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Posted on 08/05/2011 2:49:28 AM PDT by TigerLikesRooster
Marc Faber: China Bubble Crash Poses a Huge Global Risk
Stock-Markets / Financial Markets 2011 Aug 04, 2011 - 01:48 AM
By: Aftab_Singh
Stock-Markets
Best Financial Markets Analysis ArticleMarc Faber was interviewed on CNBC yesterday. He had some interesting thoughts on China, geopolitical trends, gold, equities, bonds and cash. See below for the video and summary.
Summary:
Disappointing growth (or a crash) in China is a huge risk for the global economy.
If Chinese growth really slows down (or if they have a crash), it will impact Australia, Brazil, the Middle East, Canada etc.
This could backfire as commodities producers buy less goods from China. This could trigger a vicious spiral on the downside. There is a good chance that this could happen.
The world central bankers would really not be able to help if this comes to pass. Maybe they could prop up the financial markets by supporting equity prices, but they would not be able to help the real economy.
If you’re ultra-bearish about everything, then you’re probably better off in equities than in bonds and cash. Precious metals would probably be the best. 10 years ago, a huge shift in economic power away from the West and towards Developing Economies began. The EM goods markets are far larger than the Western goods markets.
This shift in economic power from the West to Developing economies is accompanied by a shift in political and military power. The West will not just sit there and do nothing – the Libyan expedition is the ‘first shot’. The Western world will want to control the oil flowing to China from the Middle East. Then it will come to war – and you definitely don’t want to own US government bonds then!
In the worst scenario, you don’t want to be in dollars and government bonds.
People in the west have abandoned personal responsibilty for their actions. Asia is different — people have to keep reserves for the things that would be insured by government in the West.
China is lucky because they don’t have government healthcare. The US should fire half the government including the president.
In Asia, things like abortion are never discussed. They believe it is up to the individual to take responsibility for his life.
Compared to the US government debt and the monetary base, the gold price is probably cheaper today than it was 10 years ago.
Having said this, we had a little bit of euphoria in the gold market recently and a correction is due.
P!
can you see the question marks floating over my head, like they always do in the first milliseconds after I encounter a nuclear non-sequitir?
You beat me to it. Good grief, but what a dumb thing to say! Can we say “China 1-child policy, forced abortions and sterilizations, etc.”?
VIDEO
Marc Faber: Fire 50% of the US Government including Obama
http://www.youtube.com/watch?v=ri8_ux8ZCL0&feature=player_embedded
I think we should be more worried about ONGOING problems like the Euro crisis and the possibility of an Italian default, not hypotheticals.
Thanks. Faber’s one of my favorites...
This shift in economic power from the West to Developing economies is accompanied by a shift in political and military power. The West will not just sit there and do nothing – the Libyan expedition is the ‘first shot’. The Western world will want to control the oil flowing to China from the Middle East. Then it will come to war – and you definitely don’t want to own US government bonds then!
In the worst scenario, you don’t want to be in dollars and government bonds.
Seems the world is awash in debt - not a good thing for holding bonds... but getting into equities feels scary. Faber's probably right ... usually is.
I've heard it cited that less than 10% of investors have diversified a portion of their nest egg into gold, one of the best performing assets over the past 10 years. Financial analysts resist the archaic, unproductive asset, but instead steering risk-averse investors into negative return treasuries or even blue-chip stock.
Gold is not in a bubble, it is merely retaining value against many a severely declining fiat currencies. The Swiss franc has gone up 30% over the past year in terms of the US $ - a bubble?
At Kitco go check out the currency chart of the Swiss Franc vs. US $ (bottom of page), and gold priced in Francs.
Just the US lying, thieving government at work.
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