Thursday, July 16, 2009

Marc Faber the Next Stimulus Package is going to be even worse

Marc Faber Dr Doom author of Gloom Boom and Doom Report and famous global investor from Thailand answers the question if he thinks that the US could avoid the Zimbabwe like high inflation scenario he warned about few weeks before he said " no I do not think so for a variety of reasons , first of all I understand the arguments of the deflationists , they argue that because the economy is weak there will be no inflationary pressures , my argument is this , yes if the economy is weak , in theory there shouldn't be any inflationary pressures unless the government intervenes and creates large fiscal deficit and monetizes these deficit and as a result of that the government debt increases , now the more the deflationists will be right in the near term in other words if they predict that the S&P will drop to 500 and that the whole global economy collapses in a deflationary spiral then the deficit will actually expand more and more , and also what you would have is more and more monetization because that's the policy of central bankers that they have shown in the past and Mr Bernanke has written about this and he has given speeches about this , so what then happens is government debt explodes , now take the case that one day in the future that can be in 3 , 5 , 10 years whatever it is the economy recovers and interest rates should go up because of inflationary pressures The Federal reserve will be very reluctant to increase interest rates because in the meantime the government debt will be that large and interest payments on government debt which today are slightly below 500 billion dollars annually in the United States could easily double to a trillion dollar annually and so you get into a debt spiral that is very difficult to solve and The Federal Reserve by keeping their interest rates artificially low would lead to more and more inflation there is another problem for the US and that is besides from the existing fiscal deficit health care expenditures will soar very dramatically especially in the next 8 years because of the aging of the population , it takes much more money to take care of someone who is 70 years old than of someone who is 20 years old , and so these expenditures will balloon and I just do not see how the US will solve its debt problem " "The Chinese should dump the treasuries as long as they can " following topics discussed are cap and trade hyperinflation China Asia second stimulus real estate deficits and the Federal Reserve..."the way the Federal Reserve calculates inflation is highly questionable" said Marc Faber..."America has lost high quality jobs in manufacturing to hamburger flippers and people that works in retail stores and fast food shops and health care workers not scientists in health care but just nurses and so forth""The whole economic expansion driven by a bubble in America has been a total disaster"

LinkWithin

Related Posts Plugin for WordPress, Blogger...