Thursday, July 9, 2009

Even under the Gold Standard you can have Bubbles Marc Faber

Marc Faber Interviewed by McAlvany The case for Inflation or Deflation:

Marc Faber was interviewed by The McAlvany Weekly Commentary on July 8, 2009 the topics discussed are unemployment, deflation, inflation bailout , monetization of the treasuries Goldman Sachs lost software The FED global economics bubbles Greenspan Central banks , The FED new proposed powers and financial markets.
"The Feds are worse than the Mafia" Marc Faber was quoted from last year!!!
Marc Faber says "Well basically there is this debate whether the US will experience, in the next 5 to 10 years, high inflation rates or whether it will go with deflation. I just like to say that both parties may be right. We may first have deflation, and then inflation,so somebody will go and say see I told you so and then 2 , 3 years later he will be wrong it is like If someone said in 1998 the NASDAQ is a bubble so for two years he was wrong but after he was said right on the mark , and sometimes it is difficult to predict these things ""even under the gold standard you can have bubbles " "we had many bubbles in the 19th century when we did not have any inflation at all such as the canal boom , the railroad boom then different real estate boom, but the point is usually when you have a bubble it is a bubble in one sector and at the same time some other sector deflates see the Japanese stock market in 89 was accompanied by deflation in commodity prices which have picked out in 1980"

"what Greenspan and his assistant Ben Bernanke created is a bubble in everything " "I also want to point out that it is a big fallacy to believe that in weak economies you have deflation and in strong economies you have inflation. The opposite is true, because if my country is growing strongly, i can keep money tight and I can have budget deficits which are basically containing price increases across the board. But when the economy is weak like in Latin America after 1981 when the Petro Dollar crisis happened, the response of government is to create fiscal deficits, in other words, they increase government spending. Most of it is usually wasted anyway and at the same time you have easy monetary policies. The two is a recipe for a price increase somewhere in the system."
" Let’s put it this way. I think when you observe markets you have to look for symptoms of developing trends, the markets speak usually…Look at the price of gold. Currencies worldwide have depreciated against s the price of gold. So there has been a loss of purchasing power of the currencies."
"I think what we have to watch very closely is the position of the US dollar. It’s not that the weak US Dollar creates inflation. It’s that inflation creates a weak dollar. And, if you see the dollar weakening considerably, in particular against precious metals or against relatively strong currencies like the Asian currencies. I think that would be a signal that some inflation is coming back into the system."
On the other hand, if the dollar is strong as it was in 2008 - in 2008 all asset prices went down for the exception of US government bonds and the US Dollar. In that case I would say that the threat of inflation is not very high, and that would more or less signal the theory of deflation."...etc...
The following embeded audio file may not work well in Internet Explorer if you do not have the proper encoders installed , It works well on Firefox ...I apologise for the inconvenience , you can always listen to this great interview directly from McAlvany website by Clicking here

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