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Marc Faber Sees 100% Probability Of Global Recession In 2013

Tyler Durden's picture




 

From around two minutes into this CNBC clip, Marc Faber brings the conversation back into sharp focus. Noting that "whenever everybody focuses on just one thing - Greece and Europe in this case - there are other things that are far more important - such as a meaningful slowdown in India and China - going on that are being ignored". But remaining on the topic of Europe, Faber consistently opines that the next event risk will be the Greek exit - even though Faber suspects strongly that Germany will cave to Eurobonds eventually - as he comments that the longer the delay of a restructuring/default/exit/euro-bonds takes the higher the probability of a gigantic systemic failure. This subject brings up (at around 3:30) an interesting perspective that the European market would be oddly relieved (not plunging 50%) if Greek exited the Euro as there would be some clarity (though Faber adds that bank and insurance stocks would likely be crushed). At five minutes in though, Faber ramps up the rhetoric noting that while stock indices are not performing terribly, there are many economically sensitive (and luxury) stocks that are down very significantly - which suggests to him that the huge asset price run of the last decades in come to an end prompting the question of the day from CNBC's Cramer-stand-in "You're not looking for a recession in the US are you?" Faber, in his calm, thoughtful way responds, "I think we will have a global recession late this year, early next year", to which a stunned Wapner asks for odds (surely 30%, 50%?) of this recession - "100% certainty" comes the reply to leave Wapner throwing in the towel on any positive spin as Faber suggests the only 'investment' in this case is 'Cash USD' and investors must own some gold.

 

 

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Fri, 05/25/2012 - 13:51 | 2463092 tahoebumsmith
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Can we make it that long Marc? That is my only question...

Fri, 05/25/2012 - 13:51 | 2463094 vast-dom
vast-dom's picture

100% sooner on the 100%.

Fri, 05/25/2012 - 13:55 | 2463110 The Big Ching-aso
The Big Ching-aso's picture

 

 

Well at least it's better than 110%.

Fri, 05/25/2012 - 14:03 | 2463130 vast-dom
vast-dom's picture

only banksters and con-men comprehend anything above 100%................anything over that is a reach around.......

Fri, 05/25/2012 - 14:06 | 2463146 sunaJ
sunaJ's picture

This economy is a walking crack addict and no cops to stop it.  There are no markets, only our neighbors' houses, which we break into and steal what we can find.  Maybe we OD, maybe we go into heart  or liver failure.  How this crack addict dies is less important than knowing that it must and will die.  It's what crack addicts do.  If the Euro crisis was suddenly solved, it would not stop anything.  It is systemic failure. 

Fri, 05/25/2012 - 14:16 | 2463168 vast-dom
vast-dom's picture

please don't discriminate re crack addicts. it's much worse than that.

 

by Janus everyone smoke crack!

Fri, 05/25/2012 - 16:46 | 2463687 AldousHuxley
AldousHuxley's picture

recession proof career: crack dealer

 

China has been cutting back for a year now.

 

If nobosy consumes, then how will economy run?

Fri, 05/25/2012 - 17:04 | 2463725 AldousHuxley
AldousHuxley's picture

June 1 2011 ....FXI @ $45

http://www.youtube.com/watch?v=g-Cz45S5Bos

 

In one year, the Chinese economy will perform poorly. That is, they will have a recession This could be a technical recession from a gross rate of say 10% per year to 3% per year, then it is a recession. You also shouldn't believe in the gross GDP that China reports. If you adjust for the real rate of inflation, then true growth is even slower.

 

October 2011...FXI @ $30 (-33%)

May 2012...FXI @ $32

 

but Marc may be shilling little bit for his own gain here advocating US treasuries....He probably got out of equities and put them in Long Term Treasuries already and wants everyone else to jump in as well. US Treasuries are indeed up (25%) since a year ago June 2011 as it is effectively the only short you can have in your 401k.

Fri, 05/25/2012 - 18:43 | 2463923 Mauibrad
Mauibrad's picture

 

The Greek take on it:  http://youtu.be/Zvl9N9GdraQ

 

Fri, 05/25/2012 - 20:03 | 2464087 mayhem_korner
mayhem_korner's picture

If nobosy consumes, then how will economy run?

 

Wealth creation is a function of production, not consumption.  Most fundamental truth of economic activity that the liberal mindset just can't seem to grasp. 

Fri, 05/25/2012 - 21:13 | 2464225 blunderdog
blunderdog's picture

Production of the wrong output isn't usually called "wealth creation," though.

Our education and medical industries have done very well over the past 20 years, no?

Fri, 05/25/2012 - 14:21 | 2463180 Pegasus Muse
Pegasus Muse's picture

Jim Willie talks another huge event few are talking about.  JPM, Interest Rate Swaps, and the implosion of the US Treasury market.

