market economies. The Chinese pegged
its currency to the dollar in 1994, and until 1998 not much happened.
When the Fed began printing and boosting asset prices in 1998, there
was this huge debt growth, and U.S. consumers began spending at a
massive rate. That increased our trade deficit from $200 billion to
$800 billion. Of course, trade deficits have to be offset by trade
surpluses in other countries. So the Chinese began ratcheting up
production. Then their employment went up. Their wages went up.
Entrepreneurs began investing more money in capital spending. The Fed
is not the only factor that led to strong emerging market growth, but
it certainly was a major factor in it.
On delusions of grandeur: In the U.S., we still
think that we are the largest consumer market in the world. For some
services we are, but in general this is the wrong way to look at things.
There are huge differences in how statistics between countries are
produced. For one, the U.S. is the most leveraged. Other countries
factor this in. Also, consumption in the U.S. is 70% of GDP, but it's
almost all on domestic services. Spending on actual goods is only 20%
of consumption. In the U.S., we spend $600 billion a year on defense.
But $300 billion of this goes to personnel and retiree costs. In China,
the cost of personnel is basically nothing. When you adjust for
purchasing power, China probably spends about what the U.S. does on
military capital.
We also think that we have all the knowledge of the world. We think
that's our edge. But knowledge in countries with much larger
populations have the edge. Research now is being done in Asia because
it's cheaper there. Companies like Intel, IBM, and Microsoft are researching in Asia. It's just so much cheaper there. And they are
smarter than the U.S. in many ways, too.
h/t Ajay
»
- 48406 reads
- Printer-friendly version
- Send to friend
- advertisements -
Faber's words here are hyperbole. Maybe arrogant relatively to other cultures, but to say it's inborn is to diminish the point.
Exactly, he's just selling what his audience wants to hear.
Self assurance and justifiable pride is not arrogance. Some Americans are arrogant, so are many other people. So what.
Others that pontificate that "Americans are arrogant" fail to see that their own bleatings are the Height of Arrogance.
Are you seriously trying to say you are not arrogant when you deign to tell Americans they are arrogant ?
too-shay, now we're getting somewhere...some do not fail to see the irony my friend, but rather use the irony as a weapon until someone calls us on it. so, fair enough, no more Imperial Arrogance from this mouth.
so riddle me this:
is the overwhelming prevalence of psychoactive pharmaceuticals & self-help seminars the sign of the self-assurance of a culture? and is a pride borne on the glorification of killing machines & wealth-skimming algorithms justifiable?
inquiring minds want to know...
We are on a treadmill of our own making. The trickle-down effect smells of urine.
But you recognize it. Most Zh'rs recognize it. So all is not lost.
Freedom like true honest Rights,liberty,choice and freespeech scare the shit out of the political elite who feel they have a god given right to rule without results.All talk and no action,like they are now waiting for a miracle to go back to business as usual,but it won,t happen.
The Chinese had it right all along.
The US is a paper tiger.
All hot air and no grounded substance.
All Hollywood and no Detroit.
Just Bullshit and TV.
Tell your pals in China to stop sending their shit to the West. And while they are at it, send the collectors over to collect on the IOU's.
Oh, and by the way, tell your pals in China how Saddam got the rope burn on his neck.
Whenever I hear Faber speak I get this feeling he is saying, "it is this way if it isn't".
Appropos to our global crisis, here is US Ambassador Bullit writing to Pres. FDR :
William Christian Bullitt, Paris, 20 December 1936 to Franklin Delano Roosevelt
For different reason, the British, Italians and Russians are all opposed to Franco-German reconciliation. The only great Power which favors it genuinely is the United States. Poland desires it ardently and so do all the small countries of Europe, except Hungary and Bulgaria.
You will have seen from my recent cables that I have attempted to do what I could, in a quiet way and without involving the United States in the least, to encourage the idea of Franco-German rapprochement. I think it might be most useful if, when you see de Laboulay and Luther, you should stress the idea that peace in Europe is purely a question of Franco-German reconciliation; that the modern bombing plane has confronted Europe with the alternative of unification or destruction and that we ardently desire to see France and Germany reconciled.
If on some occasion, you should have an opportunity to say to Ronald Lindsay the we should be shocked if we should find that England was not genuinely doing everything possible to promote Franco-German rapprochement, it might be very helpful.
The British, of course, will say that they favor it and will do everything possible to sabotage it. But they may be less active if they think your eye is on them.
Delbos again this morning reiterated to me his remarks about Great Britain’s absolute opposition to any concessions to Germany in the matter of colonies. As he pointed out yesterday to me, it was the frown of Britain which prevented France from following up [Hjalmar Schacht's] conversations with Blum.
