The problem with government is that over time, it becomes very polarized and it moves into the hands of powerful business interests

Marc Faber : Well, basically, the problem with government is that the original intention of especially a democracy is very good. Everybody has a say in how societies should be structured, but over time, it becomes very polarized and it moves into the hands of powerful business interests, and also interest groups like the military complex, or say the welfare recipients and so forth. So you end up with kind of on the one hand a tyranny of the masses where you distribute all kinds of goodies to people. Like in America roughly 50 percent of the population gets a handout one way or the other from the government. So by continuing to support these people, you get their votes. And at the other side of the spectrum, you have the people that pay the tax, the big corporations, and the well-to-do people, and they also want to maintain their interests, which is natural. And so you have a completely dysfunctional political system.

I would rather play Agriculture by owning farms than by speculating in wheat futures and corn futures

Marc Faber : Well, I think we have to distinguish between different commodities. We have agricultural commodities, and I think the long term outlook for agriculture in the world is probably rather favorable. I would rather play it by owning farms than by speculating in wheat futures and corn futures because the average investor will find it very difficult to trade these markets. And then we have industrial commodities, and this is an important signal for the market. They collapsed. They did not collapse because of Greece. They are down 30 percent because it is very likely that the Chinese economy is now decelerating very rapidly. And that on the world would have a far greater impact than say Greece. And so I think investors who all focus on the banking crisis in Europe, they overlook the next shoe to drop, which could be China.

Consumer Confidence indices are low for a very specific reason

Marc Faber : Look, I think that consumer confidence indices are low for a very specific reason. Just before I came on, there was a report that the sales of small businesses in America has been increasing. Yes, I believe that because a lot of the sales increase has to do with price increases. In other words, the cost of living of the average American is going up by much more than what Mr. Bernanke looks at, namely core CPI, which is essentially a consumer price index that excludes energy and food. Everybody I talk to has cost of living increases in America of more than five percent per annum. But the Federal Reserve and other agencies and governments, they do not believe that inflation is five percent. They think - they assume that inflation is say two or three percent, interest rates on deposits are zero, so you are cheated out if you have actually savings in a bank. - in Bloomberg Surveillance

A Recession in China would affect the resource producing regions of the world

Marc Faber : Well, I think if China had much slower growth or even a recession, which very few people talk about, but it is conceivable if you look at the U.S. 1800 to 2000, we had many recessions and we kept from growing. But basically, if that happens, then the demand for raw materials would go down. So it would affect all the resource producing regions of the world, including Latin America, Africa, the Middle East, central Asia, Russia, Australasia, and it would affect their currencies. And then these countries would have less money to buy goods that come from China, and we could have a downward spiral in the world which would be very vicious. - in Bloomberg Surveillance