Faber - The Most Dangerous Trend Facing The World Today

Marc Faber told King World News that he expected further monetary easing and warned that he believes that central bankers are in the world to print money. He also believes that central bankers are "intellectually, completely dishonest or incompetent, and that's all they know."

Eric King
September 5, 2012
King World News

On the heels of news out of Europe that the ECB will do unlimited bond buying, today Marc Faber told King World News, “It was expected that they would start with a further monetary easing at some point.” Faber warned, “I believe central bankers are in this world to print money. They are, intellectually, completely dishonest or incompetent, and that’s all they know.”

Faber, who is author of the Gloom Boom and Doom Report, also stated, “This is a very dangerous trend, and I will always, always fight governments on every level I can because the larger the government is, the larger the abuse is in a system.” He also added: “I have roughly 25% of my assets in gold. I buy every month, and I will never, ever sell it as long as people such as Mitt Romney, Paul Ryan, Obama, Biden, Bernanke, and Geithner are in government. I will never sell it. Never.”

But first, here is what Faber had to say upon learning about the news out of Europe: “It was expected that they would start with a further monetary easing at some point. And there is still some opposition from the Germans. We’ll have to see what the Germans decide in the high court in the next few days. But basically, globally, central bankers are there to print money, and nothing else. That’s all they know.”

Marc Faber continues:

“They will continue to do it (print money), and this will lead to a misallocation of capital as we had in the past, and to further bubbles here and there. They can sterilize it (bond buying) to some point, but I think, in general, what usually happens is these measures are not fully sterilized.

... I believe central bankers are in this world to print money. They are, intellectually, completely dishonest or incompetent, and that’s all they know. They never worked a day in their lives. They are all kind of grown in the academia....

They never balanced their businesses between expenses and revenues, and achieved a net profit. They are all completely remote from reality. And they twist it around, along with the Neo-Keynesians like Mr. Krugman, the true theory of John Maynard Keynes.

Keynes was a brilliant economist, I have nothing at all against him. But his theories have been grossly abused, as were the theories of Milton Friedman. Just two days ago, I was listening, twice, to the speech of Milton Friedman given in 1977. And I have to say he is a very brilliant economist, and he was completely against money printing.

He just advocated or advanced the theory that we wouldn’t have had a depression had the Fed intervened more aggressively with money printing after 1930. But on other subjects, he was completely against government interventions, and against money printing.

And he repeatedly mentioned how the government had messed up by intervening into the economy. So all of these have been badly abused by the interventionists, who basically want to have full control, both about the economy, in terms of being central planners, and about your freedom.

This is a very dangerous trend, and I will always, always fight governments on every level I can because the larger the government is, the larger the abuse is in a system ... But every intervention of the government is a complete disaster. A complete disaster.”

When asked about the consolidation in gold and silver, and where gold is headed, Faber responded, “Well, it’s a very good question because basically we had a huge increase in prices of gold and silver. In the case of silver, (a rise) until April 2011, and then a correction got under way. And in the case of gold, (a rise) until September 2011, when gold reached $1,921. After that, gold fell from $1,921, to $1,522 in December 29, 2011. In other words, eight months ago.

Since then gold has traded essentially between $1,550 and $1,650, and now it’s broken out on the upside. And I think it’s made a low, (at) $1,522. But is this the breakout that is the definite breakout, and leads to a new leg in the bull market or not?

That, in my view, is premature to argue for because what I’d like to see, we had this breakout from roughly $1,600 to now close to $1,700, and I think I’d like to see a correction, and I would like to see the correction hold around $1,650. Stabilize around that level and then start to go up.

I’m talking as a convinced holder of gold. I have roughly 25% of my assets in gold. I buy every month, and I will never, ever sell it as long as people such as Mitt Romney, Paul Ryan, Obama, Biden, Bernanke, and Geithner are in government. I will never sell it. Never.”

Faber also added: “I’m sorry I can’t give a precise advice to your listeners, but nobody knows precisely. Markets are very difficult to predict anyway. But when there is massive manipulation and intervention, we don’t know what the results will be. This is a new territory in economic and financial history.

But we know that when John Law printed money, after the Mississippi bubble burst, what the outcome was, and the outcome wasn’t very pleasant. There was a rush into real assets, and a collapse in the currency because people transferred their money outside of France.

And I think, eventually, we’ll have similar consequences in the US. The problem is, as I just explained, that when you print money not all prices go up at the same time. So you have, say, an increase in the price of cotton in one year, then you have an increase in the price of grains in another year.

You have an increase in government bonds. Then you have an increase again in housing, and so forth and so on. This is a very difficult field to navigate for most people, including myself. So you have to ask yourself, ‘How do I protect myself the best?’

My worry about gold, and I hold a lot of gold, is the governments will one day take it away. Because you look at the clowns that are at the Democratic convention, and at the Republican convention, I mean these people don’t own a single ounce of gold.

Mr. Bernanke doesn’t own a single ounce of gold, and Mr. Paul Ryan doesn’t own a single ounce of gold. So what will they do one day? They take it away from a minority that owns it. That is the threat that gold owners should be aware of.

If the price really starts to go ballistic, they’ll take it away. So the best as a gold owner that you can hope for is that it goes up, but not too much. Just regularly 5% to 10% per annum, but no more. If it really goes up ballistically one day, I tell you then that the biggest threat will be that the governments will take it away.

And you can’t hide because the US government will knock on the door of the stupid Europeans, the bureaucrats in Brussels, that completely messed up the eurozone, and these bureaucrats in Brussels, they also don’t own any gold. So they’ll be happy to take it away from the minority that owns it.

Then they’ll knock on the door of the Swiss. The Swiss, they have no backbone. They open the books to any politician in the US and say, ‘Please take it.’ And so they’ll take the gold away as well. Then the Americans will come to Asia. That’s where I think the Asians will not open the books. But who knows?”

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