Inasmuch as we can not involve ourselves directly in European politics, inasmuch as Great Britain, Italy, and the Soviet Union will do everything possible to prevent Franco-German rapprochement and inasmuch as the French and the Germans fear and suspect each other deeply, the chances are slim, but I feel that there is nevertheless a chance — the only chance.
From Account Settled, Hjalmar Schacht 1949
. . . By the autumn of 1923 the unrestricted depreciation of the currency had reached such a pitch that it threatened to break up the whole structure of Germany’s national life. Wage-earners’ wives were in despair. Whenever they went out to buy food they were involved in a hopeless struggle against the depreciation of the mark. The wages of their menfolk ran through their fingers like water even when, as was finally the case, they were paid daily, In this extraordinarily difficult situation the authorities called upon me to put a stop to the depreciation of the mark and stabilize the currency. . . .
. . . Oddly enough, for the average citizen there is something very mysterious and incomprehensible about finance. The only thing about it which is quite clear to everyone is its importance. The obvious essential is that money should retain its purchasing power. Above all, it must allow people the chance to save, to put aside wealth for future use. It must therefore maintain its value in relation to all other commodities. The great the number of people who, in the course of historical development, are excluded from the possession of landed property, the more important it is that the value of money should remain stable, because only then can they store up the product of their labours and preserve the property they have acquired. Money, in short, must retain its value ; it must be sterling.
That money is sometimes cheap and sometimes dear ; that it is worth more in our youth than in later years ; that the relation between the value of money and the value of commodities changes constantly—these are problems which are difficult for the average man to understand, and he cannot protect himself without help against his ignorance. During the terrible period of inflation after the first world war the Reichsbank was overwhelmed with thousands of suggestions, plans and schemes for stabilizing the currency. . . . For some reason or other the arithmetical nature of finance seems to inspire the mathematically-minded, and their efforts always tend in the one direction, towards the creation of an automatically functioning solution operating according to fixed mathematical rules. But the currency problem is not a problem which can be solved according to fixed rules. If it were, then perhaps a capable professor of mathematics would be the best financier after all. Monetary policy is not an exact science but an art. As such it is a sphere which will always remain mysterious to the man who is not capable of mastering that art, while appearing simplicity itself to the man who is. The art of monetary policy consists in keeping the relationship between the value of money and the value of the other commodities as steady as possible. Part of this art consists in constantly observing and correctly judging not only the movements of money but also the production and consumption of other commodities. Therefore it is essential that the financier should have a wide knowledge of national and international economic affairs. This is all the more necessary because economic conditions, costs of production, etc., are constantly being changed by technical inventions ad new organizational measures.
The fact that I, of all people, who have always been regarded as a representative of the individualistic economic conception, should have been called in to assist a Social-Democratic Government, was entirely due to the broadmindedness and enlightenment of Fritz Ebert, who was at that time Reich’s President. When I reminded him before my appointment that I was not a Socialist, he replied with a smile: "That’s quite beside the point. The question is: do you think you can solve the problem?" He was right: that was all that mattered. I replied in the affirmative, and I am happy to say that under Ebert’s ægis the Social Democratic Government of the day gave me a completely free hand to carry through my stabilization policy. In later years, unfortunately, it seriously interfered with my plans.
German social Democracy had enjoyed its heyday in the nineties . . . The much-praised talent of the Germans for organization, which was naturally shared by the Social Democratic Party, has one great disadvantage, a tendency towards excessive bureaucracy . . . The original drive and vigour of German Social Democracy was weakened by this flaw. . All those currency projects which embody new ideas and suggestions for establishing automatically functioning principles are fruitless. All that is required after that is vigour and determination in carrying out the recovery plan. It is not a question of the percentage of gold or bills behind the notes in circulation, or of note control, or the discount rate, but simply and solely a matter of the temperature and the pulse of economic life. In monetary policy, just as in medical therapy, correct diagnosis is the secret of successful treatment.
But everything depends on initiative, on the ability to seize an opportunity, on vigorous action
In the inflation of 1923 there were three main measures which were decisive to the stabilization of the mark.
[1] abolition of private paper currency ;
[2] the diminution of the volume of legal means of payment ; and
[3] the credit bar.
As the volume of bank-notes officially issued by the Reichsbank proved unable to keep pace with the rapid rate of currency depreciation, and a shortage of notes developed everywhere, both municipal administrations and large-scale industrial undertakings began to print their own paper money, which nominally had the same value as the notes officially issued by the Reichsbank. Naturally, this unofficial paper money depreciated at the same rate as the official notes printed by the Reichsbank, and the printing of such paper money thus proved a very profitable business, since when it was issued its value was considerably higher than when it was later redeemed. This unofficial paper money was, of course, not legal tender, but if economic life was not to break down altogether then the banks, including the Reichsbank itself, had to accept it in just the same way as they accepted the official notes. Some firms ruthlessly exploited the situation by paying in the biggest possible sums of the money they had themselves printed to one branch of the Reichsbank whilst drawing out an equivalent sum at a neighbouring branch in official bank-notes, which were, of course, the only legal tender and could therefore be used abroad, or, at least, could be used abroad more readily than the unofficially printed paper money. . .
