excessive private credit growth have been replaced by excessive government credit growth

Marc Faber on CNN 03_09_11
Marc Faber : ...well all commodity prices have run up very substantially in the last say six months copper oil nickel and so forth ....and all are due for a correction , the question is what happens thereafter and quite frankly I do not think that the world can produce sufficient oil in a Goldilocks scenario where by the developed world Europe the US Japan recovers and the emerging world continues to grow in that case the demand will outstrip the production facilities and so prices will go up if everything looks good and if everything collapses in the world and we have turmoil in the middle east and so forth then obviously supplies will be curtailed very substantially , prices will go ballistic on the upside ..."
"well I think I have been concerned for quite sometime that in the western world notably in the US we had excessive credit growth , and the excessive credit growth especially in the years 2000 to 2007 caused the financial crisis , and now excessive private credit growth have been replaced by excessive government credit growth , so ...which is even worse , the private sector is actually quite efficient it is the government that is usually inefficient , so I think that we are postponing the problems and one day the hour of truth will happen then the global economy and in particular the financial system with all the derivatives and leverage and so forth will collapse and then you will have a reboot it's like when your computer crashes you have to reboot it " as to how to play this market Marc Faber answers : "I am actually quite optimistic I drive motorcycles in Thailand "
"well I think if you look at different asset classes , cash which is usually the safest in the world and government bonds these two assets classes in my scenario of eventual complete collapse are very dangerous , so then you have asst classes like equities , they can go down of course and you have real estate can also go down , precious metals can also go down but at least you still have something , so I would suggest to investors : if you are ultra pessimistic about the eventual outcome before it'll happen you have massive money printing then you'll have war and in both instances you do not want to be in cash or government bonds you want to be in equities precious metals and commodities and in real estate in the country side "





Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Oil Outlook

Marc Faber : "If you take a very optimistic view of the world, namely a global economic recovery, demand in the western world will pick up, and demand in the emerging world will continue to rise very strongly, and so from a very optimistic point of view, you should be long oil.

In a very pessimistic scenario, you have to assume the unrest will shift also to Saudi Arabia and other countries in the gulf, and at that stage, maybe production may be curtailed, and in that case, obviously oil would go up ballistically... In both cases you should be long energy and energy related shares.

The fact is the world is burning more oil than it's adding new reserves. So the level of overall proven reserves, or the existing oilfields - that production will go down. Finding and developing new oilfields, is a difficult and costly exercise." - in CNBC

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.