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Marc Faber Warns Of Wealth Destruction Via Inflation, Deflation, Unrest
Marc Faber, the fund manager who publishes “The Gloom, Boom & Doom Report,” is warning of “massive wealth destruction” sometime “down the line,” citing unresolved financial excess accumulated globally over the past few decades.
Asked how much destruction he foresees, the Swiss investor told CNBC in an interview that some rich individuals could lose as much as 50 percent of their wealth.
Faber, a Barron’s Roundtable participant, believes the destruction come will in the form of high inflation, deflation and/or social unrest.
Inflation destroys wealth by eroding currencies’ purchasing power, while deflation does so by pushing down prices of financial assets. Social unrest, which can either cause or be a result of inflation/deflation, may also lead to destruction of physical assets such as buildings and stores.
“Maybe all of it will happen but at different times,” said Faber, one of several prominent commentators who expect monetary instability — the dual threat of inflation and deflation.
“People have this extraordinary view that inflation and deflation are opposites, but of course they’re not opposites at all. [The opposite] is monetary stability,” said Jonathan Ruffer, a fund manager who oversees about $19 billion.
Before the global financial crisis, the most dominant force of financial… Continue reading
Rare Carroll Quigley interview – Tragedy and Hope
Professor Carroll Quigley, Bill Clinton’s mentor at Georgetown University, authored a massive volume entitled “Tragedy and Hope” in which he states: “There does exist and has existed for a generation, an international network which operates, to some extent, in the way the radical right believes the Communists act. In fact, this network, which we may identify as the Round Table Groups, has no aversion to cooperating with the Communists, or any other groups, and frequently does so. I know of the operations of this network because I have studied it for twenty years and was permitted for two years, in the early 1960s, to examine its papers and secret records. I have no aversion to it or to most of its aims, and have, for much of my life, been close to it and to many of its instruments. I have objected, both in the past and recently, to a few of its policies, but in general my chief difference of opinion is that it wishes to remain unknown, and I believe its role in history is significant enough to be known.”
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The Perfect Heist: Why Government Theft Continues to Go Unnoticed
Today, we doff our caps to the folks at the European Central Bank. They’ve pulled off the perfect heist.
The euro-feds have opened the valves…turned on the spigots…and let nearly a half trillion euros worth of liquidity flow directly into the very same banks that have proven they can’t be trusted with a penny.
But that’s how a zombie system works. The living give. The monsters get.
And since, at this stage of the credit cycle, the living don’t have much to give, the feds turn on the printing presses.
Then, from whom does the money come?
Gotta come from someone, no?
That’s right… When you borrow it, it comes from the people who lend it. When you tax it, it comes from the taxpayers. But whom does it come from when you just print it up?
Well, at first it appears to come from no one. Nobody reaches in his pocket and finds fewer dollars. Nobody’s pocket has been picked. But how could that be? Nothing comes from nothing. You add a zero to a zero and you still have a zero.
And yet, the zombie banks now have 489 billion more euros in their vaults. That’s what it said in yesterday’s Financial Times.
“Banks snap up 489 billion euros in ECB loan offer.”
This money certainly seems real. The banks can lend it. Spend it. Toss it out the window or down the drain. They can light cigars with it. They can use it to wrap gold coins before sending them out as Christmas presents.
Let’s see, we saw an ad. Mercedes Benz CL class 2011-2012 autos are selling, in round numbers, for $100,000. With this money, you could buy about 6 million of them. Which is probably more or less what will happen to the money.
But what concerns us today is not where it goes but where it came from. Did it come from space? From another galaxy? No? Then, isn’t all wealth on earth owned by someone? Yes? Then, it must have come from some humans somewhere on Earth.
Oxford Economics: Academic Proof that Gold is an Important Diversification Against Inflation & Deflation
Oxford Economics have released a comprehensive and excellent report, ‘The impact of inflation and deflation on the case for gold’. It studies gold’s benefit to investment and pension portfolios in inflation and deflation. Founded in 1981, Oxford Economics is one of the world’s foremost global forecasting and research consultancies.