[[[1]]]My first measure as Reich’s Currency Controller was to issue instructions that no more of this emergency currency was to be accepted by the Reichsbank. This undermined the entire basis of the private issue of currency.[[[deceitful-unfathomable CDSs, toxic mortgages,etc?]]] Notes which the Reichsbank refused to accept were valueless. This first measure was quite sufficient to make me very unpopular both with the municipalities and with the large-scale industrial undertakings. For the latter the fact that the blow was delivered by a man whom they regarded as one of themselves, the Director of a big bank, added insult to injury. I was practically mobbed. They threatened me ; they pleaded with me ; they painted the probable consequences in the most violent colours. But I remained adamant. I was determined at all costs to put an end to the misery of the great masses of Germany’s working people and to guarantee them a stable wage once more.
[[[2]]]My second measure was directed against speculation in foreign exchange.[[[carry-trade ops?]]] On November 20th, 1923, the Reichsbank had let the exchange rate of the United States dollar climb to 4.2 billion marks with the firm intention of maintaining it at that level. However, private speculators continued to buy dollars at an even higher rate. The groups who indulged in this speculation did not believe that I would succeed in keeping the exchange rate at its official level, and so they merrily went on buying foreign exchange on a rising market, paying up to 12 billion dollars [marks ?] ‘per Termin’, which meant that at the end of the month the dollars had to be paid for with legal tender, that is to say, with Reichsbank notes. When settlement day came round at the end of the month the dollar purchasers needed marks from the Reichsbank to meet their commitments, but the Reichsbank refused to give them Reichsbank notes and handed out Rentenbank notes instead. This Rentenbank had been established as an auxiliary institution to assist in the stabilization of the mark, and the notes it issued did not have the character of official bank-notes. In short, they were not normal legal tender But naturally, the foreign groups who had sold the dollars demanded payment in money which was legal tender, and the German dollar purchasers were now unable to comply. Nothing remained for them but to sell their stores of foreign currency to the Reichsbank which now secured dollars which had been bought speculatively for as much as 12 billion marks at the official rate of 4.2 billion marks[[[4.2 million-million]]]. Speculators lost many millions on this unprofitable transaction. Naturally, my unpopularity was greatly increased, but the well-being of the great mass of the German people meant more to me than the troubles of individual speculators. The dollar rate of exchange, officially fixed by the Reichsbank at 4.2 billion marks, had to be maintained at all costs. I was not prepared to allow private speculation to drive it up again. It was, in fact, held. .
[[[3]]]The third of the decisive measures adopted to put an end to inflation came into operation at the beginning of April, 1924. Big business interests had once again used the excessive credits they had asked for and obtained to start hoarding foreign exchange. In order to make them realize once and for all that they must subordinate their operations to the monetary policy of the Reichsbank, I suddenly barred all further credit against bills. In normal times these bills were the usual means of obtaining credit from the Reichsbank. It was unprecedented that the Reichsbank should refuse to discount good commercial bills. When its credit was called on to an excessive degree, that is to say, when too many bills were presented, the Reichsbank would merely raise the discount rate, and continue to raise it, until the deduction was more than the bill holders cared to pay and they preferred to do without the credit. However, in times of currency depreciation such as we had just experienced, this discount screw necessarily failed to operate effectively. It did not matter in the least whether the presenter of a bill had to pay 10 or 15 per cent discount when within a few weeks, or even within a few days, money itself would depreciate by 50 per cent and even more. This was the reason why I did not have recourse to the usual method of raising the discount rate, but adopted instead the harsh but only really effective means of blocking all credit. The measure was immediately successful. To the extent that business interests needed money they had to surrender their hoarded sums of foreign exchange to the Reichsbank, and within the space of two months equilibrium had been restored so successfully that throughout my whole subsequent period of office the mark remained stable. . . .
All in all, this struggle with the speculators over the rate of exchange lasted eight months. It was waged with vigour and determination, and private interests were ruthlessly ignored in the interests of the community as a whole. My victory did not make me popular . . . Even the experts did not always grasp my methods, which contradicted every classical theory, and the great mass of the people naturally failed to understand the significance of what was taking place. . . It was in this period that the press first dubbed me a ‘Financial Wizard’, because in money matters in particular the simple and the natural is the most difficult to grasp.
