This is an interview by Marc Faber all in German , following is a translation made by our friend Pascal Maucher :
This is an Interview with Marc Faber and Prof. Max Otte, who is pretty much "godlike" in Germany since he predicted the last crash correctly in his 2005 arrived book "Der Crash kommt" which can likely be translated to "The crash WILL come".
Faber: Central Banks are like a bar tender, who gives his guests alcohol for free. They encourage the people to speculate by giving out easy money.
Otte: The System as it is right now boosts bubbles all the time. It’ll be a huge act of power and courage to change it.
Faber: Central banks never handle the problem correctly, they just paint new color over cracks in the walls.
Interviewee: What should they’ve done?
Faber: Basically, they should have noticed, that bubbles arise because of their expansive monetary policy, which enlarges the debts of a state. When the point has come, where there’s no more debt-growth, economy will collapse.
Otte: If you want to break up this cycle, you definitely come into a long recession. We’ve got much cheap money and the people are buying everything e.g. cars they can’t afford on credit. To change this behavior, something’s got to happen, which usually is a recession.
Faber: The alternative is, to print money so you have to bear the pain over 5 up to 10 years instead of one or two years within a recession.
But even a non-economist must understand: You’re not getting rich by money-printing, otherwise Robert Mugabe would be the richest person and Zimbabwe would be the richest nation in the world. You can’t solve problems by money-printing, you’re only able to move them into the future. Right now, you’re still able to solve problems by borrowing much more money than you did the last time, but that’s not going to work forever.
Interviewee: But why is this always done? These people aren’t dumb, are they?
Faber: Well, that’s what I’m asking myself whether central banks are actually intelligent. I assume they are dumb, because they represent a theory which is unsustainable.
Otte: You can’t burst the circuit of more money, low interest rates, crash, even more money, even lower interest rates, even more crashes, because the politicians can’t retrieve the volume of money in circulation. A German law by the year ’68 told the state to spend money in bad times, but to save some other money in good times. Of course they didn’t, so the central banks don’t do that either.
Faber: All those bailout-packages and the ongoing expansive monetary policy, will in my opinion provide us large inflation rates after a short period of deflation.
Interviewee: How high?
Faber: Well, Zimbabwe’s got millions of percents per day, such as it had been in the further republic of Weimar, but I don’t think we will reach that. But 10 to 20 percent should be possible.
Otte: At the moment there is much money getting pumped in the economy, at least 5 trillion all over the world. As soon as the banks no longer hold this money in their pockets, this will generate new demand and let prices go up. I think 5, 10, even 15 percent a year is definitely possible.
Faber: Usually, the rich people benefit from inflation and the governments can hide very much by inflation.
Interviewee: Because then they can pay back their debts..
Faber: Yes, governments and companies can pay back debts with money, which has lost a lot of its value. But inflation is an awkward kind of taxation and it creates social grievance. After some time, high inflation rates lead to political issues, in the end there are usually revolutions and social changes.
Otte: The next bubble is right now in the market of government bonds. These are monetary claims, which lose their value due to high inflation rates.
Faber: The American economy will provide huge deficits in the next years. Last year there was at least one billion; this year will be, I think, at least 2 billion. How shall that ever be paid back? The only way to do so is inflation. When inflation goes up, fixed-interest papers of, let’s say 30 years, are certificates of confiscation, they are worthless.
Otte: Government-bonds are the biggest asset class of the world. Even every community emits some papers. Even small declines in prices will cause damage.
Faber: Central banks are a catastrophe. They are the worst thing that happened in the 20th and 21st century. They will lead the whole system to the collapse. Communism collapsed and the collapse will be the capitalism, because of irresponsible central banks and governments with huge deficits.
Otte: When you’re looking into the future, it’s possible that a state which has such huge debts, such as the US, has to announce bankruptcy. They didn’t have to in their whole history, but once it’s always the first time.
Interviewee: What will happen then?
Otte: I don’t want to imagine that, but foreign creditors would be stuck with their government-bonds. The confidence would be destroyed and had to be reconstructed by a currency reform and stronger market rules. This would be very hard for the world economy.
Faber: Well, I guarantee, that the US will be bankrupt. Not tomorrow, but in ten to fifteen years I see a 100-percent bankruptcy of the United States.
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Let's face it, our elected officials have purposefully wrecked our economy.
They know...
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