Marc Faber: Economic Times Interview Part 3

ET Now: The Indian central bank has cut rates. Can monetary easing help kick-start the economy?

Marc Faber: Basically what the lower interest rates in India might do is to weaken the rupee, and obviously then if the rupee weakens, we might have some inflationary pressures like in other countries. In India, the rate of inflation is vastly understated. So in real terms, probably economic growth is rather slow.


ET Now: But one of the concerns for India has been the large current account deficit which is due to higher imports of both gold and crude. What is your sense on these two commodities? Can gold correct more? Should investors be using this weakness to buy?

Marc Faber: I do not know. I would not use this weakness to buy. I rather think that India has numerous problems. One is the fiscal deficit. One is the current account deficit and the combination of the two argues in the long run for a weaker currency.


|ET Now: What are you expecting from the FOMC meet? Will it be more like a no-event or they are likely to acknowledge the better data flow and hence hey will start making a base for pulling out the QE3 plug?

Marc Faber: I do not expect any plan to exit anything at the Federal Reserve. I rather think that they might plan to extend QE3 for further time because one of the goals was to essentially reduce the asset purchases when unemployment drops to 6.5%. That may be far away.

Economic TImes Interview Part 2

Continued with Economic Times Interview:


ET Now: So what is the bigger risk to the risk-on rally? Will it be China or credit bubble in Japan or a real estate bubble in Asian markets?

Marc Faber: The risk for me globally is really European banks and financial institutions and a market that is already quite high. We are not at the 2009 lows. Many markets have gone up 100 per cent. Thailand is up almost 4 times from the 2009 lows. So we have very extended markets. Many countries in Asia have an asset bubble in real estate and we have the Chinese economy which, I believe, is growing at present at a much slower rate than what the official statistics would suggest.


ET Now: So what is your view on India? Can it get back to 6-7% growth rates, thanks to reforms the Indian government has taken?

Marc Faber: The Indian economy will grow in the long term more modestly than expected. Now can there be years when it only grows at 3% or where there is no growth at all or can there be years when it grows at 7%? Yes, it is possible, but for long term, I think that the Indian economy, by the way also China, will slow down.