Marc Faber: 7 Key Insights About Today’s Debt Bubble

marc faberGold Silver Worlds:  Based on a diversity of recent interviews with Marc Faber we could paint a picture of how the Swiss investor thinks about the ongoing debt crisis and especially its implosion. This article provides a summary on seven critical points.

The dangers of a market crash:

“Unlike the ’50s and ’70s when there was relatively less overall debt, a financial market crash did not inflict great damage on the economy. Debt levels are significantly higher these days, and so a market crash can inflict serious damage on economies. We’ve gone through a period of huge asset inflation, in stocks, bonds, commodities, and real estate, and we essentially now have in the world, a huge asset bubble. So everything is grossly inflated.”

The next bubble:

“The problem is I believe you and I are the bubble … the financial system is just too big, that is the problem. Maybe we can’t see where the next bubble is because we are the bubble – that is something to consider.”

Economic growth vs credit growth:

“One day this whole credit bubble will be deflated very badly – you are going to experience a complete implosion of all asset prices and the credit system – but as to when -I don’t know.”

The writing on the wall – declining marginal economic value of debt:

“A dollar of additional credit in the system created significant economic growth, but these days an additional dollar has very little impact. That is a sign that we have reached the end of monetary policy.

The end game:

“When the US government has to issue treasuries to pay the interest on its maturing debt. That will be the end game – then you are dealing with a collapse in the currency.”

The share of precious metals in Faber’s total portfolio:

“I recommend an asset allocation of about 25% in equities; 25% in fixed income, securities and cash; 25% in real estate; and 25% in precious metals—gold, silver.

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