Jason Hartman hosts Marc Faber, editor at Gloom, Boom, Doom. They discuss the current state of our economy and the massive inflation that is occurring. They look at central banks and how they’ve created some of the problems. Lastly, they discuss how and where investors can put their money into and transfer wealth.
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Welcome to the holistic survival show with Jason Hartman. The economic storm brewing around the world is set to spill into all aspects of our lives. Are you prepared? Where are you going to turn for the critical life skills necessary to survive and prosper? The holistic survival show is your family’s insurance for a better life. Jason will teach you to think independently to understand threats and how to create the ultimate action plan. sudden change or worst case scenario, you’ll be ready. Welcome to ballistic survival, your key resource for protecting the people, places and profits you care about in uncertain times. Ladies and gentlemen, your host, Jason Hartman.
Jason Hartman 0:59
It’s my pleasure to welcome Mark Farber, he is editor and publisher of the gloom boom and doom report. Mark, welcome. How are you?
Marc Faber 1:06
Well, thank you very much for having me on your program. And thank you for asking, I’m fine.
Jason Hartman 1:11
I have been following your work for many years and really find it to be very interesting and insightful. What is going on in the economy, I think we are on the brink of some real changes. Maybe inflationary changes, just give us the broad view, if you would mark
Marc Faber 1:27
what I mean, the economy, as you know, we had the very serious recession in 2007 2009, which was followed globally by massive fiscal interventions, and quantitative easing policies in most countries in the world. And as a result of that, we had very powerful asset inflation. As you know, the SNP went from a low of 666 in 2009, March 2009, to now close to 3000. And home prices recovered. And in some areas like Newport Beach, Denver, San Francisco, Los Angeles, Boston, New York, they made new highs. So we have had this asset inflation, what has really changed over the last 200 years or so in kind of economic activity, is that the economy nowadays is driven by asset prices. And it’s no longer the economy that drives asset prices. And this is a very dangerous situation. Because in order to keep the economy, you’d need to boost that set prices higher and higher. And that’s we know markets go up and markets go down. So I think the outcome is not going to be very desirable. But the outcome or the end of this bubble, visualized, like to say, we don’t know when it will be could be tomorrow, it may have started and it could be in five years time of year we are, but that it’s created, the very lopsided economies clear. We have this huge wealth inequality. And not only in the US, this is a phenomenon everywhere, that then leads to a lot of social tensions. And to people that argue for things like a wealth tax, or for all kinds of benefits. For people that were kind of left behind, then it becomes a political issue. And so you get social tensions and political tensions, which in my view, will not be very good for asset markets. I
Jason Hartman 3:48
couldn’t agree more. And it’s interesting to sort of dissect the inflationary picture, if you will, into consumer inflation versus asset inflation. Certainly certainly arguable that consumer inflation is a lot higher than the official numbers tell us I would certainly agree with that. And it’s, you know, it’s a mixed bag because technology is so deflationary, but monetary policy is so inflationary. But when it comes to the asset side of the inflation equation, it is incredibly significant. I mean, it’s just making the rich richer, the poor and the middle class are left out. They’re not in the game, are they?
Marc Faber 4:26
Yes, there was an article, I think, yesterday on Bloomberg or the day before, that says that children of wealthy parents in primary school did better in life later on. Then primary school children of poor people, and actually because the wealthy when you’re in primary school, they already have assets at the habit of no asset, right. So in an asset inflationary period, some people Even without work become very wealthy. I mean, I went to school in the 50s. And I finished high school before going to university in 64. And one of our friends, his family owned some buildings in Zurich, and one of the largest collection of Impressionist paintings in the world. He has some dogs in the toilet. Of course, these paintings appreciated dramatically. And because of the tax laws, it never really paid for him to work. Mm hmm. Yeah. So yeah, he just became even richer without working.
