Monday, November 21, 2011

Marc Faber on Gold, Stocks & QE3 - Beacon Equity Research

As the global financial crisis accelerates in the fourth quarter following revised economic data revealing a high probability of another recession in Europe and the United States (see BER article of Nov. 7) on the horizon, the ever-entertaining publisher of the Gloom Boom Doom
Report Marc Faber stated Wednesday that he’s convinced that governments across the globe will print money to prevent a collapse of the financial system.
Japan, the UK and EU continue to relentlessly debase their respective currencies in a fight to retain a piece of shrinking global demand, simultaneously reducing crushing debt obligations in real terms priced in their respective currencies—a kill-two-birds-with-one-stone monetary policy salvos fiercely unleashed anew in the recent wake of horrendous drops in global export data for October.

In the case of Europe, imminent debt defaults merely add to the urgency for more money printing by the ECB—whose new U.S.-centric central banker from Italy, Mario Draghi, has taken the helm as the next step toward flushing out the ultimate intentions of Germany regarding the euro.

China apologetically lurches back onto the dollar peg, and it’s now the turn of the U.S. to fight back with its own strategic weapon—the dollar—in the race to devaluations.

“A third wave of quantitative easing by the U.S. Federal Reserve is just a matter of time,” Faber said in a speech in Taipei, according to Taiwan’s Taipei Times.

Faber also points out that, while the world’s industrialized countries wage a full-blown global currency war, the victims of said war won’t include the rich; it will be the masses who take on the traditional role of cannon fodder for the bankers and politicians.

“Some people will benefit from money printing that deflates the purchasing power of currency . . . but the middle and lower—income classes are being hurt,” said Faber, who has repeated on many occasions throughout the global financial crisis his disdain for central bankers and the financial pain they inflict on innocent people.

Faber recommends eschewing bonds in favor of stocks, Asia real estate and physical gold—especially gold, an asset he colorfully referred to in an interview with Newsmax in September, “I own my gold and I will never sell it, especially when I see clowns like Ben Bernanke, Larry Summers, Tim Geithner.”

On the growing debate regarding China’s economy, according to Faber, it’s in a bubble; but the Chinese bubble can last longer than many expect; it could pop in three months or three years, he said.

It should be noted that the notion of a potential Japanese-style collapse in China has gathered steam lately—and was first suggested by famed hedge fund manager Hugh Hendry of Eclectica Asset Management, who said at an investment forum in Russia last year regarding China’s successive string of high GDP rates which appeared to him to be driven by too much capital spending, “Confucius say: thou shall not invest in overcapacity.”

Faber also touched upon the escalating geopolitical tensions between the West and the Middle East/Central Asia region.  To contain China’s rise as a bona fide superpower, the West must secure oil supplies for themselves at the expense of China, he said.

But no matter how the struggle for oil supplies between the West and China plays out, or whether China’s economy heads south, or not, Faber wittily said, if need be, “Chinese invented paper. They know how to print money.”

According to Faber, at some point, the global reflation trade is all but certain.