INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said governments have intervened too much in free markets since the crisis started, to the point that they are affecting the health of the world economy
Speaking to CNBC in a live interview Thursday, Faber said: "I think that governments have become like a cancer, they have expanded in the financial system," Faber said.
"I think the biggest problem is too much intervention. Whatever the government touches is usually done worse than in the private sector," he said.
European Union leaders pledged to reinforce economic governance within the bloc on Thursday to ward off lingering fears over the future of the European economy after the Greek crisis broke out.
The 27 member states also agreed that members states that fail to meet budget and debt targets should face sanctions, and from 2011 onwards, national budget plans should be presented to the Commission for review,
Markets usually give signals when something goes wrong but, if the government is to intervene, as is the case of the European Central Bank, the Federal Reserve and the Bank of England's bond buying, government intervention hides these signals, according to Faber.
"I think any government intervention has unintended consequences and is negative," he said. When there is intervention, "eventually the market will break the intervention and things will blow out."
Government stimulus packages create volatility in stock markets because they distort economic indicators, said Faber, who predicted that the US will implement another stimulus.
"At this level I'm not particularly interested in buying anything," he said in response to the deflation argument. "I buy gold, I don't know what else to buy."
The governments of every developed economy, including the US, the UK and Western Europe, will eventually default on their sovereign debts, so the one thing he will never do in his life is 'sell my gold, Faber said in a typically outspoken observation earlier this year.
Explaining his bullion bullishness, the famed investor said: "Gold is not a liability of someone else, you really own it, you keep it in a safe deposit box, its quantity can not be increased at the same rate as you can print money which will eventually again weaken the US dollar. I am not saying that the dollar will go straight down, but eventually the purchasing power of money will lose."
Gold may climb to a record US$1,300 an ounce this year as investment demand shifts from the euro and the dollar, agrees Bruce Ikemizu at Standard Bank Plc.
The U.S. and European currencies may lose their appeal as developed economies underperform emerging markets such as China, said Ikemizu, the head of commodity trading and managing director at the bank’s Tokyo branch. As there is no immediate replacement for the dollar and euro, demand for gold will grow, Ikemizu said in a Bloomberg interview on Thursday.
“There’s no other way out but to print money,” Faber, said at a forum in Seoul on June 9. “In the long run, all paper money will go exactly to its intrinsic value, which is zero.” Faber advised investors to protect themselves with assets such gold and silver.
“If not gold and silver, you will be better off with equities,” Faber said, adding that stocks are unlikely to revisit the lows set in March 2009. “They may not go up a lot, but they will adjust to money printers at central banks.”
In his latest CNBC interview, Faber reiterated his view that another, worse crisis may happen in five to 10 years, "when the whole financial system collapses" because the debt problem has been kicked down the road without actually being sold.
"I think the US Fed, the ECB and other central banks have no other option, they will continue to monetize and buy bad paper, period," Faber told CNBC.
"The central bankers are precisely the ones that don't know that excessive money creation and excessive debt creation leads to a crisis down the road," he added.