USTBond Tower of Babel Teeters

http://news.goldseek.com/GoldenJackass/ 

Fri, 05/25/2012 - 15:02 | 2463320 Michael
Michael's picture

as he comments that the longer the delay of a restructuring/default/exit/euro-bonds takes the higher the probability of a gigantic systemic failure.

That's my plan, and it goes for the whole world. Please give me more QE BB.

Side note;

I didn't know Iran had the highest enriched uranium on the planet acording to the MSM, I thought Israel achieved that status first in the ME.

Jimmy Carter - Israel Has over 150 Nukes

http://www.youtube.com/watch?v=4-GLj7NvWBM

Fri, 05/25/2012 - 15:04 | 2463373 DosZap
DosZap's picture

Jimmy Carter - Israel Has over 150 Nukes

Yeah, like 4-5x's that number.

Sat, 05/26/2012 - 00:54 | 2464569 Clashfan
Clashfan's picture

Thanks for this, Pegasus. MK has had him on. I am reading the piece on fascism/corruption, and it's excellent, especially the point about the big push beginning w/the JFK hit. Excellent link. :)

Sat, 05/26/2012 - 01:48 | 2464644 Clashfan
Clashfan's picture

Pegasus, if I read Willie correctly, wow. The top piece to which you refer, the IRS swaps and losses spiraling out of control... wow. I'm not sure how much of it to believe. It can't be true, can it? This looks like the worst of the worst.

Fri, 05/25/2012 - 13:53 | 2463102 valley chick
valley chick's picture

already in a recession....take away govt handouts we would be in a depression.

Fri, 05/25/2012 - 15:04 | 2463370 THECOMINGDEPRESSION
THECOMINGDEPRESSION's picture

Once the makeup is painted over all currencies, this is what it will look like:

http://www.milfmakeup.com

Fri, 05/25/2012 - 17:09 | 2463737 AldousHuxley
AldousHuxley's picture

take away government educated population, government built roads, government bailout of banksters, government protection of security....basically take away government, you have no economy.

 

we live in socialism where top 0.1% fools everyone into giving them multimilliondollar bonuses for capitalism merit.

Fri, 05/25/2012 - 20:01 | 2464076 mayhem_korner
mayhem_korner's picture

take away government educated population, government built roads, government bailout of banksters, government protection of security....basically take away government, you have no economy.

 

Take all those things away and then - and only then - do you have the foundation for a real economy.  Thanks for teeing that one up, AH.

Nit-Picky Note: 100% probability is a contradiction in terms, like sole option

Fri, 05/25/2012 - 13:54 | 2463105 Quinvarius
Quinvarius's picture

The Bernanke must have bought a new fiddle. 

Fri, 05/25/2012 - 13:55 | 2463106 DormRoom
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For the youths of the world, there's already been a systemic failure.  Perhaps it's time for the over-indebted, and entitled baby boomers to share some of our pain.

Fri, 05/25/2012 - 14:48 | 2463305 lemonobrien
lemonobrien's picture

man up; no one gives a shit about you; your mommy is dead; welcome to the real world motherfucker.

Fri, 05/25/2012 - 16:52 | 2463699 Sabibaby
Sabibaby's picture

Suitable quote: 

Man, I see in fight club the strongest and smartest men who've ever lived. I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War's a spiritual war... our Great Depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off.

Fri, 05/25/2012 - 17:20 | 2463757 AldousHuxley
AldousHuxley's picture

there's always someone who should be more pissed off than you:

Served 5 years in jail for fake rape charge and missed out college football career (for USC, UCLA) while his mother sold house and car to pay for lawyers. Entered plea bargain to avoid 42year sentence.

Accuser friends you on facebook after you get out of jail and admits that she lied.

Accuser won $1.5M in settlement fees from school district (aka. layoff teachers).

 

http://latimesblogs.latimes.com/lanow/2012/05/ex-football-player-says-ra...

Fri, 05/25/2012 - 13:54 | 2463108 junkyardjack
junkyardjack's picture

I'm 99% sure he's wrong

Fri, 05/25/2012 - 13:54 | 2463109 LongSoupLine
LongSoupLine's picture

can't stand that meat shed Wapner...f'ing idiot.

Fri, 05/25/2012 - 13:56 | 2463116 Obvious Paradox
Obvious Paradox's picture

Surely this is bullish news.  When is the next Ipad coming out?

Fri, 05/25/2012 - 14:03 | 2463133 junkyardjack
junkyardjack's picture

I'm 100% sure it will be announced in the first half of 2013...

