Tuesday, September 3, 2013

The Solution to This Systemic Crisis will be painful

L.S.: What could be done to solve a systemic crisis? 

Marc Faber : Recently, there was a professor in Germany who argued that the problem are the well-to-do people and that they should be taxed, very heavily penalized and that part of their assets should be taken away. I don’t think that the well-to-do people per se are the problem. I think the money trading by central banks is the problem and the expected debt growth, credit growth by governments and also on the household sector level and the unfunded liability. So, essentially, one of the solutions to the problem – and there is not going to be a solution that is not very painful – there will be pain and people will have to cut back on their consumption and also review their future benefits from pension funds and from social security, health care and so forth and so on.
We’ve lived beyond our means in most countries and to solve that problem is not going to be without significant pain. But effecting the right direction would be to take the depression away from central bankers to increase and cut the money supply and to intervene into the free market essentially with monetary measures. I think that would be the first step in the right direction because if you look at what has happened in the economy, one of the safest goals of central banks is price stability. Well where has there been price stability over the last 15 years? We had a colossal NASDAQ problem and then a collapse and then a colossal credit bubble and housing bubble and then a collapse and then we had a colossal bubble in commodities in 2008 when the oil price went to 147 Dollars, and so if the goal is price stability, basically the fiscal and in particular the monetary interventions have actually led to more instability rather than stability.
 - in an interview with By Lars Schall of the online platform " Gold Switzerland 1st September, 2013

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.


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