Monday, March 7, 2011

Marc Faber : Gold and Silver are a safe currency

Marc Faber :.."... I would say , let’s take a very bearish scenario, assuming there is a collapse in the Chinese economy, which is not necessarily my prediction, but some people say there is a horrendous bubble. I agree, if we define a bubble as artificially low interest rates, and excessive credit growth, then we have a colossal bubble in China. But it may go on for another 2-3 years.But let’s say it breaks one day.Then it will have a very negative impact on the demand for industrial commodities. And we may get, at some stage, in some sectors of the economy, the risk of deflation. In other words, the demand for industrial commodities could, for a year or two, decline, and so, obviously, the price of copper, and of nickel, and also, to some extent, oil– although this would depend very much on political developments– would go down.In that environment, there will be more money-printing. If the S&P drops 20%, all the people that are now criticizing Mr. Bernanke for QE-II will go back to their old pattern,as they have done between 1980 and 2007, to encourage the Fed to print money, because they all benefited from rising asset prices. But as soon as the S&P drops 20%, the American policy-makers will all again be for further monetary policy measures and further fiscal measures.At that time, obviously, you could end up with a global economy that is very weak, but where prices go up for certain commodities, such as gold and silver. They don’t go down because of an oversupply situation, but they move because they are a safe currency.They become the proper unit of account. In all hyper-inflation economies, eventually people give up their own currencies as a unit of account.If you had gone to Zimbabwe during their hyper-inflation, or if you had gone to Germany during their hyper-inflation, or Mexico during their hyper-inflation, nobody in those countries calculated prices anymore in their domestic currency, it was all then becoming a dollar standard, or gold standard. That is why I think that people should have some of their money in gold and silver...."
in a recent interview with McAlvany on 23 Feb 2011 

Marc Faber : silver may outperform gold but I stick to gold because my safe deposit box is not large enough to put enough silver in it

Marc Faber : "....First of all, I think that gold and silver will move in the same direction, but as I tried to explain earlier on, when you print money, essentially, everything goes up, but at different times, and with different intensities. In a bull market, usually, toward the tail end of the bull market, silver tends to grossly outperform gold. So, yes, maybe it will outperform gold, but I stick to gold because my safe deposit box is not large enough to put enough silver in it, whereas, it is large enough to put enough gold in it.Different people have different takes on this, and my friend Eric Sprott, who knows the silver and gold markets extremely well, thinks that silver will go ballistic. Yes, maybe that is true, but I do not think that silver will go up alone, without gold also moving. The direction will be same. Concerning China, yes, I suppose that silver would have a larger industrial component than gold, but as I pointed out, if China collapses and there is a huge deflationary scare, I suppose that it is the real industrial commodities, like copper and nickel and so forth, would be more vulnerable than gold and silver..."
in a recent interview with McAlvany on 23 Feb 2011


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