Friday, April 14, 2017
Marc Faber Warns : Market Correction is coming
Gloom, Boom & Doom Report Editor Marc Faber discusses why investors should be weary of a market correction.
Two things determine if the market will enter recession: the private debt to GDP ratio must be above 150% and the rate of private debt increase must average above 18% over a 5 year span. Obama deleveraged the private debt down from 230% to about 190% by shifting the private debt to public debt through keynsian economic methods such as the stimulus etc. but the debt is still there from 2008. The economy entered the leveraging phase at the end of 2014 and is a large reason why a Republican was a favorite to win the presidency as people what to spend the money they started to get back under Obama's deleveraging. The problem is that Republican economics is OVERLEVERAGING where they allow banks to speculate too much, cause poor people (the economic anchor) to put too much on credit cards they can't pay back etc. Because they over leverage the private debt to gdp rate of increase eventually goes over 18% over a 5 year span and the economy dives after rapid expansion before that. It happened after Hoover and people wanted a deleveraging democrat like FDR, it happened after Reagan during H.W. years and people wanted a democrat like Clinton to deleverage the economy, and it happened under Bush and people wanted a democrat to deleverage again like Obama. The key is to control leveraging to be slower than 18%, but Trump and the GOP congress is showing he is going to over leverage again with the deregulation of banks, the massive tax cuts, and the gutting of social programs. That being said, I say Trump's economy will stay booming for another 3ish years heading into the election year 2020 when things will start to get rocky, but he may still have holdover favorability to win. That being said 2021 will be ugly no matter who is newly elected, the thing is that if GOP inputs austerity following a 2020 win and the economy dives, the economy will be over contracted and we will end up in an economic rut like Japan forever.
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