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Tuesday, July 6, 2010

Marc Faber: U.S. debt crisis in next 5 to 10 years

I just read an article on Digital Journal on the topic of United States Debt. Actually it is an article stating forecast from world famous economic forecaster and “Mr. Doom” himself, Marc Faber.

I am trying to figure out the next course of stock markets,like everyone else in the world is trying to do, just to protect my investments from "crashes" and may be; to be prepared for next big opportunity.

I am reproducing this article as it is, for reference purpose only. I strongly believe, the financial crisis is not over. It is going to be a multi-year affair with some ups and downs periodically. Just as in 2008-2009 it was American financial crisis, Dubai financial crisis in 2009 and recent 2010 European debt crisis, which I believe is just a beginning in Europe. The amount of debt on many of the countries is just bulging every day. I found an interesting US Debt Clock which tries to display US debt and associated figures real time. Check this out. As I am writing this article, the figure is astonishing 13.15 Trillion US Dollars. The way to get out of this debt is literally to "print money". But this would lead to a crash in value of that currency which again would lead to a financial crisis.

Here is the article from Digital Journal.

The United States debt is more than $12 trillion and financial guru Marc Faber believes the country will see the consequences of that within the next five to ten years through defaulting on their debt, most likely by printing large quantities of money.

On Wednesday, economic forecaster and “Mr. Doom” himself, Marc Faber, spoke to "Tech Ticker" about the state of the current economic downturn within the United States and, in original fashion, stated that he doesn’t see much hope for the US economy because of its major debt crisis it will face, according to Yahoo! Finance. Faber, publisher of Gloom Boom Doom, said the US won’t see a debt crisis next year or the year after but within the next five to ten years.

Faber explained that every financial crisis there’s a sovereign debt problem because countries borrowed large amounts of money during the boom from other nations and then when there is a downturn, such as the current one, they have a hard time to back their lenders.

Most countries that will blow up will be the “PIIGS,” which are Portugal, Ireland, Italy, Greece and Spain and he expects that at least one of them will default in the next couple of years. If that does truly happen then it will be the death of the Euro.

According to the Business Insider, when it comes to the US, Faber believes the two main problems when it comes to destroying the US Dollar are the ballooning debt and the future interest costs, which amounts to 12 per cent of the government’s tax revenue but he expects it to largely increase to 35 per cent.

The only solutions the government has, according to Faber, will be to cut spending, which he finds unlikely to happen, or print money at astronomical levels.

Digital Journal reported on Thursday that Jim Rogers, Chairman of Rogers Holdings, strongly criticized Jim Chanos’ prediction that the Chinese economy will collapse. Rogers said a guy like Chanos “couldn’t spell China 10 years ago and now they’re experts.”

GuruFocus reports that Faber does believe the Chinese economy will collapse because of its excessive credit but it won’t be for quite some time. “It is very difficult to pinpoint a day when China will implode; I don’t think it will happen right away.”

1 comment:

  1. So.. what do you conclude bro...? r we on the brink of another crisis?? or Is Indian economy here to stay?? can we be bullish on Indian markets in the next 5-10 yrs?? or should we look at other-than-stocks investments???
    Plzz suggest.. I follow your blog and do invest likewise.. Nice work.. keep it up..

    ReplyDelete

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