Sunday, June 16, 2013

Marc Faber : There has been a huge credit bubble in China, and it isn't going to end well

Let's discuss China. The economy appears to be weakening, and investors understandably are worried. How does the situation look to you?
Marc Faber : There has been a huge credit bubble in China, and it isn't going to end well. Its economy officially grew 7.7% in the first quarter. In reality, it is growing 4% a year, at best. Figures on Chinese exports to Taiwan, South Korea, Hong Kong, and Singapore don't agree with the import figures of those countries. In each case, reported exports are much larger than reported imports. Singapore publishes relatively honest economic statistics. Its gross domestic product has hardly grown in the past six months. Inflation is about 4% a year. Here in Thailand, growth has slowed despite massive fiscal stimulus. Trade and current-account surpluses have been shrinking in Malaysia, Indonesia, and other countries.
Again, the economy of the rich is booming. There has been huge wealth accumulation in Asia in recent years. But the middle class has experienced diminishing purchasing power. Throughout history, growing wealth inequality has been corrected either peacefully, through taxation and wealth redistribution, or by revolution, as in Russia. I am not sure we will have a revolution in the Western world, but I can see European voters turning against the arrogance of the bureaucracy. There have been so many scandals involving French politicians with Swiss bank accounts, and so forth. - in Barron's


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