Posted on 09/23/2010 10:55:18 AM PDT by blam
Interview With Marc Faber: It Is Not A Matter Of If With Hyperinflation, But When
Ron Hera, Hera Research, LLC
Sep. 23, 2010, 1:28 PM
The Hera Research Newsletter (HRN) is delighted to present the following powerful interview with noted speaker and best selling author Dr. Marc Faber, whose newsletter, The Gloom Boom & Doom Report, highlights unusual investment opportunities. Dr. Faber is a popular speaker at investment seminars and conferences around the world and is best known for his contrarian investment approach.
Born in Zurich, Switzerland, Dr. Faber went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude.
Between 1970 and 1978, Dr. Faber worked for White Weld & Company Limited in New York, Zurich and Hong Kong and, since 1973, has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd.
Dr. Faber’s best selling book Tomorrow’s Gold – Asia's Age of Discovery has been translated into Japanese, Chinese, Korean, Thai and German. Dr. Faber is a regular contributor to several leading financial publications around the world.
Dr. Faber, who is an investment adviser and fund manager associated with a variety of funds, is a member of the Board of Directors of numerous companies around the world.
Hera Research Newsletter (HRN): Thank you for joining us today. You’ve commented that the Federal Reserve’s policies have been linked to past boom and bust cycles in the US economy. Why do you believe that?
Dr. Marc Faber: Booms and busts happen also under the gold standard like we had in the 19th century various railroad and canal booms...
[snip]
(Excerpt) Read more at businessinsider.com ...
Thoughts?
Not a good picture.
And of course mortgage rates would be higher too.
Those who are underwater could do relatively well, just as most current debt-holders would. But that’d be tempered if interest rates were to spike up, as in the old stagflation, as well.
The money you would get, wouldn’t buy half the house. Maybe not 1/100th of a house of equal size and value.
But the good part is your note would be paid off.
Neither you nor anyone else would get a loan though.
Most peoples life savings, say in the US, 90 million would be wiped out. We’d have starvation. Triple the unemployment.
Maybe a dictatorship to establish order.
( It can't happen here. Honest. )
Funny thing about hyperinflation is that those that owe lots of money are winners and those that have lots of money are losers.
Hyperinflation is a currency event, distinct from “normal” garden variety inflation.
One thing governments are good at is changing the rules in the middle of the game. Like as not, existing debts would be rolled over into a new currency or something along those lines. In the case of housing or real property, the problem is the absence of the rule of law is part and parcel of a hyperinflation. Already seeing that in spades. To put it mildly, possession is nine points of the law, a good part of our time would be keeping thugs away from our homes. Now it’s easy to see why those old european towns had high walls, drawbridges, boiling oil gargoyles, etc.
Hyperinflation - in the sense of a sudden onetime devaluation of the dollar - NOT in the sense of a Zimbabwe/Weimar Republic-style hyperinflation - is going to happen within the next two years.
When it happens, it will happen very abruptly, and it will leave the dollar at about 1/4 of its current buying power.
Anybody holding cash at that time will be wiped out.
Anybody holding bonds (municipal or federal) will be wiped out.
Anybody holding non-commodity, non-world beater stocks will be wiped out.
Those who own commodities and commodity stocks (with the possible exception of oil), hard assets and precious metals - especially Gold - will retain their current standard of living. Also people who own shares of Exxon, JNJ or WAL will be fine.
This dollar collapse will happen, and yet I can confidently say that America will survive it.
Not only because America has the assets to pay its stupendous debts (it can liquidate Federal land) but because the American people - when unfettered by Government - are the best wealth producers on Earth. After 2012 the dollar will appreciate sharply once again.
That’s a scary story.... fiction, right?
/sarc
Journalists and others who write commentary on the issue tend to cling to investors’ artificial concepts while neglecting the main cause in our case: trade imbalance. Sustainable revenues come from manufacturing. That’s the elephant in the room. Some affluent Americans have hated their own American neighbors for over three decades and have used hundreds of millions of foreign laborers (along with false environmentalism and romanticism/feminism as tools of competition) to cheat and defeat them.
We’ll see small government and healthier old fashioned policies after the default. Hyperinflation won’t stop the de facto default, regardless of what our business and political leaders will call it.
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