If you follow Marc Faber in the news you quickly notice that he has the habit of repeating himself. That's what someone with a good point tends to do. One of the overriding themes in his commentary is that governments (namely the American one) are printing like there's no tomorrow (maybe there isn't).
It's not a complex concept to understand. Even the caveman economist can explain it : Print lots of green paper + economy not grow = inflation.
Marc Faber is back in the guest chair at Bloomberg Asia and talking about the economic state of affairs. I always find it interesting how much his comments on the future diverge from the slick BS of CNBC. He has made some pretty harsh comments on the US dollar in the past - such as saying there will be Zimbabwe-like inflation.
Here he speaks about the dollar and the future of the US. He points out that the US can be expected to continue to devalue the dollar in order to pay for all their imperial excursions in the mid-east. It is important to note that just about every empire has devalued their currency as they decline into insignificance. Simply chanting "USA, USA" at the sight of the star spangled banner, like the proverbial Pavlovian dog, could cause one to be fleeced - whether they are in dollars or the DOW.
Dr. Faber also talks about how the dollar shouldn't be seen as a store of value, but perhaps something like property or other tangible things could be used to save - a point that has been made on this humble blog and many other websites.
He also mentioned the concept of a currency 'based on discipline'. If only there were such a thing! Many have argued for a currency that is printed and issued by the government, rather than one issued by a cartel of private banks (The Fed). That would certainly be better than the current system, but I don't really trust government to exercise much discipline in any field, especially not in the greedy realm of money. I think things like precious metals and land should always be seen as stores of value above money.
I and many other gold/silver folks believe there is a long term, concerted move away from the dollar - by the Chinese, the Russians and even regular investors that don't think it will be a good vehicle for saving. These two articles are just a couple of examples of the bearish outlook for the dollar.
The first is just a general prognostication by some investment folks at PIMCO and the second is about how Russia is looking to get away from exposure to the dollar, just like the Chinese. In this case, they are shorting the dollar in a kind of indirect way that would not be quite as obvious as if they were to alter their central bank reserves.
I hope more people begin to see the US dollar as only a medium of exchange for goods and services but not a way of saving. People ought to save with things that will retain their value, like precious metals (in sensible quantities) and land, which is real wealth.
There has been a lot of talk about a new currency for the world, something to act as an alternative to the dollar. The article I am linking to today is just one out of countless articles now swirling around the net where some official person or bureaucracy calls for a new currency.
The one thing I can say on all this is that we should not get ahead of ourselves. By that I mean : Yes the US dollar is and will continue to decline into insignificance, but that is a long process. The world has been using the greenback for oil and other things for quite some time now and you don't just switch over to something else in one fell swoop. Moreover, China and others have significant dollar holdings and though they would like to get out of them, that too cannot happen instantaneously.
I'm sure many gold bugs are pleased as punch to see gold now well over 1000$ but this process we have been predicting will happen over years.
This is a good article that condenses a lot of the arguments for gold and finishes with a few links to a guy who does not like the metal. In it you will find comments from such luminaries as Alan Greenspan, Marc Faber, Adrian Ash and others. I found the comments on gold in a deflationary environment interesting. I never really thought of deflation as being good for gold, I just knew I did not want to be at the mercy of a currency that I fundamentally do not believe in as a store of wealth. I wanted the stability of gold, and regardless of whatever deflation there was, I was sure that in the long run we would have inflation due to all the paper and digital dollars being created. But some of the pundits in this article say it doesn't matter if there is deflation or inflation, gold is a 'go-to' asset that will be much sought after.
Some comments of note include Dr. Faber's belief that stocks will rise by about 7% per annum but any gains will be eaten by inflation. Also he repeated a criticism he has made of Bernanke and Greenspan numerous times in the past; that they have succeeded in creating a bubble in everything (that doesn't sound good).
He likes Asian equities and of course, commodities. He advised people to buy physical gold and to store it out of the country.
On the subject of inflation, it seems to me that the 'lame-stream' media is becoming more accepting of the view that the dollar is going to lose significant value over the coming years. I suppose there will be a bubble in gold at some point, when everyone will be running to it, but I'm sure that day has yet to come.
Some sensible advice on how to hedge against inflation. Don't listen to the USA rah rah rah morons on CNBC who think the dollar is king just because they get teary-eyed when the Star Spangled Banner is playing. There are a lot of things about America I love and respect but it aint' the country it used to be and it is not a rising star right now - nor is its dollar.
Here is an article with a great quote from Ludwig von Mises on inflation and the different stages it goes through. We are destined to live in interesting times ...
This article confirms what many have been saying about China edging towards the exit door at the dollar party.
Two important points I want to emphasize :
1) China wants to decrease their exposure to the dollar (bearish for the dollar)
2) China is looking at gold as one of the many places they could park all that money (bullish for gold)
Here's an interesting excerpt. (The man quoted is Cheng Siwei, a former vice-chairman of the Standing Committee in China) :
"“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,” he added.
The comments suggest that China has become the driving force in the gold market and can be counted on to buy whenever there is a price dip, putting a floor under any correction."
He makes the important point near the end that China is planning on dumping the dollar. That is sure to be a gradual process so perhaps 'dumping' is not quite the right verb to user but he is absolutely right.
It's good to see guys like this doing an end run around the talking heads of CNBC and speaking straight to the people. Viva la internet!
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