Marc Faber : China will build up its gold reserves and dump the treasuries

Marc Faber MoneyandWealth interview : Stimulus Americanus August 07, 2010

Marc Faber : "Governments create problems , Governments are not there to solve problems , they are there to create problems and to take more and more power and freedom from individuals ..."I think in the US the stimulus spending will continue , and in my view the fiscal deficit that's say on an annual basis we are running at 1.5 trillion dollars in the last twelve months , in my view they'll be going up over time to around 2 trillion dollars annually and as far as the eye can see we are never going to have again deficit of less than a trillion dollars a year " "Te government policies are a constrain on the economic growth they are not stimulating economic growth quite on the contrary"
"we have a Credit bubble in China and when it will burst we will have some negative consequences" "the big issue in Asia are more of political nature , the tensions in the world are rising between the united States and China , because obviously it should be clear to anyone that China is of course the largest trading partner of North Korea and the great supporter of the North Koreans and this does not please the other Asian nations very much nor the US , so I think we are going into a more difficult environment where other issues than just US fiscal and monetary policies will determine the movement of asset market ""something that the Chinese will not do (in the future) is to continue to accumulate at the same rate they did in the past US treasuries , that won't happen , but whether they sell it right away or reduce the position , question of course also for them is where do you invest I, i think eventually the Chinese will build up their gold reserves and of course strategic reserves like copper or oil because that is in period of conflict would be very difficult to procure for China""so far i have been to some extent surprised that the Chinese were slow to essentially accumulate Gold because we told them already 8 years ago that they should actually increase their gold holdings which they did not do , but i think slowly especially if gold came down to a level below where the Indian central bank , the Reserve bank of India bought its gold because the Chinese they will perceive it as a loss of face if they pay the higher price than the Indians , so if the price drops below around $1050 I think the Chinese will come in""Basically I am optimistic that over time the price of gold will go up in paper currency term , I could also argue that the price of gold stays the same it is just the paper money depreciates against the price of gold , well as ten years ago you had to pay $250 to buy an ounce of gold now you have to pay close to $1200 , so there is a loss of purchasing power of money , a symptom of inflation , I think that over time paper money will lose even more value and so that gold is a store of value , but can it fluctuate , of course we live in a very volatile world , I just want to tell people who are interested in Gold , it is possible that the price of gold drops to $950 dollars if the Robert Prechter's scenario of the Dow Jones below 1000 comes about which I do not believe but just in case it comes about then Gold may be at $5000 may be it would have gone up who knows , I would rather imagine that in a huge debt contraction that everything will be down then something will be down to zero like paper cash in US dollars , the government bonds will be worthless shares will have some value and gold will have some value " "it's very clear that the richest people are not the ones that own government bonds in the long run , nor the ones that own cash but people that own real estate or paintings art or they own equities or they own their own businesses and so forth or mines , mining wells or oil wells and so forth..."