Marc Faber: Buy a $100 US Bond to Teach How Inflation Causes Its Value to Vanish

Marc Faber was interviewed by the Daily Bell regarding the dollar and how good the emerging markets look today. He set up Marc Faber Limited, an investment advisor company focusing on value investment back in 1990 in Hong Kong but moved to Thailand, one of the emerging markets in Asia, in 2000. He has had the same clients for 20 years and has not taken any new client for the past 12 years. The clients he has had so far has known him to have different investment strategies than most portfolio managers or fund managers.

His recently famous tag-line is, Buy a $100 US bond and frame it to teach your children about inflation by watching the US bond value diminish to almost nothing over the next 20 years. To Daily Bell, Faber explains why he is so negative about US Treasuries, We have to distinguish the short term and the long term. I think about two months ago, I turned quite positive for US Treasuries. But obviously long term, at less than 3% yield on a ten year US Treasury, I dont see any value. I think that interest rates in time will be much higher because the fiscal deficit will stay very elevated or even increase and that will impair the ability of the government to pay the interest. If the ability to pay the interest is impaired, theres only one way out and that is for them to print money, and so eventually you will get higher interest rates.

Faber believes that hyperinflation is still going to come because in a recent speech of Bernanke we can tell that he prefers to devalue the US dollar through inflation rather than have domestic style deflation. Considering the US debt level, unfunded liabilities of Medicare, Medicaid and Social Security, the US economy is beyond repair. This will only necessitate printing more money. In addition, Faber said, Also, in my view, there is no real political will to address the issues, because who ever would cut entitlements, will not be re-elected. So we have a tyranny of the masses.

However gloomy it looks for the US dollar, though, Marc Faber thinks that the US dollar will still continue to be the worlds reserve currency for a while. But at the same time the greenback will have tougher competition and there will be other currencies that people will trust more than the US dollar.

When asked what could replace the US dollar as the worlds reserve currency, Marc Faber answered, That I dont know, but I think in Asia we will have currencies that will be important. I dont think we can have united currencies the way we have the Euro because there are numerous political disagreements from the expansion of the influence of China. Obviously, the Chinese currency will be an important currency in Asia.

Faber now serves as advisor to a number of investment funds in emerging markets including in Sri Lanka and Cambodia. Faber said that he really believes in the emerging markets and commented, I think the world is in a gigantic transition. The growth will be in new economies, countries like India and China. This trend I think, will be with us for a very long time. It will be a contributing factor to geopolitical tensions because obviously the West will not be very happy to see its super power status diminish relative to the rest of the world.

Read the whole interview in detail here at the Daily Bell.

Similar Posts:

• How Central Banks Control Zimbabwean Style Hyperinflation from Happening Yet
• How FAST Hyperinflation Can Change Your World
• $5000 Gold, $1000 Silver
• Collect the gold coins now
• The Student Loan for All Students in This World

Tags: Marc Faber, Value   Posted in Debt Consolidation