They were the
( Abrechung mit Hitler, Hjalmar Schacht
Rowohltverlag, Hamburg 1948. )
Translated by Edward Fitzgerald
London : Weidenfel & Nicolson, 1949, pages 8 - 15.
[sorry cannot get rid of hi-lites]
If he thinks the economic crisis will hurt, just wait until the ecological ones start hitting!
Faber hates America, there is a reason 3/4 of the Chinese population lives in dirt.
And as for the market "sees" oil being peaked out, please, the market can not see an inch past its nose, all the markets have been destorted for at least ten years by the easy money and Gov proping.
HA. Let 'em destroy the country. We'll all just fucking leave. Take our tax monies and go elsewhere. Who the fuck wants to stay here with our government and all the socialist bullshit they are pulling. I'm not gonna stay and fund their entitlement programs, fuuuuuck that. They better figure this shit out in a hurry or they will need inverse border protection.
Bernanke has a perfect track record. Consistent as well. Always wrong
Stayed the course straight into the iceberg from out!
http://www.google.com/#hl=en&source=hp&q=secret+of+oz&aq=f&aqi=g8&aql=&oq=&gs_rfai=CuwD0LztOTJSrLZG6hATIvbz-CgAAAKoEBU_QczjB&fp=ef15fa2e12aeb723
"So it's not a good idea to be all in cash and out of stocks. Cash is very dangerous when central banks want real interest rates at 0%."
Who are still in Japanese stock since their rate went to 0%?
"The easiest way to fix our debt problems is with 6% inflation per year. That bails out everyone in debt."
But it's not so easy to create a 6% inflation without busting everything else including the Government bonds market. If the Fed creates too much money and put them into Treasury, their rates won't be 6%. More like 60%?
WINNER
Faber of course ignores the fact that the bond market is bigger than the government and the Fed combined. And what's bigger than the bond market you ask? You, me and every other tax payer with a pitchfork and a vote.
Inflation is an on-demand situation. The demand for credit is the driver of inflation as much as demand for goods drives the investment, production and consumption. Faber describes inflation as an on-command option. It's not. Him and his pony tail should be ashamed of themselves.
Faber rules, funny guy likes his whisky and grass....but he has these 10 yr mega cycles predictions.
he has written china off on the mid term, i would too, banking system is about to implode (google FT article on Chinese bank stress tests 26th July 2010), south Korean unemployment up and rumored probs with their banking system.
the chinese are terrible at business, a cheap copy of what 'good' capitalism has to offer. it's property and more property. until they (chinease) start to innovate then maybe we could see a power shift, not yet.
the US still has the brains...at this point
but yeah the west could have peaked out (200yrs)
Well, you could be right, in which case we're screwed... I personally don't think you are right. Perhaps I'm a bit of an optimist! We shall see...
In a sense I think you're correct PBR. The real problem in American politics is that no one has actually developed a political party based on the protection of freedom. I think political parties in this country evolved along the lines of either militarism or socialism(actually both major parties fuse both together traits together just in different ways).
Personally I think it's really a question of social interest. Neither republicans nor democrats are interested in creating a political doctrine that removes power from the state and devolves power back to the individuals,at least an institutional level. Politicians and political institutions thrive by consolidating their own power, not limiting it. powerful industries also benefit from politics if they can use bureaucracies and politicians to consolidate their positions in ways that the market would normally preclude.
The flip side to this that makes me somewhat optimistic is freedom is something that everyone may value. Not everyone values universal healthcare or foreign wars but everyone and dare I say most corporations value being able to operate freely. Potentially this is what makes freedom the most powerful force in politics, it's universally valued and relatively benign. Freedom could really succeed as political doctrine and economic doctrine if people realized that if that by giving it to others they in turn have a right to it as well. Whereas tax law or even law in general is often a zero sum game, your gain is at someone else loss , this is the unstated but universally recognized law of politics.
Another trait that needs to be dealt with are punative attempts to deal with inequality. We have attempted to reduce social inequality by punishing one group of people:the rich, but only end up punishing the middle class. For example income taxes were only suppose to apply to the top 1% of the population now everyone pays them. The same is true with estate taxes which were designed for the rich yet even middle class people whose parents die with less than a 100K in assets end up paying thousands of dollars worth of estate taxes. Our attempts to create social equality by penalizing one class of people over another ultimately harm everyone because they were intended to be punative and hurt one group of people in order to "help" another.
So although it's important to reduce inequality we should do so in the context of freedom without being punative from the start. This would require a drastic retooling of our current social and political systems.
