"Wake up people of the world and investors. Greece will come to your neighborhood very soon, maybe not this year, but next year or whenever it is, because the world is over infected. And defaults will follow, or they will have to create very high inflation rates."
That's Marc Faber's message to all of those who may still think that Greece doesn't matter in the grand scheme of things. In an interview with Bloomberg TV, Faber talks Greece, China, and of course the Fed.
And everybody knows in the world that Greece cannot pay its debt at the current size. So what will happen, in my view, is either Greece will leave the EU and will suffer very badly for a few months, maybe even longer. There will be a cash shortage. Or the EU, and the ECB and the IMF will have to cut a significant haircut. And Tsipras proposed a haircut of something like 30 percent. I don't think that's enough. I think they will need a haircut of at least 50 percent.
I think the likelihood of contagion is very high. And I have to say when you have a borrower, you also have a lender. And it's actually, in my view, amazing how the EU kept on pumping money into Greece, partly also to bail out their own banks. And suddenly now the debt is no longer manageable.
And I would say, wake up people of the world and investors. Greece will come to your neighborhood very soon, maybe not this year, but next year or whenever it is, because the world is over infected. And defaults will follow, or they will have to create very high inflation rates.
Well my view was that after this 100 percent increase in Chinese stocks and huge speculation, and huge speculation on margin, margin index in China, the percent of the economy, was almost twice as large as in the U.S. So it was very large. And my view was that the market would fall from the peak by at least 40 percent.
And I still maintain that -- that the market will move lower before it starts to move up again. But I don't think we'll see a new high in China for some time.
I think the economy is very weak by Chinese growth standards. And we've seen that also in industrial commodity prices. I think lots of sectors in China are no longer growing.
Well, as you know, the majority of Fed's governors that are voting are those that always they will use any excuse to essentially delay a rate increase.