Saturday, November 29, 2014
The Unfunded Liabilities - Another Ponzi Scheme we’ll have to talk about in a few years’ time
REGAN: You mentioned the economic numbers out of the US. You said people should take them – to not take them for granted. You also mentioned in the same sentence because they’re coming from the Obama administration. What is your concern there about what they’re telling us?
FABER: Well first of all, if we talk about GDP growth, we have to – the figures are adjusted essentially for inflation, the PCE in the case of the US. Now depending on how you weight the basket of goods and services that you take into your inflation measure, you will get completely different results. And if you print money and if you have large budget deficits, and last year up to October 13 of this year the total government debt in the US increased by over a trillion dollars. So I would say that is kind of a deficit figure that makes halfway sense, but it does not include the unfunded liabilities. That’s another Ponzi scheme we’ll have to talk about in a few years’ time.
In any event, the point is that (inaudible) improvement in the economy has taken place, there’s no question, from the 2009 lows. The question is more had we had a further decline in home prices, would actually affordability for most people have improved or not? And I would argue why do people rush out when there are sales in department stores? Because they get the bargain. At the present time when young people want to buy something, they buy the stock market at an expensive valuation. They buy bonds at miserable yields.
That I didn’t have to do when I started to work in 1970. In the early ‘70 the Dow Jones was yielding 4 to 6 percent. Bonds, they were yielding 6 percent on treasuries and they rose to 15 percent, add (ph) the benefit of a huge compounding effect. Not (inaudible) I’m smart, but $1 invested in 1970 at 100 years at 5 percent grows to $131. - in a recent Bloomberg Interview
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.
Posted by Nicole Bourbaki