Everyone take the 5 minutes and look into this... your time has been wasted before...
http://www.google.com/#hl=en&source=hp&q=secret+of+oz&aq=f&aqi=g8&aql=&oq=&gs_rfai=CuwD0LztOTJSrLZG6hATIvbz-CgAAAKoEBU_QczjB&fp=ef15fa2e12aeb723
But I am hard pressed to argue the points... anyone care to go round and round? maybe see if we have a winner? speak up, ignorant / stupid cattle / pussies need not apply.
There is a consensus amongst engineers that more shit comes out of emerging markets (India and China) than good in regards to innovation and technology. Now I can't help but to be broad but I just can't state it any simpler.
the people producing are in fact innovators... NO! Can't be?! How dare you? great post, but people who didnt get that before reading it... are un-reachable, unfortunates... yeah?
@ozzii
We import rolling bearings into Peru (mostly for vehicle replacement parts). We buy mostly from Korea and Japan.
Whenever we buy a new brand from China, it never works out well (Peru is poor, price matters a lot in many segments). We have been buying on-and-off perhaps China's best brand, this lot just arrived and were packed terribly, almost un-sellable.
We have also had several quality problems. Why did we buy? Everyone wants low price but good quality. Tough to make that balance work well.
...
Just our little anecdote. But, China will not be providing many of the bearings that we buy to serve Peru's fleets.
India tried to reengineer one of the MOST critical items in a vehicles operation just to save a couple of bucks. Till now, we have ripped up every one of their proposals just to avoid a recall or death.
Hi All
Here is a big picture market post; sent it to Tyler...
http://www.bostonwealth.net/2010/07/24/morties%E2%80%99-weekend-update-24july2010-the-big-picture/
Marc Faber said two months ago that he is extremely bearish on China. Now what has changed his mind?
economists are weird.
china and india are the most corrupt in business than any other country and they are our savious? i don't think so. both Keynesian or austrian haven't got models for absolute corruption within business cycles; a trader does and waits for the implosion from bad business and corrupt money dealings all going south, hears about the banks about to be KO'ed and sets up short pos on commod countries.
i mean 30,000 deposit for an apartment to be completed in 2015???
fucking comical. complete asian fubar coming
Chump,
That really happened? Goodness - that is the most astoundingly stupid thing I've heard. But, if true, you're right - FUBAR. On steroids.
Guaranteed market run up tomorrow. Look how low the consensus is on Consumer Confidence Index. If tomorrow is not a beat on that, then it would have to defo drop 20 points.
I love Marc Faber. Such an optimist. But ast least he doesn't drink Kool-Aide. I wish I could be so bright, but then I'm stuck in the bowels of the Empire...so, that probably explains my gloom...
How much deflation in the future? LOTS!
http://www.lloydslistdcn.com.au/archive/2010/july/26/capesize-lay-ups-lo...
It's INFLATION - b/c the economy always has to go grow....and other fairy tales.
Deflation would seem to be the prevailing trend in my neighborhood, Beverly Hills CA. Lots of office space for lease/sale, lots of houses suddenly on the market and used Range Rovers for 10's of thousands less than a few years ago...
What if the fed printed a bunch of money and no one actually wanted anything new...b/c suddenly they didn't even want the stuff they already had, which they couldn't afford in the first place...which is why they took out the 2nd mortgage on their house (b/c housing prices always go up)
Suddenly things like extra cars, elective plastic surgery (@#$%&! especially), giant SUVs, extra houses, meals out...etc etc etc suddenly become less appetizing.
deflation...could be much more serious than inflation, and this is the first time in my life i've ever hear the word tossed about, like that other serious word...austerity.
http://www.lloydslistdcn.com.au/archive/2010/july/26/capesize-lay-ups-lo...
All the U.S. has to do is suspend trade with the rest of the world to maintain a semblance of living standards. Yes, no more cheap consumer electronics, and no more cheap clothing, but we can produce just about anything we need within our borders. We can even provide our energy needs domestically if we are serious about it. It will be disastrous, but it won't happen the way Faber says it will.
Everybody is arrogant. Some can back it up, some can't. Some don't realize they can't back it up anymore, kind of like a Rolls Royce missing a hubcap. In any event, arrogance comes first. Just about everybody thinks his gene pool is the best, and is "proud" of being whatever it is he is, especially when challenged ("This is the greatest country on the face of the Earth", "We have a glorious 5000 year history"; I guess almost every country needs somebody's face to put on their banknotes, unless they put their deity's name instead).
Everybody also tries to piggyback off of anyone who succeeds in some way and shares something in common like race or color, hoping to capitalize on coincidence and accidents of birth. That desire to attach oneself to something great does have a plus side at times, as it can unify a people and lift them from their own shortcomings. China and India are feeling this right now.