Jason Hartman 5:43
That’s certainly true. And when you look at I mean, that’s a more extreme example, because that’s, you know, already starting out as a wealthy person. But when you look at the typical say, millennial in the United States, they’re saddled by student loan debt. And assets have become so expensive, that they’re just not acting the same way they did. When I was in my 20s. I was a Gen X, or the tail end of Gen X. You know, people were buying homes, they were buying their first home when they were 26. And then home has become super expensive, you know, Yeah,
Marc Faber 6:16
I agree with you. But on this point, I’d like to make an additional commentary. A lot of young people nowadays, particularly the millennial generation, and the Generation Z, that comes after the millennials, and I have experiences that because my daughter is a typical millennial. Now the thing is, these people, they grew up with a different mentality, and a different attitude than when I grew up. A lot of my generation, when we went to college, and when we went to school, and after school, at university, we took part time jobs to earn some money. And we didn’t borrow any money. I mean, in Europe, people don’t borrow money to study, because it’s free of charge users, right? But even in the US, the debt explosion of millennials, and student loans that has occurred precisely in the last 1015 years is amazing. And it’s partly because people just think, well, I go to university, I study, even if they don’t study very much, but offers, they think they will earn a lot of money and retain that. But it doesn’t happen that way frequently, later on when they finish studies, depending on what they studied, they can be employed.
Jason Hartman 7:42
Yeah, well, you know, there aren’t a lot of people hiring for liberal arts credential jobs, there just aren’t that many positions for that.
Marc Faber 7:51
Like they did. A lot of millennials, they really got hit very hard. By the housing bubble. They bought homes, on speculation with large borrowings, because as you say, they don’t have much money or they didn’t have a bunch of money then. And then the property market who had the house, and so they lost a ton of money. And number two, go on the website, Robin Hood, and look a little bit at what kind of stocks the millennials own. One of their favorites. naevia media is down almost 50% from that.
Jason Hartman 8:30
That’s the chipmaker you’re talking about. Right? In Video. Yeah, yeah. Okay.
Marc Faber 8:34
And Tesla is also down almost 50%. These are the type of stocks the millennials bought. They bought those kryptos. But at the wrong time, right? Yeah,
Jason Hartman 8:44
yeah, well, in videos behind the crypto revolution, and Tesla is potentially on the brink of failure. It’s amazing what’s going on with Tesla, that’s a soap opera in and of itself. But this generation when you take this out 10 years from now, and these these kids are 40 years old, for example, they won’t have the start that the baby boomers and the Gen Xers had because they don’t own assets because of the asset price inflation. Right?
Marc Faber 9:14
Yeah. But there are many studies about this, that the millennial at 35 years of age, they earn less, they have less assets than the boomers. Right. I can verify that. And I have a really a lot of friends in America. Some are very rich, and some are not very, that they’re, they offer middle class. And when we have discussions and so forth, I always ask them, what are your children good. Well, one is there and one works there and so forth. And then I say jokingly, what about Are you still supporting them? I take 80% My generation is still supporting their children.
Jason Hartman 10:03
That is amazing. You know, the one wild card in this that might save the millennials is the inheritance that will eventually come on? And I don’t, I don’t really know of any stats on that. I mean, yeah, you read all these things about how many Americans, for example, are living paycheck to paycheck, couldn’t come up with $400 if they had an emergency, etc, etc. But, you know, there certainly are some wealthy baby boomers, no question about it. Any any thoughts on the inheritance side of the equation?
Marc Faber 10:32
The problem is that the people that don’t have $400 to spend on emergency, and they live from paycheck to paycheck, they usually do not come from wealthy families. That is the problem, right? And I know about this inheritance. In Switzerland, we have made studies on the subject, how much wealth is going to be transferred between now mine generation of baby boomers, that takes that company or is approaching the day of final departure. And the young people, our children, this is a huge wealth transfer. But it’s particularly large, in countries that have large savings, where people own their homes and so forth, and where people owned their homes, not on credit. Because I have friends, you know, they will inherit large homes, but they want the tort to live in these homes. Within Switzerland, like in the US, in most states, we have property taxes. So property tax can be quite expensive. That’s true. That’s true.