Fri, 05/25/2012 - 13:58 | 2463119 caconhma
caconhma's picture

Marc Faber is an intertainer.

"Marc Faber Sees 100% Probability Of Global Recession In 2013". WOW!

Will it happen on Feb. 3, 2013 at 2:31 PM or on Feb. 30, 2013 and 10:33 AM?

Fri, 05/25/2012 - 14:04 | 2463139 LoneStarHog
LoneStarHog's picture

February 30th?  Oh yeah, that is the day that the banksters have agreed to turn themselves into law enforcement to face charges of corruption, fraud, treason, etc.  That February 30th.

Fri, 05/25/2012 - 13:59 | 2463120 e-man
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I caught that one too, this morning.  He also said that the markets would bounce back up, once the Greek situation was resolved one way or another, and that he thought Germany would finally sway toward allowing Euro bonds.  Gotta love Faber, people just hate hearing the truth.  They just look at you like a deer in the headlights.

Fri, 05/25/2012 - 13:59 | 2463124 Fail2Deliver
Fail2Deliver's picture
I am grateful for the work you do Tyler. This is the one source of real financial news to counter the government sponsored CNBC. Seriously is there anyone,anyone on CNBC worth listening to (other than Rick Santelli)?
Fri, 05/25/2012 - 15:17 | 2463419 beachdude
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Maybe just the commodities reporters, like Dan Dicker on energy. I come off of mute for Santelli, Dicker, and Epperson. Although her softball interview of Blythe Masters knocked her down a few pegs.

Fri, 05/25/2012 - 13:59 | 2463126 metaforge
metaforge's picture

Ah yes... USD Cash... the safest place to be!  ...  Until one day it isn't.

Fri, 05/25/2012 - 14:00 | 2463129 youngman
youngman's picture

Was he wearing a Hoodie.....???  100% sure...me too....BUT our government numbers will never show it.....the new normal is 11% unemployment..50 million on food stamps...15 million on disability...60% not paying Federal taxes...all is good in the ole USA...

Fri, 05/25/2012 - 14:02 | 2463131 LoneStarHog
LoneStarHog's picture

2013?  Hey. Marc, what the hell do you think that the global economy has been in since at least 2008? If you cover a turd with lots of paper, does it change the name and smell?

Fri, 05/25/2012 - 14:08 | 2463150 LeBalance
LeBalance's picture

Baby Ruth?

Fri, 05/25/2012 - 14:40 | 2463256 Dr. Kananga
Dr. Kananga's picture

Tootsie Roll.

Fri, 05/25/2012 - 14:03 | 2463132 JustObserving
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Cash USD and gold??  Are they rather not contrary investments?  Consistency is the mark of small minds.

I would suggest silver and gold and a basket of currencies, if you want to own fiat.  Just enough to last 2 years at a maximum.  A lot of fiat will be proven worthless soon enough.

How about farm land, Mr Farber?

Fri, 05/25/2012 - 14:15 | 2463166 Not Too Important
Not Too Important's picture

Fukushima screwed the farmland. Plutonium does that.

Fri, 05/25/2012 - 14:33 | 2463232 BlueCollaredOne
BlueCollaredOne's picture

Monsanto and Tyson are busy lobbying to make that farmland worthless. I'm not going to pretend like I'm a farmer, but I've read some chilling reports on the regulation that Tyson is trying to push on small time farmers.

Fri, 05/25/2012 - 15:02 | 2463368 DosZap
DosZap's picture

BlueCollaredOne

The(gub) have already put many agencies in charge of those,small farms/ers.

The newest gig is Organics, sold on roadside stands and farmers mkts.

No inspections, no TAXES,their and out butts are grass getting fresh Organic produce.

Seeds that grow more than once(repro), are almost gone..........soon will be.( esp to the open mkt).

Another step, and likely the most important one of all..........you control the food, and you control everything.

I think the cap busting will start well before this all comes to a head.

And Tyson loves to sell diseased chickens,and drain the blood into rivers, and streams, (and donate big bucks to certain parties).........no range fed period.

Fri, 05/25/2012 - 14:42 | 2463270 DosZap
DosZap's picture

How about farm land, Mr Farber?

First its FABER, second, WILL you be able to pay the taxes on land?.

What if they just take it.............?,you cant hide LAND.

Fri, 05/25/2012 - 14:06 | 2463145 No Euros please...
No Euros please we're British's picture

100% certain? Is that physical or paper certain?

Fri, 05/25/2012 - 14:07 | 2463148 KandiRaverHipster
KandiRaverHipster's picture

CNBC gets pwnd lol

Fri, 05/25/2012 - 14:08 | 2463151 e-man
e-man's picture

Markets negative again today.  I think ZH should have a special post where you can guess the exact time the Magic Market Fairy will appear. Winner gets a Banzai7 TShirt.