The grand irony is that success contains the seeds of its own eventual failure. Like that old saying, if my devils leave me I fear my angels will soon follow. Hard times and poverty galvanize the spirit, at least in the Darwinian sense. The Depression bred the hardscraple victors of WWII and the architects of the post war boom. Not all traits are inheritable, however, and the spawn of the "greatest generation" grew up believing in birthrights and free lunches. The impetus to succeed departed when life became too easy. It took a while, but eventually the kids brought the whole thing down. The arrogance remains, but the relative position of the US in 2010 is hardly what it was in 1960. Looking at the last collapsed empire, it seems the US' future is to be football hooligans with bad teeth.
Technology has sped everything up. China can achieve high growth rates because the technology invented elsewhere can be absorbed and assimilated in rapid fashion. In a way it is a miracle, but the miracle is not China, but rather the explosion of knowledge that occured primarily in the West over the last hundred years. The human race may never see that again.
It took Rome more than a century to collapse. It took Britain fifty years. The US can finish the job in thirty. Japan did it in twenty. China will be faster still, and go back to being just a wildly overpopulated, underachieving blob, making thousand mile long piles of rock that are obsolete before they're finished.
In retrospect, arrogance looks pretty silly. To a one we're all Ozymandias.
What a great post Chindit.
+ a billion?
China's population is broadly ignorant... and the Government... will bend over and break its own back to keep the populace at sub-par education levels for fear of losing grip. As for a diverse population, China is how many Countries smashed into 1? How many different languages? of just China Proper? I did a piece further up on China and spending habits plus cash on hand verse the debt we all have here at home... who's smarter? who's better? no one, everyone. I dont see a failure coming that has come and gone, we now have fire prevention measures being implemented.
No; decline is a choice, not an inevitibility. Never denigrate the power of humanity to reform - especially that part of humanity which resides in the United States.
History seems to indicate decline is an inevitability. Those that were, are no longer, and most never even had their day in the sun. The closer anyone moves towards the abyss, the tighter they grasp onto the decaying dreams of past glories. Rhetoric trumps accomplishment just before the lights go out for the final time. The US is full of boastful rhetoric now, and that concerns me.
I hope neither of us lives long enough to really know the answer, and I mean that in the nicest possible way.
This rises to a level beyond just that of opinion.
There is the harsh clang of truth that cannot be argued with in your statement.
+++++
Faber has to sell, so bashing America is what his audience is willing to pay to hear. The reality is that since the entire world is on fiat currency, it falls with the USA. We all go into depression and hyperinflation around the same time. The trick is to replace our failed leaders with people who know WTF they are doing. A return to the Gold standard (I don't care if people think it sucks, it works), deregulate business, repeal ObamaCare, and default on all debts will restore prosperity and world leadership within a couple years.
Marc Faber’s knowledge about the resources of both worlds, new and old, is extensive. But in projecting trends it is folly to leave out the vast differences among nations in political philosophy and social motivation. America did not build its vast economic engine just because of natural resources, geography and markets. It was representative government that allowed individuals to pursue wealth without undue government restrictions, and with government protection for freedoms, inventions, business proposals, property rights and work environment.
In recent years, these freedoms have become seriously restricted and endangered by a takeover of central control of America’s financial system by the investment banks. The good news is that Americans still have the entrepreneurial spirit and still thirst for the free enterprise they once enjoyed. IMO, the domination by the international bankers will not be America’s future; already this centrally planned socialist system has begun to break down.
The fact that Congress gave the internationalists the right to sell America’s achievements and transfer her means of production to China and Japan does not mean that Jeffersonian free enterprise and property rights is going to break out in Beijing. Example: If the United States would fall back in its world influence, and China and Japan would become the leading countries of the world, the Internet would shut off in 24 hours. The key phrase here, undiscovered anywhere in the world, is a government and nation that operates under “the consent of its people.” That’s the only reason rights such as speech are free.
The point is, none of these countries have that; America still does (they have to lie to the people to get their consent, yes, but the others don’t bother).
And never mind, I suppose, that the workers in China who are producing products for America’s corporate powerhouses such as Apple are suffering under a management of military style conduct and inhuman treatment—ending in a line of suicides during the past five months, brought to light by two reporters from the China Business News earlier this year. Foxconn, the giant, major outsourcer manufacturer for a number of large tech companies, including Apple, Sony, Dell, Nintendo and others, was cited for its abysmal 'sweatshop' working conditions.
http://www.szcpost.com/2010/05/foxconn-suicides.html
But, then, Steve Jobs (who remarkably found nothing out of the ordinary at Foxconn) can bring his cheap-labor products back here to sell, where the people still are making enough money to buy them, and where the government, as yet, won’t steal his company from him.
