Marc Faber Blog

Wednesday, September 10, 2014

Financial markets should pay attention to middle east crisis

Today, we find ourselves with the same anti-free market interventionists who set up the Federal Reserve, the US Treasury and the US government. These same incompetent professors and academics also run foreign policy in America and then go and intervene in the affairs of Libya, Syria, Egypt, Iraq or Afghanistan. And as can be expected, they mess up just about everything. 

We have this Wolfowitz Doctrine that says they don’t want to tolerate any other major power such as the Soviet Union or China. So they want to contain these countries. When these countries become economically more and more important, the tensions, in my view, are only going to increase. 

I think it’s unlikely that the West will take any action. 

First of all, they don’t have the money. 

Second, a survey done by the US military stated that over 71% of their youth are unqualified to join the military for a number of reasons, including educational, behavioral and health conditions. So, if 71% of American youth are not qualified, it means the US doesn’t have the labor force to actually implement its foreign policies. And so they resort to private contracting companies that create more problems than solutions. I’m very negative about the Middle East. I think the whole region will blow up. Eventually Iraq will be divided into three different countries: the Kurds, the Sunni in the North and the Shiites in the South. All I can say is that, in general, financial markets are not paying sufficient attention to this.

Monday, September 8, 2014

Water and Food investments can be big in future in emerging economies

I think there is an opportunity in real estate in some emerging markets because they are depressed and so forth. But in terms of industries, I tend to stay away from the new industries until they've gone through a bubble stage and then the bubble bursts and then they become cheap. At the present time, I want to be rather in liquid investments than in these kind of sectors. I think an underappreciated sector is probably water and food. I think this will be a big issue in the future.

Tuesday, September 2, 2014

Economic power shifting from Western countries to Asia

Everything is connected and interrelated. We had a colonial system until the end of the Second World War, followed by the rise of individual countries. And over the last twenty-five to thirty years what we had as the rise of China with 1.3 billion people. Because of China’s rapid growth and resource dependence (iron ore, copper from Australia, Brazil and Africa, and oil principally from the Middle East), the Chinese have obviously become a very important economic force.
Sky scrapers dot the cities across China and Hong Kong

Take Africa twelve years ago: trade between Africa and the US was twice the size of trade between Africa and China. But today, the situation is reversed. As a result, China has gained large geopolitical influence due to its growing economic relations. This helped shift alliances from the US to the East, which has led to tensions. China has many provinces that are larger than a European country and as an economic block, China is huge! It dwarfs everything else in Asia. But now China is surrounded by military bases in Asia, by American aircraft carriers and by the signed defense treaties between the US and Japan.

Moreover, the Chinese never forgot that Japan had attacked them numerous times over the past 200 years. Additional disputes between China and its surrounding countries, Vietnam, the Philippines, Taiwan, and especially Japan about maritime rights will cause further tension in the region. Despite these tensions, the power shift is still underway. 

You have a superpower like the one Britain was until the First World War and you have a rising power like Germany whose economy in 1910 overtook that of the British. Here you have the superpower that believes in the old order and the new power that believes it should have more influence on global affairs. The
resulting tensions create an environment that is favorable for confrontation. But it doesn’t have to come to war. In my view, China’s long-term objective is to kick out the US from their military bases, particularly after Hillary Clinton and Mr. Obama announced the American Pivot to Asia two years ago; it was a kind of direct attack or confrontational behavior towards China.


Last Update: Sep 5, 2014

Wednesday, August 27, 2014

Financial Crisis will return

There will again be a financial crisis because if you look at the cause of the last financial crisis, it was overly expansionary monetary policies that led to excessive credit growth and the very high leverage in the system was most noted in the US. And now they have bailed out the financial system by pumping even more money in the system. Excessive credit brought the crisis out and now the medicine is even more credit.