Fri, 05/25/2012 - 14:11 | 2463156 Conman
Conman's picture

2:30 pm - but who knows PPT prob took the day off.

Fri, 05/25/2012 - 14:47 | 2463295 Dr. Kananga
Dr. Kananga's picture

I dunno--we got a three day weekend, and it's probably the last one before the swans make an appearence. I don't think they'd want to waste the opportunity to try to 'fix' things before Tuesday.

Fri, 05/25/2012 - 15:24 | 2463443 e-man
e-man's picture

Anyone smell the magic green dust yet?

Fri, 05/25/2012 - 14:10 | 2463154 New England Patriot
New England Patriot's picture

The undercurrent is that power brokers in Europe want to consolidate the political reigns brought together by the EU. If Greece fails and seeks to break away, this trends against the wishes of the continentals.

 

To me, this suggests a 'black swan' environment; the time to play a trump card that will override the economic reality by creating a new political one.   

Fri, 05/25/2012 - 14:44 | 2463260 ThirdWorldDude
ThirdWorldDude's picture

Further economic and political unity in Europe will never be achieved under the current conditions. Opposition has been strong even during the good times and the EU didn't manage to take that critical step towards greater fiscal unity. One thing to be worried about is Germany's approval of the Eurobond issuance - if Merkel gives in under the pressure, it will not only be CDU's political suicide, but it will also create the perfect circumstances for radicalization of Germany and the enthronement of a new fuhrer. 1929 all the way again.

 

I believe that TPTB are going to draw that "black" joker out of the sleeve. It would be the most logical solution to their problems as it would, on one hand, shift the focus from the inevitable economic meltdown to a far greater danger, while leaving them (at least temporarily) in the cockpit and saving their sorry butts from getting lynched by their own people.

Fri, 05/25/2012 - 14:14 | 2463159 Conman
Conman's picture

Quick CNBC line up "banking analyst" Dick Bove again to tell us how great the banks are. Or better yet just talk to a recording from a past show because it really doesn't matter, he always says the same thing.

Fri, 05/25/2012 - 14:13 | 2463160 Zero Govt
Zero Govt's picture

"..100% certainty comes the reply to leave Wapner throwing in the towel on any positive spin.."

chuckle :)  

Fri, 05/25/2012 - 14:16 | 2463167 Dr. Engali
Dr. Engali's picture

I wish they would quit bring up Nouriel Roubini. He is almost as big an idiot as the CNBS talking heads pretending we are't in a depression.

Fri, 05/25/2012 - 14:39 | 2463248 BlueCollaredOne
BlueCollaredOne's picture

He definitely has strayed. In 2006 he was warning about the PIIGS. In 2008 he said "we don't have a subprime mortgage market, but instead a subprime system.". In 2009 he said the big banks were insolvent.

I didn't know that it was possible to be put back to sleep after one was awake to the calamity we are in.

Fri, 05/25/2012 - 14:49 | 2463307 DosZap
DosZap's picture

In 2009 he said the big banks were insolvent.

They WERE, we just didn't know it.

Fri, 05/25/2012 - 22:25 | 2464367 Bringin It
Bringin It's picture

- In 2009 he said the big banks were insolvent.

They WERE, we just didn't know it.

Yes DZ, that's the point of the post.  RoomBeeny spoke about the negative reality in the past, then he went sideways.

Fri, 05/25/2012 - 15:22 | 2463434 beachdude
beachdude's picture

Intuitively feel that Roubini has been enticed* over to the dark side.

* $

Sat, 05/26/2012 - 02:59 | 2464736 natty light
natty light's picture

bread, buttered.

Fri, 05/25/2012 - 14:18 | 2463171 lizzy36
lizzy36's picture

It is ironic that in the attempt to "smooth" out the normal volatility inherent in and large economy, create a false business cycle, the central planners, actually cause these huge busts.

I laugh everytime some Fed research paper talks about all the positive the Fed does, without regard to the unintended consequences. 

I firmly believe one of the reasons we have seen a more negative response in the market place to the probablity of a disorderly greek exit, is because over the last 3.5 years we have been trained to believe nothing bad will ever happen again. The Fed, the Government....etc. have your back. Don't worry about how to price risk, because real risk doesn't exist. 

Fri, 05/25/2012 - 14:20 | 2463177 the 300000000th...
the 300000000th percent's picture

Its so funny, you have on one side a guy who is successfull, has made his money because he is right more than he is wrong, and can consistently predict the future correctly. And then on the other side you got a handful of never have beens, clueless little repeating robot, drones that sometimes want to debate a guest who DOES make money because he UNDERSTANDS what is going on and what IS going to happen.

