Marc Faber: 7 Key Insights About Today’s Debt Bubble

Based on a diversity of recent interviews with Marc Faber we could paint a picture of how the Swiss investor thinks about the ongoing debt crisis and especially its implosion. This article provides a summary on seven critical points.

The dangers of a market crash:

“Unlike the ’50s and ’70s when there was relatively less overall debt, a financial market crash did not inflict great damage on the economy. Debt levels are significantly higher these days, and so a market crash can inflict serious damage on economies. We’ve gone through a period of huge asset inflation, in stocks, bonds, commodities, and real estate, and we essentially now have in the world, a huge asset bubble. So everything is grossly inflated.”

The next bubble:

“The problem is I believe you and I are the bubble … the financial system is just too big, that is the problem. Maybe we can’t see where the next bubble is because we are the bubble – that is something to consider.”

Economic growth vs credit growth:

“One day this whole credit bubble will be deflated very badly – you are going to experience a complete implosion of all asset prices and the credit system – but as to when -I don’t know.”

The writing on the wall – declining marginal economic value of debt:

“A dollar of additional credit in the system created significant economic growth, but these days an additional dollar has very little impact. That is a sign that we have reached the end of monetary policy.

The end game:

“When the US government has to issue treasuries to pay the interest on its maturing debt. That will be the end game – then you are dealing with a collapse in the currency.”

The share of precious metals in Faber’s total portfolio:

“I recommend an asset allocation of about 25% in equities; 25% in fixed income, securities and cash; 25% in real estate; and 25% in precious metals—gold, silver. I think I have around 25% in gold whereby I don’t value my gold. I have it and it’s my insurance policy. It is important that one day when the so-called shit hits the fan—and I think the Fed is well on its way to creating that situation—you have access to your gold, that it is not taken away.”

The massive gold accumulation by China, India and Russia:

“In the Far East, we have a tradition of owning physical gold, but what is new is the Chinese government encouraging citizens to own gold. I believe that in the face of political instability and a lack of faith in the U.S. dollar, Asians will continue to accumulate physical gold and silver.”

 

Sources: 
Marc Faber spells out end game on CLSA Forum
Marc Faber Own 25% Of His Assets In Physical Gold

 

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