| Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report’” talks about colossal amounts of debt and the possible outcome: Inflation vs. Deflation.
In regards to the colossal amounts of debt there are two major schools of thought: Inflationists and Deflationists. According to the first, all the money printing will lead to high levels of inflation, devaluing the currency and with it the debt will be inflated away. Deflationists would hold against, that, even if central banks wanted to, they ultimately cannot stop deflation. Where do you stand in that debate? Well you know it is like in a bubble. The bears are right and the bulls are right but at different times. Every bubble will go up and then eventually the bubble will burst and then you know prices collapse. So during the bubble stage the bullish people are right and during the collapse the bears are right, but at different times. This is the same with deflation and inflation; I think both will be right, but at different times. I believe that most people have a misconception of what inflation is. In other words most people, they think of inflation as an increase in price of goods they go and buy in the shop over there and over there, at the butcher and at the baker and in the grocery store and so forth when in fact this is just one of the symptoms of inflation. You can have inflation that manifests itself in sharply rising wages, this hasn’t taken place but if you look globally, say in China, wages have gone up substantially or you take Thailand, wages have gone up substantially. Or it can manifest itself in rising commodity prices. Well I mean commodity prices have been weak lately but the oil price is still close to 50 dollars a barrel and it was at 12 dollars a barrel in 1999 and gold is still around 1000 dollars and it was at 300 dollars and below in the 1990s, the low was at 255 dollars. You understand? A lot of things have been weak recently but they are still up substantially compared to the past. Or you take bond prices, in other words bond prices go up when interest rates go down. Bond prices in the last hundred years have never been this high; in other words interest rates have never been this low on sovereign debts. Or you take equity prices, ok some markets are down, mostly the emerging markets whether it is Russia or Brazil or the Asian markets, they are down from the peak but they are still much higher than say ten or fifteen years ago. Or you take property prices, it depends which properties but most property prices, for example if you look around here in Switzerland, the prices are much much higher than they were fifteen, twenty years ago…. Interview conducted by Johannes Maierhofer and Peter Matay Full Interview – http://www.marcopolis.net/the-big-picture-with-marc-faber.htm http://www.marcopolis.net/ http://www.marcopolis.net/marc-faber-colossal-amounts-of-debt-and-the-possible-outcome-inflation-vs-deflation.htm |
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