INTERVIEW OF MARC FABER AND JIMI ROGERS
By Jim Puplava of Financial Sense
Sept 8, 2003
(I will not distinguish much between Faber and Rogers, since consistent views)
Evidence is that price inflation is on the rise, despite reports, all anecdotes point up
Cost of services are up, education, entertainment, postage, insurance
Hedonics smooth out the economic statistics, done by Bureau Labor Statistics
We have deflation and inflation at same time, economy is a composition of sectors
Some price inflation like with hard assets, esp residential real estate
Clear price deflation in mfg goods, consumer electronics, big China effect
Some price reduction is not deflation, but natural product cycle development
After new innovation, and initial product introduction, economy of scale kicks in
Monetization and monetary expansion never ceased or slowed in recent years
Asset price growth is symptom of rising money supply
(*) Central Banks cannot control where new money is directed
We have had absolutely mad credit extension recently
Debt growth is now 8x faster than GDP growth benefit !!!
Investment and speculative flows have resulted in exported inflation since 1980
Faber: Major downtrend for USDollar in next two years
Commodities like gold cannot increase in supply as fast as the dollar
Perception that USEconomy is growing now, but primarily driven by financial assets
Rogers: multiyear USDollar bear should be expected
Fed resolves by easing rates, with big credit expansion since 1980
Faber: trade gap of 5% of GDP likely not to decrease, but probably rise
Fed will inject more new liquidity
Financial markets will have to react to higher price inflation later on
Japan bond yields have moved from 0.5% to 1.5%, US yields from 3.2% to 4.5%
We are in the midst of a bond revolt right now on worldwide scale
(*) Faber: expect higher interest rates in 2004
US has lost its ability and willingness to save, moral and intellectual chasm
The wise among the population see the potential for big speculative gains
Faber: never never inflate the entire system, leads to disaster, destroys society
(*) Faber: this is a suicidal monetary policy, monetization has never worked in history
Federal deficits will produce higher interest rates in delayed fashion
War effort, police adventure, exercise in domination bring heavy costs
(*) Massive upside price inflation is in the pipeline, masked by doctored statistics
US is a debtor nation, with debts exceeding the rest of the world combined
A 1929 style of deflation is out of the question right now
However, deflation systemically is possible, but in terms of gold money terms
US has serious foreign dependence on capital, mfg, energy (a dangerous situation)
(*) US parallels to 1980 decade in South America, which saw hyperinflation
Coming is a standard of living deterioration, wealth loss inside the USA
Strong price inflation should lead eventually to capital and currency exchange controls
US$, Euro, Yen, Yuan, Gold are the main currencies (commercial or reserves)
(*) But only gold cannot be increased in supply indefinitely |