The report concurs with numerous other academic studies proving gold’s importance in investment and pension portfolios – for both enhancing returns but more importantly reducing risk.
The importance of owning gold has been proven conclusively in numerous studies. The importance of owning gold in a properly diversified portfolio has been shown in studies and academic papers by Mercer Consulting, Bruno and Chincarini, Scherer, Baur and McDermott and the asset allocation specialist Ibbotson.
Oxford Economics gold report shows how gold is a good hedge against inflation, as well as deflation.
It says that investors should allocate 5 percent of their portfolio to gold to best offset the effects of both inflation and deflation.
The analysis reflects a simple model including gold, cash, equities, bonds and commercial real estate. It goes on to add that the allocation rises (10%) in a higher inflation scenario, as well as for risk-averse investors in an environment of even weaker growth and lower inflation.
2012 Outlook for Gold – Positive Fundamentals Remain and Crucial Diversification
• Introduction – Gold in 2011
• Money Creating Central Banks May Push Gold to New Nominal Record in 2012
• Central Banks Will Continue To Be Net Buyers of Gold
• China Foreign Exchange Diversification Should Support Demand
• PIIGS Lesson: Iceland Shows How Gold Protects From FX Crises
• Currency Wars and Competitive Currency Devaluations
• Falling Confidence in Paper Assets, Bank Deposits May Prompt Physical Deliveries
• Gold Remains A Historically and Academically Proven Safe Haven
• Conclusion – Gold in 2012
Introduction
With just a few trading days left in 2011, we can take stock of gold’s performance vis-à-vis other assets.
Gold is 13.7% higher in USD, 12% higher in GBP and 14.4% higher in EUR. Gains were seen in all fiat currencies and even stronger performing fiat currencies such as the CNY (yuan) and JPY (+9% and +8.75% respectively).
G10 and Gold in USD in 2011 (YTD)
Stock markets globally had a torrid year with the S&P500 down 1.3%, the FTSE down 8% and the CAC and DAX down 19% and 15% respectively. Asian stock markets also fell with the Nikkei down 17%, the Hang Seng 20% and the Shanghai SE down 22%.
The MSCI World Index fell 9%.
Thus, gold again acted as a safe haven and protected and preserved wealth over the long term.
While gold reached record nominal highs at $1,915/oz in August, it is important to continually emphasize that gold remains well below the real high, adjusted for inflation, in 1980 of $2,500/oz.
Gold today at $1,625/oz is 18% below the record nominal high of $1915/oz in August 2011. More importantly, gold remains 46% below its real high of $2,500/oz.
Since 2003, we have said that gold would likely reach the real high from 1980 for a variety of important fundamental reasons – such as global debt levels, global demographics and geopolitical, macroeconomic, monetary and systemic risk.
Video Explanation Of How The ESM Is Europe’s TARP
Three years ago, Congress balked at the mere thought of giving Hank Paulson’s (so lovingly portrayed in Andrew Ross Sorkin’s straight to HBO Too Big To Fail) proposed TARP, which came in an “exhaustive” 3 page term sheet with limited bailout powers however with virtually unlimited waivers and supervision, and voted it down leading to one of the biggest market collapses in history. Curiously, a more careful look through Europe’s €500 billion (oddly enough almost the same size as America’s $700 billion TARP) European Stability Mechanism or ESM, reveals that in preparing the terms and conditions of the ESM, Europe may have laid precisely the same Easter Egg that Paulson did with TARP, but failed. Because at its core, the ESM is like a TARP… on steroids. It is a potentially unlimited liquidity conduit (only contingent on how much cash Germany wants to allocate to it – which in turn means how much cash Germany is willing to let the ECB print), with no supervisory checks and balances embedded, and even worse with no explicit or implicit liability clauses – in essence it is a carte blanche for its owners to do as they see fit without… Continue reading
