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Marc Faber says Americans need to tighten their belts, save more and work more for lower salaries
Source: BI-ME , Author: BI-ME staff
Posted: Mon October 17, 2011 7:55 pm

INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor spoke Tuesday about the Occupy Wall Street protests, blaming lobbyist and Washington for the current economic stagnation and characterizing Wall Street as a "minority" that is only "using the system."

He suggested protesters should instead go after the real culprits in Washington and "also occupy the Federal Reserve on the way."

Speaking in an interview with CNBC from Montreal, Faber blamed "Keynesians and US Democrats for their interventionist policies.

"There has been too much intervention in the Western World where the share of the total economy that goes to the government and is government sponsored has grown,"  he said.

"That essentially makes it very difficult for the Western World to grow substantially...I don't see how the Western World, including the US, Japan, and Western Europe can actually grow. They're going to stagnate," Faber predicted.

Stagnation, in turn, leads "people to ask questions and to go after minorities," he said.

"Wall Street is a minority, anyone else would have done the same, they use the system but they didn't create the system. The system was created by the lobbyists and by Washington. So they [the protesters] should actually go to Washington and also occupy the Federal Reserve on the way," Faber suggested.

The protesters say the Wall Street bank bailouts in 2008 left banks enjoying huge profits while average Americans suffered under high unemployment and job insecurity with little help from Washington. They contend that the richest 1% of Americans have amassed vast fortunes while being taxed at a lower rate than most people.

What America needs

Faber blamed an excessive regulatory environment in the US for curtailing initiatives by businesses, leading to a drop in net investments.

Businesses no longer employ and invest capital in the US, he said,  preferring instead to invest in china or somewhere else in the world where the regulatory environment is more favorable.

"If you look at net investments in the US, it has gone down for the last 20 years, and it's now negative. In other words, basically the capital stock of America is not being replenished...althought it's being replenished somewhere else in the world.  At the same time, the policies of the Keynesians have always encouraged spending," the renowned investor noted.

"We're not going to get out of a recession by saying spend, spend, spend. That is wrong!" 

"The lack of saving is the problem of the United States."

In one of his most memorable recent rants, Faber then went to explain what the US [really] needs to do: "I tell you what the US needs. The US needs Lee Kwan Yew [Singapore's first Prime Minister] who stands in front of the US and tells them: Listen you lazy buggers, you have to tighten your belts, you have to save more, work more for lower salaries and only through that will we get out of the current dilemma, that essentially prevents the economy from growing."

Markets and the Dollar

Faber, who predicted the stock market crash in 1987, turned bearish shortly before the 2007-2009 bear market and called the March 2009 level a major low which is not going to be broken any time soon, expects market volatility to continue for a long period of time and sees global liquidity tightening.

He is quite positive about the Dollar because whenever global liquidity is tightening "it's bad for asset prices but good for the US Dollar as was the case in 2008." 

Tyranny of the masses 

In an interview with Tom Keene and Ken Prewitt on Bloomberg Surveillance on Thursday, Faber was asked about one of the themes in the current issue of the Gloom Boom & Doom Report regarding alleged widespread corruption in many US institutions, including the political and corporate systems.

"The problem with government is that the original intention of, especially a democracy, is very good," he started by saying.

"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," Faber added.

"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% 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, he concluded.

Income inequality

Asked about the ratio of income of the top one percent to the bottom 90% in the US going back to pre-Depression levels, Faber said: "We cannot blame Wall Street and well-to-do people for the mishap, for this ratio to have exploded on the upside. We have to blame essentially expansionary monetary policies that favor assets. So you have low consumer price inflation, you have no wage inflation."

"In fact, the problem in America is that real wages, real compensation has been down since the 1970s. But at the same time, asset prices, equities, real estate and so forth have gone up dramatically, and that favors people who have these assets. And so the ratio expanded and you have now a record wealth inequality, and income inequality," he told Bloomberg Surveillance.

How is it all going to end up?

In a series of recent appearances on TV business networks, Faber has been reiterating his case for being "ultra bearish about everything," as a result of the debt crisis.

He has spoken of hyperinflation, a complete collapse of credit markets, major sovereign debt defaults, and currency collapses as consequences of current policies.
 
In a recent interview he mentioned  that "10 years ago, a huge shift in economic power began from the Western World - the US and Western Europe- to Asia and emerging economies."

"This shift in the balance of economic power to emerging economies is accompanied by a shift in the political and military power, and that..., the West will not just sit and do nothing about it," he said.

"I think the West would want to control China by controlling the oil supplies from the Middle East, and then it will come to war," he predicted.
 
In war time the one thing you don't want to own is government bonds, he said. "I would prepare for the worst. In a worst case scenario investors are better off in precious metals," Faber stressed.

About Dr. Marc Faber

Dr Marc Faber was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics. Between 1970 and 1978, Dr Faber worked for White Weld & Co in New York, Zurich and Hong Kong.

Since 1973, he has lived in Asia. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK). In June 1990, he set up his own business which acts as an investment advisor and fund manager.

In 2000 Faber decided to spend more time writing his newsletters as well as growing his advisory business. He moved back to his home in Chiang Mai, Thailand, maintaining only a small administrative office in Hong Kong.

Dr Faber publishes a widely read monthly investment newsletter 'The Gloom Boom & Doom Report' which highlights unusual investment opportunities, and is the author of several books.

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