"Excessive credit growth eventually leads to a crisis," Marc Faber tells CNBC Asia, warning that "it has always happened and will again." The Gloom, Boom, & Doom editor briefly explains how the facts are that China is growing at no more than 4% per annum (if one looks beneath the government's manufactured data) and in the case of China "we have a gigantic credit bubble." Reflecting on recent price action (and the potential for social unrest), Faber exclaims, to deny the problems is to believe "the market is wrong and the government is right."
While this low-growth scenario rases concerns of social disorder and chaos in the nation, Faber is much more concerned about the unrest that will occur due to the expectations that speculative investments in the nation will always go up but appear now to possibly be going down...
"if everything is so great, why are Chinese stocks declining?, why are copper prices collapsing, why is iron ore dropping? The people who are benying these will be problems and stimulus will save the day are the same people who have said buy Chinese stocks for the last 4 years..."
"This is just like Japan..."
"Some Chinese stocks may be cheap... but they will get cheaper"