Fri, 05/25/2012 - 14:33 | 2463233 TrumpXVI
TrumpXVI's picture

Or worse, by actually showing a guest up by injecting a final contrary comment.  Muppet Wranglerette, Jackie DiAngelis did that one too many times on "Worldwide Exchange".  I've given up on CNBC.  I never watch it anymore.

Fri, 05/25/2012 - 14:21 | 2463179 skepticCarl
skepticCarl's picture

The Bulls have their talking head media personalities, and we Bears have ours.  Their bold prognostications are meant for entertaining us traders, as we sit in our pajamas, trading away our spouses' 401k accounts.

Fri, 05/25/2012 - 14:26 | 2463198 RationalPrepper
RationalPrepper's picture

+1...that's funny, and in some cases, all too true...

Fri, 05/25/2012 - 14:21 | 2463181 BeetleBailey
BeetleBailey's picture

if he is 100% wrong, will be go on cBSnbc and admit it?

I am guessing.....100% unlikely.

Fri, 05/25/2012 - 14:24 | 2463190 Arnold Ziffel
Arnold Ziffel's picture

Faber is an optimist. My broker predicts 128.625% chance of recession.

 

Fri, 05/25/2012 - 14:24 | 2463193 blunderdog
blunderdog's picture

What's "global recession" supposed to be a code-word for, again?  Anyone?

Fri, 05/25/2012 - 15:27 | 2463448 Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

Hmm... monetary system collapse? Roll out of grand master central planner wet dream? No? Enlighten me, please.

Fri, 05/25/2012 - 16:38 | 2463666 blunderdog
blunderdog's picture

Well, I ask because I think Faber means something like collapse in price of equities and/or commodities OR hyperinflation of a significant currency.

He's not truly concerned about what the CBs and governments report about the relative health of their "economies," is he?

Fri, 05/25/2012 - 19:17 | 2463989 Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

Global recession would mean global contraction in economic output. I think he means just that, but not only that. The question is, how the situation would deteriorate so profoundly, that the recession becomes all engulfing global and how he can be 100% sure.

I think the reason will be a wholesale collapse in funding of business activities. The keypoint is that this time, the mushroom clouds will form in the sovereign bondmarkets and linked derivatives, but before they do, their "safehaven" appeal will drain capital from e.g. the corporate bonds. Many businesses rely on corporate bonds to run the business, because the cost of borrowing has been low. This will change, in the last stages. More planned projects will be dropped -> subcontractors will suffer -> lost orders and defaulted payments -> more people will be fired -> less tax revenue -> public spending cuts (maybe!) -> rising budget deficits -> contracting economy. In the absence of PPT, the stocks will fall badly, which will make it even more difficult for companies to raise cash via issuance of new shares.

In a recession, normally commodities should fall as well, but because this is a monetary crisis, (and the negative real interest rate on bonds destroys capital), the last flight to safety will be into tangibles. This will escalate the recession, because the cost of every manufacturing input will rise and profit margins will be crushed. Prices go up and discretionary spending tanks. This will result in either wholesale debt defaults (deflation) or a printfest (inflation).

If they do not introduce a new monetary system before, ultimately the treasuries/bonds/derivatives and hence the US dollar will blow up, and you could see your hyperinflation in the world reserve currency. So he is right about holding US dollars right up until the moment, when he is very very wrong.

I think that the very odd JPM "a fuse has been lit" story, coupled with Chinas direct access to Treasury Auctions, coupled with Chinas statement that the Renminbi will be reserve currency, coupled with Russia saying that Greece should leave the Euro and that they have a plan C, coupled with Draghis renewed enthusiastic calls for Eurobonds and Hollandes need to print, coupled with "running out of patience" Germany/Netherlands/Austria etc, coupled with the SWIFT sanctions deadline coming up, coupled with severel bilateral currency agreements in Asia and suggested BRICS bank, coupled with EUR Y notes disappearing, coupled with a swiss tax on foreign CHF holdings, coupled with the unreleased new 100$ notes with gold on them, coupled with new EUR note series planned for 1. January 2013 and repeated rumours of national currency note printing in Europe, coupled with unpredictable political situation in US and EU, coupled with reports of ongoing bankruns, suggests to me, that some profound changes to the monetary regime may be coming areound the corner very soon - as in Q2-3. Just guessing.

So yes, that is probably where his real concern is nested, and sorry for my cronic lack of brevity.

Anyways, TFMetalsReport has a very interesting podcast up today, that addresses the whole topic, if you haven't seen it.

Fri, 05/25/2012 - 21:18 | 2464241 blunderdog
blunderdog's picture

Thank you for your candor.

