Thursday, November 10, 2011

Marc Faber: They Can Postpone the Endgame for Five or Ten Years

Economist, global trend analyst and well know Doctor of Doom, Marc Faber, suggests that with so many monetary, fiscal and political variables at play, the end game of this crisis can be delayed for months or years to come. Faber, who has warned since before the 2008 crisis that entire nations would fail due to high debt levels, that hyperinflation is an inevitable outcome of the Fed’s accounting games, and that war will be the ultimate result, shares his views on CNBC:

[Video Interview Below]

I don’t know what other people think, but what I think will happen eventually – and there are so many contradictory statements coming out that nobody really knows – but eventually the same will happen as in the United States. The ECB (European Central Bank) will print money one way or the other. And, the debts that essentially should be written down to realistic value will continue to be carried on the books of banks at unrealistic values. So, the end crisis will be postponed until the sovereigns go bankrupt.

Before they go bankrupt they’ll print money. They’ll print endless money. As long as we have Ben Bernanke and Janet Yellin at the Fed they’ll print money and so they can postpone the end game endlessly…Endlessly not, but say for another five to ten years.

Each money printing exercise brings about unintended consequences. These unintended consequences are partly higher inflation rates than had no money been printed.

When the banking system came unhinged in 2008 many assumed the system would simply collapse into a depression right then and there, reset, and then eventually restart the economic growth cycle. Instead, the US government and central bank decided to intervene. While this “saved” the system at the time, recapitalized banks, boosted stock markets, and pumped what some believe to be in excess of $20 Trillion into the global economy, it really did nothing but further prolong the inevitable. Furthermore, it made the eventual and unavoidable collapse of debt and leverage that much worse.

Now, with Europe very much on the brink, the ECB is really left with no other choice than to print trillions of Euros. The consequences of the money printing in the U.S. and Europe, according to Faber (and many others), will not be pretty:

I think I am very constructive and a I’m a great optimist in life, otherwise I would commit suicide in view of the kind of governments we have nowadays.

Because, for sure, they will take wealth away from well-to-do people one way or the other. And from the middle class they will take it away through inflating the economy and lowering the standards of living.

…So I think that we are in a very difficult situation…

If you print money the U.S. it doesn’t mean that it creates bubbles in the U.S. It can create bubbles in your neighboring regions – say Latin America, or Asia, or it can create bubbles in precious metals or in commodities, or in home prices somewhere else in the world. Or, say, for instance, in China. And if the Chinese bubble bursts one day, which inevitably will happen, maybe not tomorrow, but maybe in three months or maybe in three years. But when it happens it will have devastating consequences for the global economy.

As Dr. Faber points out, the system is complex and the butterfly effect, while clearly evident, is simply impossible to predict with any meaningful accuracy. For all we know the entire system can collapse in the next 30 days, or, the full fallout may not be witnessed for several years.

All we can do is draw on historical example and the facts as they become available to us.

What we know is that entire nations, including the United States, have bit off more debt than they can chew. There exists no way to pay this debt back. The only option is immediate default or monetary machinations. No politician is willing to pull the trigger on default, and the banks (who are controlling the strings of the political puppets) will not let it happen if they have any sayso in the matter. Thus, we are left with more printing.

As they print more and force prices to rise, they will also cut services that have become essential to millions. They’ll also move to increase taxes and fees across all Western nations. Total collapse of the system may be avoided for now, but the lives of tens of millions of people will be made more difficult with each new dollar they print and every new policy measure they implement. During the great depression there was a decade of strife before the world went to war. In Zimbabwe, the hyperinflation built up for many years before it went super nova – all the while the people suffered.

The eventual outcome of all this, as Doctor Faber has argued, is the end of the world as we have come to know it. This coming paradigm shift is unavoidable.

So what should you do? According to Faber, All Currencies are Doomed, Except for Gold so become your own central bank and trade your fiat paper for hard assets.

In November of 2009 Faber predicted that the coming meltdown in sovereign debt will eventually lead to the worst possible outcome for the people of the world:

The crisis has not solved anything. On the contrary there is less transparency today than there was before. The government’s balance sheet is expanding, and the abuses that have led to the one cause of the crisis have continued.

I think eventually there will be a big bust and then the whole credit expansion will come to an end.

Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to stimulus.

The average family will be hurt by that, and then in order to distract the attention of the people, the governments will go to war.

People ask me against whom? Well, they will invent an enemy.

Chances are, we can’t stop the war that’s coming, just like we can’t stop the debt collapse. The system is just too big, too complex and out of our control. Thus, according to Faber, it’s time to focus on yourself and your family – with investments that will matter when it all falls apart:

With tongue apparently in cheek, he says buy a farm you can tend to yourself way out in the boondocks. And protect it with high voltage fences, barbed wire, booby traps, military weapons and Dobermans.

Forget time lines here and understand that the sheer size and volatility of the system makes it nearly impossible to identify exactly what, when and how. The only thing we need to know is that we are living in the middle of it all right now, and day-by-day, month-by-month, year-by-year it continues to deteriorate.

We’d be ecstatic If Dr. Faber is correct in his assessment that they could potentially postpone the worst-case endgame for five to ten years. That just means we’ve got much more time than we thought to get out of harm’s way.

Reprinted from SHTF Plan.




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