Welcome back to the DR Video Series. If you are tuning in for the first time, here’s the scoop on the newest addition to The Daily Reckoning. A few times a month, we’ll post interviews, video shorts and insights from today’s top minds. As a Daily Reckoning reader, you’ll have first crack at these exclusive videos – we’ll let you know each time a new one is posted.
In the latest DR Video Series interview, The Daily Reckoning’s Eric Fry talks with The Gloom, Boom & Doom Report’s Dr. Marc Faber about where he sees the biggest opportunities in the global economy. In addition, Dr. Faber explains his view on the inflation/deflation argument – and reminds us of the sneakiest form of inflation: taxation.
We hope you enjoy the video. Let us know what you think in the comments section below the transcript. Stay tuned for the second part of this exclusive interview with Dr. Marc Faber…coming soon!
Eric Fry: Hello, I’m Eric Fry. I’m here with Dr. Marc Faber, the editor of The Gloom, Boom & Doom Report. Which is it?
Marc Faber: Well, the world is in transition and you have some trends that are favorable and other trends that are no favorable. So I think it’s not a question to be ultra-bearish or ultra-bullish but to try to identify where there are opportunities. And I believe, in general, we live through very interesting times in the sense that the weight of the global economy is shifting to emerging economies.
And we’ll have volatility in emerging economies, but in general I think that as a percent of world’s GDP, you will find in 10-20 years time countries like India, China, Vietnam, Latin America, Africa, the Middle East, Russia, Central Asia will have a much larger weight and also a much larger say in the global economic affairs and political affairs. And that will lead to a lot of tension and volatilities in asset markets.
Eric Fry: Right. Well, that’s the boom part of the story. The gloom and the doom part, you’ve written a lot about deflation and inflation. Often those are simply academic arguments. In this environment, it feels as though the inflation/deflation argument is critical, and kind of a razor’s edge for determining the outcome of the various asset classes.
Marc Faber: Yes. That is correct. But if you really think through the deflation scenario then it would mean that the economy in the western world, notably in the US, is very weak.
So what happens if the economy is very weak under the Obama administration, the fiscal deficit goes up not down. The government tanks as a percent of economy expands. Monetary policies will have another huge easy move, or another extraordinary measure increasing the effects balance sheet. These are all factors that then lead eventually to more inflation.
Even if you have an environment where GDP per capita in real terms, inflation adjustment goes down. The government will of course lie about it. They will make it look good with all statistical adjustments they can use. The rate will go down as it has for the last ten years, but asset markets can go up very strongly.
Eric Fry: Well, you make the case that the government monetary policies will offset the deflationary effects in the western economies. How quickly do you think that will take place?
Marc Faber: Yes. And also I’d like to point out that in an economic system you can always have, in some sectors of the economy, deflation and then in the other sectors inflation. And we have now a global economy. I can assure you, you can go anywhere in the world – whether it’s Brazil, Africa, Asia, Central Asia, Russia.
The price level today is of course much higher than 20 years ago or ten years ago. So the US and western Europe, they may have on an international scale a bias towards maybe deflating a little bit, certainly. Real wages are deflating. But in emerging economies you have a lot of inflation. In some countries you have food prices going up annually at 20 percent per annum. And nobody can tell me that his energy bill is today lower than it was ten years ago.
Because the price of oil is much higher. It is up from ten dollars a barrel to say eighty dollars a barrel.
Eric Fry: Right. But right here in the US, many economists – and you know who they are – make the case for a long-term deflation or disinflation because private credit is contracting.
Marc Faber: Yes. I love one economist. He lives in New Jersey. His train fare has just gone up by almost 30 percent and he talks about deflation.
I can also send him a nice message that his tax bill will go up. So taxation is also a form of inflation. Because it’s not as simple as to say, “I’m going to tax you and you will pay the tax.” You can roll over these taxes onto other people, like retailers. They can roll it over to the consumer, and so forth and so on. This is the difficulty of fiscal policies. You don’t know right away who will end up paying the tax whenever you impose a tax.
Stay tuned for the second part of this exclusive interview with Marc Faber – coming soon!
Kate "Short Fuse" Incontrera is a regular contributor to The Daily Reckoning. Ms. Incontrera was also an associate producer and writer on the critically-acclaimed documentary film, I.O.U.S.A. Before joining Agora Financial in 2004, Ms. Incontrera studied writing at The University of Cambridge and at Towson University in Baltimore, Maryland.
Great interview. I hope you will keep the interviews with interesting characters such as Dr. Faber coming…
This was totally worthless. Both questions and answers were a jumble of contradicting statements. Dr. Faber was spoon fed questions that he had prepared politically correct answers to.
I will NOT be checking in on any more of his interview. I can learn alot more about the economy by observation of government policies and comparing them (almost identical) to the period just prior to, during and after the great depression.
Yes! History does repeat itself because it was caused by politicians and they don’t learn from history!
I agree. This article had absolutely zero value
The insidious takeover of the western world by Rothschild and Co is inevitable. Their lust for power is the control
of energy worldwide. They finance the roque state of Israel to intimidate the oil rich nations in the middle east. All the while they rule the super stooges of the US congress through AIPAC and the DHS.Not to forget the brain washed US population with their total control anf ownership of the US media. Their pereption of the goyim world as dumber than cattle is easy to understand when we see how the USA is miss governed by a herd of imbeciles
“And we have now a global economy.” I keep wondering just how this “global economy” was foisted upon us and why so many accept it without question. my idea is that somewhere deep in the bowels of some think tank business school some greed head robot mutant money grubber came up with the great idea of turning everyone in the world into consumers and that “business” and “short term profit”was the only thing worth doing on the planet. So you spend much of your short time on the planet chasing money and then you die. Really very pathetic. Especially since the younger generations are going to be fighting for every little thing.
The real wisdom is “where the puck will be”, as a consequence of events, not “where the puck is now”, which we all know and was again shared in this article.
Thanks for posting the interview. I’ll watch the next, too.
Probably Mr.Faber doesn’t read the comments .Or else with a couple of exceptions he might think he was casting pearls before swine.
Yes it crystal clear the Marc Faber has received the new list of “politicaly correct”thema.
Their German Illuminati have now another agenda! IV Financial Reich led by the Jews.
Yes mr. Marc Faber yo are what you are : one German who provide allways all catastrophy in the World !
To Aleks M.
Just to point out that Marc Faber is a Swiss who has been living in Asia for a long time. No catastrophy here … !
That was an awesome video! I totally love these video reckonings and I love your normal written reckonings too. Heck, I just love you all, youse have saved me thousands of dollars already in my life:-)
It’s fine if your money is more important to you than social and environmental consciousness.
Pingback: Autoapprove List
Make Way for the Gold Price "Zero Hour"
After a six month rally, the Nipponese index dropped 7.3%. Is it a turning point or a small correction?
After rising 3% out of the gate after Thursday’s bloodbath, the Japanese index embarked on a wild ride.
The American Association of Petroleum Geologists was nice enough to schedule its 2013 annual convention at my hometown of Pittsburgh…
Given a choice, Bernanke will likely strangle the currency (your money)... in favor of “strengthening” the economy.
If the Maker Movement Is So Great, Where’s Our Flying Car?
IRS scandals and the dangers of dissenting opinion in America.