It appears to me that "real" global economic activity was gutshot in '08, and it hasn't yet recovered.  It's not likely to reach a similar baseline again. 

It also occurs to me now that a guy like Faber must know that floating a new currency is not a possible outcome to mention on the teevee.

I listened to the podcast.  All the gold-standard guys understand the problem, but I haven't heard what I think is a plausible resolution, yet--not to dwell on debating whether a simple fixed-rate gold exchange would "work," I don't believe it can occur geopolitically for 2 years minimum.

Sat, 05/26/2012 - 08:00 | 2464964 Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

You should listen to the JW podcast as well. There are some interesting points.

I agree. There are things you cannot say on TV, if you want to come back, and this is one of them. 

About a plausible resolution, I have commented on this before, but noone seemed interested in discussing it, or maybe I was too late posting in an already dead thread. No bitching though! I am just a little frustrated with all the one-line snarky comments that clouds the treads without any attempted value addition what so ever. 

Anyways, I do not think that we will see a traditional fixed gold standard as first choise. If you have read some of FOFOAs work, you will know that the ECB has a mark-to-market policy for their monetary gold. Assuming that they actually have that gold, of course, that suggests to me, that an insurance policy has been built into their balance sheet. Right now, the European situation seems to be in a gridlock, because contagion will result in tremendous further detrioration of the ECBs assets. Without the insurance policy, that deterioration would result in insolvency, but since the valuation of gold could be adjusted to make up for any shortfall, there is a built-in safety valve to the system.

To begin with, I thought that was neat, but a somewhat academic discussion. But then Robert Zoellick came out with his "A new monetary system should use Gold as a reference point" comment. That sounded similar to what FOFOA had been writing about, and that was the first time I saw a super high ranking central banker utter the G-word as a significant element in the monetary regime. Before that, it had all been SDR nonsense. Acknowledgement of the beginning of the end so to speak.

Here is what I think they will do. In a debt saturated world, it is clear that no progress can be made until a substantial portion of that debt has been purged/defaulted on, i.e that the natural force in play is the mother of all deflationary spirals. I think that they will let it fall as far as possible without allowing a total collapse in the system and per extension a collapse of broad confidence in the currency. Lets hope they get the timing right ;-) Just before the breaking point, they will write off all the toxic debt and keep only the stable debt. This will leave a tremendous hole in the balance sheets of Central Banks, and that hole will be filled with a re-valuation of monetary gold.

(Aside: Or if they manage to set the gold market free, they might even see the natural market forces fixing the problem, without any grand and shocking policy announcements. I think it will be announced though, because a rapid but not instantanious rise in gold, can provoke more panic, than a surprise all over the board announcement).

From that point any trading account deficit between nations will have to be settled in gold. That means that the future currency reserves of any nation will be a basket of currencies corresponding to their trading partners, and the final settler of imbalances will be gold.

I think that this will work, because it will be adapted worldwide very quickly, which means that the fiat currencies that people hold will all be hit simultaniously, which I hope will lessen the devastation of individual peoples relative purchasing power. Most people in the western world are net-debtors, so they will not suffer from a write-off. This is also why, the Chinese encourage their savers to invest in gold, because they would be hurt and very angry otherwise. Private investors in debt will suffer badly, but I think that pension funds will be at least partially patched up to avoid civil war.

Going forward "the reference point" in a free and physical gold price will see gold as a themometer of the level of confidence, savers have in the currency management. So I do not see private convertability, but I think they will use the gold price in the management of the size of the fiat currency and revolving credit supply. (Setting different standards for the practise of fractional reserve banking, and I HOPE they will outlaw leveraged derivatives).

The most unpredictable part, in my mind, is the gigantic shift in geopolitical power, and what this will mean. The countries that have been hoarding gold over the last 20 years, will have the upper hand economically. Will the eastern powers (e.g. China, Russia, Middle East) turn out to be "benign liberators" of our degraded financial system or will their long history of totalitarianism send us from the ashes straight into the fire?.

Well, that was 2 cents from me ;-) I am curious, why do you think, geopolitically, that it will be at least another 2 years to reset?

Sat, 05/26/2012 - 11:44 | 2465367 blunderdog
blunderdog's picture

There are two major factors, one is touchy-feely and the other is logistical.

1) It takes awhile for an idea to properly penetrate the minds of billions of people.  We haven't yet heard any significant "ideasphere" campaign to return to a gold standard from the governments or the bankers.  This is not a step that they can take too suddenly.

2) National reserves (or CB reserves) of gold are vastly disparate.  The actual physical economic scale of the gold-rich countries (US, Italy, France, Germany, Switzerland) is completely out-of-whack with the economies of China, Russia, Japan on a relative basis.  The "purging toxic debt" step is another way to describe massive theft from the non-gold-rich states by the gold-rich states.  This is the kind of thing that causes war.  The gold standard can work properly only AFTER some generally acceptable draw-down of relative debts. 

In short: China will have to be paid before the switch can be performed, and we haven't heard any peep at all from ANYONE about clearing the current international debt imbalances.  That's going to take awhile.

I think most of this *can* be engineered in a few years--2 is aggressive.  So once the idea has sufficient traction and power behind it to become predictable, it'll take that long for it to actually happen.

Sat, 05/26/2012 - 14:38 | 2465757 Day_Of_The_Tentacle
Day_Of_The_Tentacle's picture

Very interesting. As an aside, when I mentioned purge of toxic debt, I was thinking more Euro internally. Also, I doubt that the gold rich guys have as much as they claim, but we have to go by the official numbers until proven wrong. I agree that China will have to be paid, and I wonder if the new direct chinese access to the Treasury Auction system is a part of that plan. Anyways, great feedback. Thanks for playing!

Fri, 05/25/2012 - 14:25 | 2463195 RationalPrepper
RationalPrepper's picture

Haven't listened, yet.  What kind of cash:gold ratio does he recommend?  Based on Tyler's summary it almost sounds like Faber has become a deflationist after having been a long time inflationist.

Fri, 05/25/2012 - 14:26 | 2463199 Cranios
Cranios's picture

Then again, Faber has seen a 100% chance of recession in every year since he was about 16.

That's how he makes his dough, kids. Doomsaying.

Fri, 05/25/2012 - 14:41 | 2463261 Banksters
Banksters's picture

Still breastfeeding I see.   Good luck, nipper.

Fri, 05/25/2012 - 14:43 | 2463273 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Faber is bullish!  Then bearish!  Then bullish!  Then bearish! 

I just thought of a term, "Bloblation"!

I also just had a new idea - if we all buy silver, maybe we can crash JPM's shorts!

Sat, 05/26/2012 - 00:39 | 2464541 BenLightYear
BenLightYear's picture

Buying silver doesn't crash shorts if it's physical...I love the whole buy silver crash JPM movement....everyone who got hooked on that is dumb enough to take an almost 50% drop in less than a year...and for the record to sell shorts you have to own the contract...if everyone holding contracts hoping to sell shorts sold off their contracts it would make silver drop more than the ability to short and the knowledge that the ability is there...and owning an industrial metal going into a worldwide production recession doesn't sound like a very good plan...add to that silver never got over 50 let alone 200 like a lot of people were fantasizing about and the fact that the same outlets who promote silver purchases also promote physical means that the common mans rush into silver isn't going to make it anymore valuable that it started as...unlike a stock or real estate and so on

Fri, 05/25/2012 - 14:45 | 2463288 amadeusb4
amadeusb4's picture

Average world population growth rate is ~1.2% y/y. So if the economy is not growing at least that much, then we're going backwards. Not quite the definition of recession but pretty much insures one will happen. Given that the UK is already formally in a recession and Germany, the lynchpin of the eurozone registered only 1.7% Q1 growth, a recession is just around the corner. You can't kick this can down the road until 2013. It will happen in Q3. Just watch the US Q1 rev next week. The monster inventory builds in the last couple of quarters have to be absorbed sometime and banks are working feverishly to get robosigners signing again to start moving excess properties off their books. It could happen as soon as Q2 but more likely Q3 and with certainty by Q4. We may come OUT of a recession by late 2013.

Fri, 05/25/2012 - 14:53 | 2463326 Trimmed Hedge
Trimmed Hedge's picture

After his interview, Faber slapped a Strong Buy on FB...

Fri, 05/25/2012 - 15:01 | 2463362 levelworm
levelworm's picture

USD up + GLD up = stagflation. Actually this has been going on for a while, although GLD was constantly pushed down by the lack of USD.

Sat, 05/26/2012 - 00:44 | 2464551 BenLightYear
BenLightYear's picture

Although the current value of a currency can fluctuate on its own the price of a commodity it does not mean that is the sole pricing mechanism....this idea that the whole world is breaking down when gold and USD are up on the same day is nonsense....they are loosely connected but not attached at the hip....they are 2 of the 3 best things to own in an economic climate such as ours with land (not houses) being the third

Fri, 05/25/2012 - 15:05 | 2463376 poldark
poldark's picture

So how about Germany leaving the euro, then the rest can do what they want, print loads and loads of euros so every country could have cheap money. Germany would have to manage with a strong currency

Fri, 05/25/2012 - 15:10 | 2463390 CitizenPete
CitizenPete's picture

 

CFTC Staff to Host a Public Roundtable to Discuss the Proposed Volcker Rule 05/24/2012 04:21 PM EDT


Staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable to discuss the proposed regulations to implement Section 619 (commonly known as the Volcker Rule) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Event Date - 05/31/2012 ---------------------------------------------------------------------- CFTC Staff to Host a Public Roundtable to Discuss Proposed Regulations Implementing Core Principle 9 for Designated Contract Markets 05/25/2012 11:45 AM EDT



Staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable on Tuesday, June 5, 2012, to discuss the proposed regulations implementing Core Principle 9 for designated contract markets.

Event Date - 06/05/2012

 

Fri, 05/25/2012 - 15:09 | 2463392 slewie the pi-rat
slewie the pi-rat's picture

it only took him a year, but he finally agrees with slewie!  L0L!!!

these old porn stars are putty in my hands, BiCheZ!

Fri, 05/25/2012 - 15:09 | 2463395 Bunga Bunga
Bunga Bunga's picture

100% impossible, because there is a slight chance that aliens reach earth and buy our debt.

Sat, 05/26/2012 - 00:47 | 2464557 BenLightYear
BenLightYear's picture

Money is created from debt and accrues interest...the debt is little more than a measure of the amount of money that has been printed and has not been returned via taxes...pay off the debt and see where ya end up...add in the fact THE WORLD CONDUCTS TRADE IN USD which means there has to be a large amount available to purchase so the world can engage in trade

Fri, 05/25/2012 - 15:17 | 2463417 Sandmann
Sandmann's picture

that Germany will cave to Eurobonds eventually

 

Well US Troops imposed Germany's last so-called Constitution in 1948, so I guess Faber is right if US Troops are ready to impose another on Germany.

Fri, 05/25/2012 - 15:29 | 2463461 giggler123
giggler123's picture

I thought I'd point out that your CNBC clip's never work - oh they play a stupid advert and then claim some error, probably because I'm not in the USA.

Fri, 05/25/2012 - 15:54 | 2463520 valueslots
valueslots's picture

As usual , he talks the book of Jim Rogers. By the way, if you like him you can check his up-to-date updates here: http://valueslots.com/other-investors/marc-faber/

Fri, 05/25/2012 - 16:07 | 2463569 marketcycles79
marketcycles79's picture

Detailed roadmaps to get you through it. Highly recommend for what is coming.

http://humblestudent777.blogspot.com/

Fri, 05/25/2012 - 16:32 | 2463649 zerotohero
zerotohero's picture

picked up 150 more silver maples today - I like my game better than their game.

Sat, 05/26/2012 - 00:52 | 2464565 BenLightYear
BenLightYear's picture

Sorry for your soon to be loss on investment...might as well hae bought a boat...if your gonna lose money at least ya could have had fun with it

Fri, 05/25/2012 - 16:52 | 2463700 Venerability
Venerability's picture

I hear when sophisticated parents want their little children to behave, they no longer talk about the Bogey Man.

They tell them, "If you don't eat your vegetables, the Marc Faber will come to get you."

(Or maybe the S&P.)

 

 

Fri, 05/25/2012 - 19:05 | 2463963 banksterhater
banksterhater's picture

someone needs to reconstruct Asshole Wapner's permanent smile.

Fri, 05/25/2012 - 19:46 | 2464043 GONOB RADIO
GONOB RADIO's picture

Faber is an ass.

Our show with HS Dent give a logical understanding of things: http://youtu.be/bo_2b9AP2k0

 

Fri, 05/25/2012 - 20:40 | 2464159 bhakta
bhakta's picture

Of all commentators on economic issues, I like Dr. Marc Faber a lot. Anyone who listened to him over the years would not be in a bad position. 

Sat, 05/26/2012 - 00:55 | 2464573 BenLightYear
BenLightYear's picture

Faber is very smart and generally accurate...the problem is he is so convincing that those who listen to him stay in an investment even after he changes his views based on a changing economic climate and few follow him because they are still convinced from his earlier calls

Sat, 05/26/2012 - 08:37 | 2465010 hero HNL
hero HNL's picture

This guy is an incompetent & egregious liar.

 

Just a moment ago, he was saying central banks around the world would be printing to infinity and we would have hyperinflation. He was arguing with Mish Shedlock and making fun of deflationists at that time.

 

Now, he's saying a deflationary bust.....He fits just like Chris Martenson. These guys make wild theories only to get attention or to make money out of crisis.

 

 

hero

Sun, 05/27/2012 - 08:06 | 2466900 1eyedman
1eyedman's picture

...deflation then inflation....yes they will print to infinity, thats how they react to things....its not a linear 'now we will go to x'.    mkts change and adapt if one is still hung up on the forecast from 3 months ago the game has moved on

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