JR,
It is important to also remember that no stats out of China can be trusted. A lower-level apparatchik is not going to be the bearer of ill tidings when doing such can get you jailed or shot. No one really knows what is going on in China - there is no free press, and no democratic means (even highly imperfect democratic means) to curb government abuses. There clearly has been a lot of activity in China which has allowed a story to be told of Chinese success - but we're only getting that part of the story that the Chinese government and westerners heavily invested in China wish to tell.
Some times a few rumors come floating out of China which tell a story sharply at variance with the "rah rah" official story, but even that can't be taken at face value. To me, though, it is almost a certainty that the whole thing is a fraud - corrupt oligarchies, such as that running China, are simply not conducively to genuinely strong economic growth. The bosses want a rake-off and thus the market is fundamentally distorted from top to bottom.
China is getting their 15 minutes of Japanese economic fame - just as back in the early 1980's we were all supposed to fall under the control of our Tokyo overlords (who were doing it so much faster and smarter than we dumb, lazy Americans!), so we are now to fall under the dominance of Peking. Hogwash. China is a giant - but a giant on spindly legs. They are heading for a fall - and the real concern everyone should have is how to be manage China's coming collapse.
Thank you, Mark, for this extraordinary Chinese realism.
China can produce a grand show, like the Olympics. Magnificent! Moving people around, controlling the air quality by forcing businesses to close, etc. But there is a difference, as you say, between the growth of an economic system based on the hopes, dreams and, yes, the participation of a people directing their futures through a representative government, and that of a country run by unaccountable, corrupt oligarchies.
Well said JR.
I like to call this Faber's Anti-Gipper speech.
Well, that certainly is a lot of gloom and doom to take at one sitting. Still, there is much to be said for being negative about things right now. It is the death of a Ruling Class - an entire socio-economic system, cobbled together starting in 1913, is coming unglued as a mountain of debt paralyzes the powers that be.
Of course Bernanke will print up a bunch more money. Of course Obama Administration policy will continue in the Keynesian rut. Of course people heavily invested in China will continue to praise China as the be-all and end-all of economic existence. And, of course, all of that will prove to be quite pointless. We're broke, massively in debt and the world suffers the first stirrings of a hideous demographic decline. Things are going to get pretty bad, and stay that way for a while.
But, there is no need for gloom - and no need for absurd predictions that a nation of 300 millions with, unique in the advanced world, a growing population to fear the future. We are, indeed, broke - but we are also still slopping over with actual wealth.
Our wealth in not in stocks and bonds. It is not in Wall Street. It is not in DC. It isn't any any of the decaying pustles of a dying Ruling Class. It is in our land, and in our people. It just waits to be re-tapped, once we've cleared out the political barnacles which have fastened themselves upon us.
How will China, which is about to slide in to population decline while still having nearly half its population engaged in susbsitence agriculture to compete with us? India has, indeed, many good things - but it also has China's demographic problems and is still riven by faction, and has a massive population which barely scrapes by day to day. Brazil is probably our likeliest competitor, but even they have less than 2/3 of our population, and posses far fewer total national resources...in addition to, once again, being a nation with a huge population at the subsistence level. There are people who can compete with us - but all of them will fall flat against a revived United States.
The most important thing is not to fall for the story that Americans are flabby; that we don't want to work; that we are spoiled brats. That is the Ruling Class attitude projected upon the American people. A shift of tax policy towards rewarding the making, mining and growing of things will spark a surge in production in the United States Freeing up our natural resources for economic exploitation will revive the boom we had from 1776 until 1929. Just letting the American people be Americans will solve all problems.
Forbid issuance of government debt; restore the gold standard; craft a rational tax and regulatory policy - and then just get out of the way.
America will emerge from this morass as still the most powerful, most generous, richest nation in human history.
Well said, Mark Noonan. Those are my sentiments.
JR,
And right back at ya with your views.
It will suck to be poor, but as we'll all be poor, together, it won't be so bad. And I think that people will get in to producing things as opposed to sitting in cubicles wondering when their customer service job will be shipped to India.
Pollyanna and Pandora in a mud wrestling match, the way to bet is on Pandora.
The idea that americans are going to magically start producing things may well happen, but not in the lifetimes of those now exchanging oxygen to Co2.
One day the toxic assets on the books of banks and the Federal government will be worth more than they are today, and more than they ever were worth before. But that won't happen until another 100 years have passed.
Writing that the US will man up and respond is a sure thing, but as in everything, timing is crucial.
A stopped clock is right too, about twice a day. The other 1,338 minutes, it's dead wrong.
Death of the ruling class? They buy low and sell high. No, it's the death of the middle class.