Jason Hartman 11:47
What is your outlook for the future? In terms of inflation? Especially, you know, say you’re looking the next 1015 years ahead? What will that look like?
Marc Faber 11:58
I mean, you said correctly, that they are very powerful deflationary forces in the system, they, Amazon is a hugely deflationary force, also Uber or Lyft. And suppose, sharing economy that reduce the cost. And your living costs, and now airborne, these kind of companies, they contribute to a relatively low consumer price inflation, although, as you pointed out, the consumer price inflation varies a lot. For instance, event smoking and drinking, alcohol taxes went up, and prices of cigarettes went up a lot. So depends also what kind of a life you have. If you have four children as you have to pay their education. And so if your wife is sick, and you have to pay the health expenditures for her, then the cost is very high. So there are many, many different aspects to this inflationary issue. But in general, if you look at the bond market, you know, at the beginning of the year, everybody was very, very bearish about bonds, they expected interest rates to go up the bonds market has been very strong, and yields have come down from 3% to now, slightly below 2.4%. On the 10 years, US Treasury in half a year. So I think that the deflationary issues are still in place. And I keep on emphasizing, what can happen is that you get global asset deflation, properties go down, commodities go down, stocks go down. And in that scenario, the only asset that will appreciate our treasury bonds for a while, but the dollar may become weak, you understand that you now have to also think about currencies. There’s no point to make 5% on the US Treasury through price appreciation and annual interest of two and a half percent or so. But lose it on the exchange rate. So this is an additional thing, you know, when you measure inflation, I can tell you in most emerging economies, and in Asia, we have had cost of living increases that are rather substantial.
Jason Hartman 14:33
Absolutely no question about
Marc Faber 14:35
it. Let’s say you’re on the 15 years outlook. When I look at the unfunded pension fund liabilities in the US. I look at the government’s that globally. I look at the asset dependency of the economy. I think there is only one option for central banks. And that will be to print money. Yeah, it doesn’t work that print More, it’s not gonna work, the more you understand. So eventually I suppose that type of money will become worth much less. That would be kind of my view over the long term.
Jason Hartman 15:14
Yeah, it seems to be the only tool that governments and central banks really have is just money creation. They’ve just got to create more. Whenever I see a G 20 meeting, you know, Davos, whatever it is, right? It’s always, let’s just get together and talk about how we can stimulate, stimulate, stimulate, it’s more QE, right. I mean, what else is there is? Do they have any other tools? It seems to be the only thing they’ve got?
Marc Faber 15:39
Yes, correct. But they are two ways they can print money. They can print money by buying assets, which they’ve done through QE. In other words, they go into the market and buy treasury bonds, mortgage backed securities. And in the case of Japan, they will support dogs, okay? That is one way that money flows mostly to the financial system and to rich people. The other way is what they propose, though, they think it’s a modern monetary theory. It’s not modern, or it’s not a new theory. But it’s basically to hand out money to individuals, and to finance it by the Central Bank, buying bonds, essentially, expanding its balance sheet, you know, the central bank prints money, but the money doesn’t flow into the financial system, it flows to individuals. And that creates that nice society that depends on the government, like a socialist society. But maybe this is what people want. I don’t want it but this is a lot of young people, they want socialism, or they want more government intervention. I want less.
Jason Hartman 16:50
Oh, yes. And I hope AOC and Bernie, and the rest of them don’t get their way. Because that has never worked at any time in history or any place on Earth. But I keep trying it. I keep trying, you know, right
Marc Faber 17:06
now. But maybe the capitalistic system, the way we have it, and the way it morphed into crony capitalism, where you have this huge wealth inequality. And where you have, I mean, rampant corruption between the government and the leading system, and we have to see this. Yeah, maybe the system doesn’t work, either.
Jason Hartman 17:33
Right. So what system does work? I agree, the cronyism is just disgusting. And the anti capitalists want to say, well, it’s capitalism run amok. It doesn’t always work. