Marc Faber: Continuing Financial Crisis Must Be Endured

Seeking Alpha ^ | 03/26/12 | Ed Bace

[TigerLikesRooster]

Marc Faber: Continuing Financial Crisis Must Be Endured

March 26, 2012 | 21 commentsby: CFA Institute | includes: DIA, IVV, QQQ, SPY, VTI

By Ed Bace, CFA

Marc Faber, editor of “The Gloom, Boom and Doom Report,” kicked off the CFA Institute Middle East Investment Conference by quoting Ernest Hemingway who said, “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring permanent ruin.” On this downcast note, Faber attacked short-term Keynesian spending and reviewed the implications for investors of the accelerating shift of world economic and political power from the developed countries to the developing world.

Central bank action to cut interest rates, whilst intended to boost consumption and hence economic growth, has had unintended and severely negative consequences. Faber argued that “dollar bills dumped by helicopters” all over the US have not been channeled into housing, as hoped, but into other more speculative asset classes, particularly commodities such as precious metals and oil. He added that expansionist monetary policies have contributed to higher financial and economic volatility, in addition to inflation. Since greater money supply does not flow evenly across sectors, this gives rise to asset bubbles, which are not easy to identify.

[TigerLikesRooster]

P!

[Capt. Tom]

“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring permanent ruin.”

I hope he is refering to a country that starts the war and loses it.
I was around before, during, and after WWll, and I would say the United States was propelled to greatness by winning WWll. -tom

[RegulatorCountry]

I've been writing much the same on FR since 2008.

We're enslaving future generations to the tune of tens of trillions of dollars in “stimulus,” and all we're getting for it is expensive food and fuel due to commodity bubbles, while everything else goes Great Depression on us anyway.

What if they threw an inflationary spiral but no one could afford the price of admission?

It's criminal.

[Travis McGee]

[GOPJ]

...quoting Ernest Hemingway who said, “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring permanent ruin.”

Most difficult paradigm to extinguish is 'short term gain - long term disaster'. Alcoholism, drug dependency, bullying, compulsive gambling etc... all fall into this category. Feels good in the short run - destroys in the long run. Farber's right - the piper will be paid.

[GOPJ]

In his view the welfare state has evolved from the many helping the few to the few helping the many and that the inevitable crash, or “rebooting the computer,” will simply have to be endured. Whether this crisis occurs soon, as further credit expansion is voluntarily abandoned, or occurs later, as the currency system meets final and total catastrophe, Faber cannot predict.

The Sanford mess might be an early indicator...

[DuncanWaring]

“The Sanford mess” is not the early indicator.

The early indicators were last summer during the three-day holiday weekends in Chicago and Philadelphia, and the evening of Opening Day at the Wisconsin State Fair.

[GOPJ]

You’re right. Thanks.

[JDoutrider]

mark

[ctdonath2]

Checks and balances?
Who cares about balances when the checks keep cashing?

[Freedom_Is_Not_Free]

He was referring to a “mismanaged nation”. The USA was anything but mismanaged prior to and through WWII.

[Travis McGee]

It always ends in a variation on this theme. There is no way the debt can be repaid, so the currency must be crashed, and a new currency regime installed. The trick for the PTB is to massage the transition, so that they again wind up on top of the new currency regime. Land and gold are two traditional bridges between the old and the new.

[GOPJ]

You’re right, Travis - that’s how it works.

[ctdonath2]

“There is no way the debt can be repaid, so the currency must be crashed, and a new currency regime installed.”

A point which must be reiterated - for understanding of the intent of others, if not agreement therewith.

[Travis McGee]

Yep. That is inevitable. The writing is on the wall. I think the big attempt will be to go with some kind of global central bank, as a first step to a globla currency. I don’t think it will work, but it will be part of the runup to world war.