Death to the upper middle... absolute fund(s) participants... thats who got crushed. the largest biggy pank smash and grab in history!
China is a toxic wasteland. Ever been there ? It is disgusting. Ironically, Communism will kill Democracy with cancer causing export firms run by Chinese military kabals. It is a gas chamber of a society far, far beyond the horror of any Orwellelian nightmare. To in any way honor it is a joke.
Over here, those running the FDA should be convicted of treason. Meanwhile we run an $800 billion per year military that is tucking us into our coffin. Washington would be disgusted at what his town has become...
i hear ya. it's a bubble in everything. guy i know started up advertising business over there, sold it x50 in less than a yr. a consumption monster consumes whole earths in 10 yrs it would have consumed the resources of 3 earth/s...something like that.
i'd rather be chillin out in nyc hanging with bohemians (the women) drinking martini's anyday...
if the west ends, thats where i rather be...
china will just implode and go all commie again.
The US is 5% of the world population burning over 25% of the worlds resources. For some resources, we are over 40% of world demand. An American uses 10x the energy of the typical Chinese.
Tell me again who is the consumption monster?
America did not become the world's greatest success by burning and consuming her resources; she got there by developing and growing her resources. By replenishing the earth.
America’s gift to the world, the gift that lifted the standards of living for all people, was the fruit produced from individual freedom, the opportunity to own property and develop the means of production. America, as steward of her resources, advanced man’s progress that for more than 60 known centuries had advanced no farther than wagon wheels and open fire cooking. The fruits of freedom lifted poverty and fed peoples throughout the globe..
This freedom-light has now touched the whole world. But is that world ready to pick up the torch? Are these new financial power centers of the world--Beijing, Tokyo, Dubai, Hong Kong, Moscow-- the new Americas, the new centers of freedom? No. If America’s light is dimmed, the world will have to take its chances with a billion rooms of darkness. And in the process, poverty again will scorch the earth.
IMHO it was technology not *freedom* that contributed to higher standard of living worldwide. Roughly 10 years ago, a PBS series called The Odyssey Of Science clearly demonstrated that.
"China is a toxic wasteland." They poison thier own people to provide dumping sites for our old computers? So?! This is harmful to you how?
"Chinese military kabals." Armed Thugs, can be bought and paid for... thusly managed?! So?! This is bad for U.S. how?
nm
Property bubbles - especially towards the tail end inspire grandiosity and hubris. Remember how it felt in 1999? In California? Top of the world.
Now you have the property bubble in Asia - ofcourse everybody feels top of the world.
Look people who buy property on a 10X leverage ( the normal) - and have property values go up 50%, 100% - feel very good. feel wealthy. Then - they attribute their wealth to their own genius - the superiority of their culture, their manufacturing prowess. their education and just their plain raw Smarts!!!
remember Japan in 1989? The Art Of Japanese management - was very popular book then!!!
Faber always smelled like an inside man, meaning he works for the dark side. Although he has had some good points in the past, something stinks. Faber did help me in the bedroom however, girls love that accent and I studied it well, especially that "yaeeeess". Thanks Marc!
i think he has a bet going on the dow collapse thing with some other doomer, plus he sounds like he has some china plays.
time for chanos right about now...that guy made the china collapse call early 2010.
"if the Dow hits 700 all the banks would be bust"
And that would be bad in what way?
Ehh, all the banks were bust back in 2008, and they have not gotten any flusher except in an hallucinagenic accounting sense.
Hey robobbob, America, as the media would like you to believe, is arrogant. Despite our historic growth, we are not arrogant. In fact, your being an arrogant SOB by implying so. Everything else you said I agree. What NMarc Faber left out was who was going to replace the USA as the next Ellis Island of the world?
You don't need to be an Ellis Island of the world, and outside of stupid "universal" western societies this does not happen.
If you trade, your part of the problem, monies skimmed off the top of nothing (electron KFC kids fat club) is paramount to screwing your own mother. What a bunch of sick boys and gals.
I've watched and listened to Marc Faber for a long time now. Its seems that as he has gained a bigger and bigger audience, his market opinions have frequently become watered down, much like his peer Roubini's have . Hate to say it , but another truthful voice has been bought off by TPTB.
EURO buying support mentioned since June continues and further upside is expected.
http://stockmarket618.wordpress.com
The Marshall Plan turned China into a trillion dollar trading partner in the blink (50 years) of an eye. Applause please.
Faber's anti-American bias obscures some of his good points. But I doubt he has been to an American school of today. The fact is all the smart people immigrating to the US are staying here, having mixed kids and will be the new Americans.
Asia and Europe are both nice places but endemic xenophobia will eventually bury them. And China is worst of all in this respect.
In reality, we are probably much closer to peak Asia than many people realize.