Marc Faber Rationalizes The Irrational And Fears China's "Colossal Credit Bubble"

Tyler Durden's picture

Though infamous for his doom and gloom more than boom, Marc Faber explains in this brief CNBC clip how the herd-like behavior in stocks and real estate is actually not totally irrational as it is merely a reaction to the central banks forcing people not to hold cash and instead but "gold watches and Ferraris." His point is that if (and when) interest rates are ever normalized, everything changes (and not in a good way) as valuations become severely stretched on all these inflated assets. While the world tells us that bonds are unattractive and stocks are attractive, Faber rhetorically asks, "who knows, maybe the bonds are telling us something about the future return on equities." He warns of paying too much attention to government headline statistics, "what is published does not necessarily reflect the reality," But, just as we have warned, China is his biggest fear for knocking the world' exuberance: "Whether they [Chinese government] can ensure continuous growth will depend on reforms and how to deflate the colossal credit bubble we have in China. This is going to be a huge problem because we have so much underground credit, questionable loans outstanding and questionable investments."


Rational Irrationality; Interest Rate Normalization; and Don't Trust The Data



China's Credit Bubble... questioning Chinese growth relative to real GDP numbers...

China won’t miss it [GDP growth target 7.5%] They will announce it. But the reality will be much lower. If you look at the statistics that are more reliable like Korean, Japanese or Taiwanese exports … then export figures from China don’t add up entirely.

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DJ Happy Ending's picture

I am long Chinese pork bellies

ozzz169's picture

LOL... as long as they dont start selling the ones in the rivers you should be ok with that play.

Bunga Bunga's picture

As a delicious underwater belly-up frozen microwave meal.

FEDbuster's picture

McDonalds is bringing back the McRib for a limited time in Beijing.

IridiumRebel's picture

Beijing Baconator at BK BEH BEH! I'll have that with Yangtze Mayo!

pods's picture

The Chinese credit bubble is like a bloated pig, floating down the river.


eigenvalue's picture

Marc Faber is a shill and snakeoil charlatan. His favourite investment-gold is going down the sewer. Gold can't even go back to $1600 while some maniacs are calling for $5000 gold.

alien-IQ's picture

You don't seem to understand the function of gold and silver. It's not an "investment" in the commonly used (buying stock or real estate) sense of the word. It's about the preservation of your purchasing power.

To put it in very simple terms: The amount of gold it takes to buy a house today will be the same amount of gold it will take to buy a house thirty years from now and it was the same amount of gold it took to buy a house 30 years ago. As opposed to cash: the amount of cash it took to buy a house thirty years ago won't buy you a decent used car today and the amount of cash it takes to buy a house today certainly will not buy you a house in thirty years.

If you want to SAVE money, you save it in gold or silver, not in currency because the purchasing power of the metals remains constant while the purchasing power of currencies constantly depreciates. But judging by your clearly do not understand that.

Cdad's picture

Actually, what eigenvalue understands is not apparent in his comment.  This is by design, I expect.

Marc Faber's honesty is demonstrated by WHAT he talks about...not necessarily his prognostications.  While everyone has an ax to grind, not everyone is willing to subvert the truth with some ridiculous Orwellian speak, and Faber is one of those guys who seems to understand the purpose of his appearances...unlike 99% of the folks who show up on The BlowHorn [CNBC] to try their hand at selling utter nonsense and outright fraud.

AldousHuxley's picture





The jig is up. China won't be buying much dollar. exporting inflation to china won't work anymore. manufacturing is coming back via cheaper dollar.

dark pools of soros's picture

in a ZIRP environment yes.. when compounding interest existed it was a different world altogether


Davilis's picture

Really?  100 ounces in 1999 would not have gotten much of anything in NYC but 100 ounces today certainly would.  This notion that gold only goes up and will have the same relative value 30 years from now is a very dangerous way of thinking and simply isn't supported by any facts that I can find.

_ConanTheLibertarian_'s picture

Gold is both suitable for preservation of purchasing power and as an investment but timing is also important.

hankwil74's picture

This simply isn't true.  

pods's picture

Can you point me to which sewer exactly it is going down?  Thanks.


Lord Of Finance's picture

EIGAN VALUE, I guess you do not expect inflation to pick up. I agree that it will not be anytime soon, but at some point velocity will accelerate and the fed will be forced to raise rates. Now, you probably believe the market will be able to handle rising rates,but many of us gold/silver buyers dont.


Right now the banks are speculating, which is typical in low interest environments, but when velocity increases those speculations will cease and the banks will yake their Bernanke bucks and start loading their vaults with gold. We saw a preview of this just last year, with banks making huge purchases, but the fear was not quite founded at the moment. In few years I believe the fear will be real when velocity increases with more foreign money buying up assests here and bonds being sold bzecause that will be the only thing to do when real inflation fears materialize. The bond market/treasuries will be a no go for putting your hard earned money in and once the bank speculation ceases, the stock market will be just as toxic. 

    The only place to go for safety will be PM. This occured during the depression and it occured in the late 70

ebworthen's picture

Thanks for the entertainment eigenvalue.

If Gold were at $400/ounce and Silver at $10/ounce you might have a point.

So, are you buying equities?  When are you going to get out?  Or, is it 1983 all over again?

Yen Cross's picture

 How is "Viet Nam" working out Mr. Faber?  I'm not being sarchastic.

zorba THE GREEK's picture

Mark Faber is still bitter about losing out to Werner Klemperer for the

the role as Cnl. Klink in Hogan's Heroes. 

Rbh110's picture

He resembles Klink but talks more like General Burkhalter. I especially like how he says "Preident Obama and his Clowns"

pods's picture

Betcha Faber could rock a monocle.


FEDbuster's picture

Only with a riding crop in his right hand.

ebworthen's picture

Bet he does that with some of his asian prostitutes, and could you blame him?

AGuy's picture

FWIW: No body does a better Klink than Hank Paulson!

fuu's picture

"Well let's let them party a little more, let's not prick their little air castle up there."

gwar5's picture

I feel like I'm in the movie "Independence Day." Central Bankers have circled the globe and are just synchronizing and counting down for one big coordinated collapse. 



disabledvet's picture

not a gold bug but this is a VERY interesting missive. "there's no competition for dollars" courtesy of the Fed's QE (unless you are a foreign country and have no interest in serving the US market.) I would argue this is both an abomination of capitalism...but also a capitalist's dream come true...a "man made Almighty Dollar" as it were. you could argue it is "fascism"...but this is not coming from the State but from "money theorists." very GOOD money theorists actually. "theorists who's theories are in fact anti-thetical to the State" ironically enough. indeed if we look at the "recovery" one could argue...and i have made this argument consistently actually...that in fact "it's bad for banks as well." it's wonderful for energy companies of course. as well as "techies" and "futurists." but a world where one's return on money is "mandated" by a capitalist entity (the Fed) is an odd juxta-position indeed. "is it good...or pure evil?" comes to mind. "where so rich we live in complete terror of our money ever being returned" is an odd form of "confidence." at some point it might even work...when that happens clearly it will be "a good." until then...

Arthur's picture

The video you are trying to access is unfortunately unavailable at the moment.

e-recep's picture

here's a link for those who have problems with the videos above.

Video : China's Colossal Credit Bubble Next Big Risk: Faber

zen0's picture

Faber was right for a time, and good for him.

If he thinks interest rates will ever be normalized in his lifetime, he has becoma a delusional old man.

The only way the powers  imagine for the system now is Stasis.


First among the Entropic Spheres is that of Stasis, which seeks to entrap all things, snuffing out energy and ending motion, change and growth. While Stasis can prevent death and so is sometimes seen as beneficial, it also blocks healing, new discovery and activity, and can suffocate new life before it arrives. Stasis is most closely aligned with the alignment of Law, though in a definitely dark fashion; it prevents the spread of Negation (deflation), is torn asunder by Ravening (inflation), and seeks to freeze the conflicts created by Discord (lawless plunder).

tip e. canoe's picture

where is that paragraph from may i ask?

zen0's picture

its from "the four spheres of entropy"  If you search that it should come up.



tip e. canoe's picture

thanks.   nice.   i like this one:

The final Sphere, that of Life, seeks to encourage growth, health, the continuation of old things and the creation of new ones. Many right-thinking Immortals consider its ways dangerously radical, opposing the proper elimination of things unfit to face the natural order and potentially filling the entire multiverse with stifling, hungry life. Fragments of history and prophecy suggest that Life has four separate aspects which mirror the four Entropic Spheres, and that at some time in the distant future may be in the ascendant and exist as separate focuses of Immortal power. No Immortal currently in existence can say whether these rumours have any truth. 

ebworthen's picture

Science has never quite reconciled itself with the human beast.

Higher rates will come, but only slightly preceding the current bubble (Grand Bubble Part II) then enacted as a "healthy mechanism" once all the seniors and pensions have that much less money to earn interest on from the banks, and the banks can charge that much interest for apartments and overpriced healthcare.

AGuy's picture

"If he thinks interest rates will ever be normalized in his lifetime, he has becoma a delusional old man."

No, it that was a hypothetical comparison, to explain why assets prices are rising. If interest rates normalizes asset prices would collapse.

Faber believes we are heading for WW3 as industrialized nations run out of gimmicks to prop up their economies.

Lord Of Finance's picture

zenO, I know nothing about stasis, but I know economic history, and history shows that whenever you have massive increases in spending/stimulus/bailouts, it leads to terrible inflation. It roughly takes 5-10 years for the previous massive money printing to work its way into the economy, thus causing a massive increase in velocity.


Is there any literature that you could refer to me for reading on what you believe has been created by this current establishment. I know these bastards know history as well, and just like the professional thief/criminal figures out new ways to continue a criminal enterprize, it would not be surprising for these banker criminal enterprizers to figure a way to get a one up on history.


Authors or web info would be appreciated.

zen0's picture

I'm sorry. I go on instinct after absorbing mucho info.

I am Ronin.


I know they know history. They also know that we have never been here before and history is very situational, and its extrapolation to the future is extremely interpretational, so they just have to do what they think they can get away with while suffering the least damage, always with an eye to bugging out when necessary.

zen0's picture



I added the comments in parentheses.

Lord Of Finance's picture

Intuition and the gut. In times such as these, the technicals and market signals are misleading. I have been making more and more gut calls as well.


 I know history, but my gut tells me something is of a miss here in the new millenium.

zen0's picture

Yes. There is something no one has yet responded to. The chart of the destruction of the dollar starting 100 years ago shows a line diving toward zero and then flattening out, as the dollar lost 98% of its value.

The chart suggests it will take another 100 years to lose 98% of the last 2% of its value.

Or longer.

Mike in GA's picture

Don't think it'll take that long, zen0 - I'd give the $ 98 WEEKS till the beginning of the Mises inflationary 'crack-up boom' which should erase a double digit percentage of $ value. I dunno how long this phase lasts but historically they've lasted just a short period of time, say, a couple or three years.  Once that inflationary spiral begins that genie's outta the bottle and off to the races.  Next stop - Fiat Currency Purgatory, a Marc Faber wallpaper, where the currency formerly known as the dollar will be but a hollowed out memory of its former self. 

This may take an additional handful of years but, given the compression of time brought to us by bits and bytes travelling at the speed of light, this is not likely to take 98 more years.  Once the snowball gets rolling, even Bennie and the Inkjets will not be able to print fast enough, they'll be handing out free zeroes, three decimal places at the time.

Just like Zimbabwe.  Whocouldanode.

Mr. Magoo's picture

Who cares!! i just bought some canadian maple leafs .9999 fine

zen0's picture

I have some of those. I admire them, but I do not love them, or think that they will save me.

Mr. Magoo's picture

Only God can save you, everything else means nothing especially when your dead

Moon Pie's picture

Well said, Magoo.  Having some gold around isn't bad while you're still here and if you want a superior bargaining position, is not a bad plan, either.  Easier to hide from the estate tax vultures, too.

I like ZH'ers (mostly) a lot and the angst and smarts and questions.  Earlier I was reading some firey blog comments on the Sandberg book Lean In (COO FacePlant/Book)...thing that strikes me there as well as here often is the lack of perspective.

Surveys consistently say that 10 out of 10 people...will die.  That fact accepted, why isn't life itself correlatively valued or maybe better, why is it so mis-valued? 

Gold investing is wise and responsible.  You don't buy gold to rehypothecate it and collect fees in doing so and screw your counterparts.  You buy it as a surety for your value, your wealth, your expended economic energy.  And I agree it is a wise and good thing to do.  It will rise again, too.  More dramatically next time, I believe.

Point is, that morality/law/ethics have gone wobbly and kooky-wacky.  Stick to wisdom and the things that matter while you're here...and maybe...just maybe...the kids (our kids) might see the wisdom in that and make things better later.  I hope.

Joe moneybags's picture

Faber and Santelli, Faber and Santelli.  We get a steady dose of these perma bears, and lap it up the way the Bulls lap up Cramer and Krugman.

Vidar's picture

I don't know why they post these CNBC videos, they are made unavailable by CNBC long before I've ever seen one.