Monday, August 11, 2014

Marc Faber : The Current Monetary Arrangements Are not Sustainable in the Long Run

That brings me to the next question. We at Global Gold think in scenarios. We don’t believe in models, but rather use our common sense and history as our guide to try to understand ongoing developments and where they will take us. One of our scenarios for the mid-term, meaning in the next 5 years, stands for crisis (collapse of the monetary system or wars), which we weight with 20%. Do you think we are overly optimistic or pessimistic?

Marc Faber : Well, my view is that the current monetary arrangements are not sustainable in the long run. We have sensitive, overly indebted Western economies in the US and Europe. It is not visible yet, because the unfunded liabilities are probably not accounted for. A company under GAAP would have to account for them, but governments don’t have to. What this means is that the benefits of people will eventually have to be cut either through inflation and adjustments that are below the true cost of living increases or through reduced payments to the individuals. With benefits going down or through outright expropriation over the last two or three years, more and more voices have come up talking about wealth inequality. I previously discussed the problem of wealth inequality brought about by expansionary monetary policies where the main beneficiaries become the asset holders. Wealth inequality should be largely addressed through monetary policies in the sense that you should have an interest rate structure that does not favor the kind of asset inflation we have. - in

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.

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