Monday Thoughts – Fantastic Marc Faber Lecture


(please note that the Faber lecture below has 7 parts – go to Youtube to see the 6 following; and down below, the Faber/Rogers interview has 5 parts – for both, only part 1 is on my website -you have to click through to Youtube to get the rest)

Dr Marc Faber addresses the cause of the current economic crisis and discusses the various government policy responses implemented over the past few years in this excellent series of videos from YouTube of a lecture he recently gave in Slovakia.  He also covers global interaction of balance of trade issues, energy needs, and geopolitical issues resulting from the need for resources.

Why listen to Dr Faber? As opposed to some of the economists/government policymakers that you might see quoted in your local newspaper or TV news show such as Fed Chairman Ben Bernanke, Treasury Secretary Tim Geithner, Harvard economist Paul Krugman (& Greg Mankiw), or even NYU Professor Nouriel Roubini, he has been right for a LONG time with a consistent track record and undogmatic analysis of economics.

Furthermore, having lived in Asia for the last 30 years (he is a Swiss native), Faber has a real global perspective and has seen economic development first-hand for a long period of time. In addition, real asset/investment managers rely on his analysis to protect capital and make money – his advice is used in the real world – many of the others quoted above have been mainly academic or government types for most of their careers (Roubini does have a consulting company).

Also, you can easily find many of the others mentioned above, on record, despite their Nobel Prize or other awards, being unbelievably wrong about their economic analysis. Let me give you a sample of the thinking of some of those mentioned above:

Here is a transcript of a speech by Bernanke where he discusses the idea of the US issuing more debt and having the Fed PRINT MONEY to buy the debt (a policy right out of Robert Mugabe’s playbook) – FRB

Here’s Geithner helping to turn the US debt into an ARM – adjustable rate mortgage – since according to the Treasury in this CNN article, FORTY PERCENT of US debt will need to be refinanced in a year (sound like an ARM?) and it’s Geither’s responsibility to set what kind of borrowing the US does – if rates were to rise, interest payments would become an UNSUSTAINABLE portion of our annual expenditures – CNN

Here is an article from Bloomberg where both Roubini and Krugman voice their support for “money printer extraordinaire”, Ben Bernanke – Bloomberg

Here’s an interesting reflection on Krugman discussing his denial in advocating the housing bubble and super low Fed Funds rates – Mises

Another article from Mises examining the time in 2002 when Krugman specifically ASKED for a housing bubble (good one Paul) – Mises

Here is a financial writer commenting on the times Roubini was wrong – Roubini may do some good analysis but perhaps he speaks so surely when he really should be less certain because his timing can be way off (and cost people money) – Roubini – on

Here is Professor Gregory Mankiw describing how one of grad students at Harvard gave him the idea to make paper money worthless so people would get scared and spend it (for the greater good of the economy of course) but I think he just settled on the idea of monetary policy encouraging inflation ( think about the cost of food, utilities, fuel, taxes, and insurance premiums doubling in 12 years or sooner with 6% inflation annualized  – who’s to say they’ll get the number right) – Mankiw Blog – what they should be advocating is savings and investment which may induce slower growth, but it will be REAL growth that encourages investment in technology and manufacturing and creates long term jobs – not spending growth that creates part time retail jobs or public service jobs that would end and leave the workers just as unemployed as before (unless we get someone like Ted Stevens to run the program to come up with endless “bridges to nowhere” with funding from Helicopter Ben)

As you can see, many of these people, their thinking got us into this mess of bubble creation, overconsumption, bubble bursting, economic pain cycles.  We had the stock market bubble, then the real estate bubble and now we will have the government spending bubble – the previous 2 ended badly but just watch how this last one ends. Here’s a one minute video of Dr Faber explaining how this will be exacerbated by our current Fed Chairman:

What is the solution to all of this mess? Get government out of economic manipulation – encourage savings, investment, and employment by decreasing taxes, making it easier to have employees, and increasing rates so that conservative savings earn interest. We may have to increase income taxes (not taxes on savings and investment) on EVERYONE to get out of this – everyone should pay because everyone was complicit in this mess. Though I am a fan of very low taxes and limited involvement in the economy by government and other “smart” people.

if you want to see how Marc Faber can be eerily correct, here is a video interview series that he did (along with friend Jim Rogers) with Dutch TV I believe in 2005 which I have permanently placed on my front page (wait through the first 2 minutes of various shots of GW Bush,  Dutch talk and other stuff to get to the good stuff):

Chris Grande