Friday, June 19, 2009

Marc Faber: 10-20% Inflation Coming to US

The latest short snippet of Marc Faber - He calls 10-20% price increases Hyperinflation which is interesting, because most associate that term with Zimbabwe or the Weimar Republic. But he makes a good point, if you annualize 10-20% purchasing power losses over half a decade, it wipes out much of your buying power very quickly.

On the plus side the US deficits will be paid back to our creditors in increasingly worthless dollars and all the problems I raise about our massive debts will become inconsequential. It also means you can go out and spend like mad, and build up your own debts because by 2019 the dollar you pay them back with will be akin to toilet paper. Green shoots... green shoots.

As an aside, I have not talked about the CPI (Consumer Price Index i.e. inflation) reports in over a year, but he makes the exact same point I was making as long time blog readers will know. Lies, lies and more damn lies.
[Dec 12, 2007: Real Inflation Showing in Reports not Called PPI/CPI] [May 10, 2008: Finally Some Mainstream Reports are Figuring Out the Spin from Government] [Apr 23, 2008: Barry Ritholtz on Disappearing Economic Indicators] [Sep 28, 2007: Barry Ritholtz on Bloomberg Finally Seeing the Truth in CPI] [Mar 16, 2008: A Picture is Worth a Thousand Words - Inflation]

I can only imagine the day real inflation is running 13.2% and we are told by government its 3.2%. Maybe finally the non financial folk will question these things :)

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The US is headed toward hyperinflation, and within five to 10 years it could have inflation rates of 10 to 20 percent, said Marc Faber, editor and publisher of the Gloom, Boom & Doom Report.

"In every society, when you have large fiscal deficits combined with easy monetary policies … the likelihood that you will have high inflation is very, very high," Faber said. "And it happens very quickly."

These numbers rise so speedily because the government "massively" understates the country's rate of inflation, Faber said. To get a true reading, he said, people need to ditch core inflation numbers and include CPI in their analysis.

"It’s a lie what they publish," said Faber. "If you underweigh education costs, and if you underweigh health care costs, then you come to a totally different result."

In such a volatile market, Faber said the safest place to invest is in equities or assets.

"I'm not very bullish about real estate prices in the U.S., but I'd rather be in real estate than in 30-year U.S. bonds."

[May 20: Jim Rogers Agrees with Marc Faber]

[May 15, 2009: This was a Central Bank Printing Press Rally]

[Mar 19, 2009: Both Marc Faber and Jim Rogers Predicting Civil War or Unrest]

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