Wednesday, 12 October 2011

Marc Faber: Americans need to tighten their belts and save more

Marc Faber, the well known author of the GloomBoomDoom Report, and widely regarded as one of the investors who predicted the 2008 crisis, has declared in a recent interview on CNBC: 

"I will tell you what the US needs.  The US needs a Lee Kwan Yew who stands in front of the US  and tells them, listen you lazy bugger, now you have to tighten your belts, you have to save more, work more for lower salaries and only through that will we get out of the current dilemma that essentially prevents the economy from growing."

Now, Marc Faber is on the libertarian side of the most recent economic debate (keynesians versus libertarians), and it is reflected by its comments on the general state of the economy:

If you look at net investments in the US, it's gone down for the last 20 years, and it's now negative. In other words, basically the capital stock of America is not being replenished. It's being replenished somewhere else. And at the same time, the policies of the Keynesians have always encouraged spending. “We're not going to get out of recession by saving. Spend, Spend, Spend.”  That is wrong. The lack of savings is the problem of the United States.

The Keynesians economists argue that in the case of a credit crunch and a subsequent economic crisis, the one thing a government needs to do is more stimulating. They infer that by stimulating the consumption, they can increase the aggregate demand of goods and services, thereby putting the economic mechanism back in motion. This is entirely false, as a crisis of overextended credit cannot be cooled down with more credit stimulus, and at one point all the debt will mature.

As regarding the markets, Marc Faber believes in the thesis of growing commodities prices, especially for gold and silver and is an advocate for investing the Asian equity. More on this in his CNBC interview:

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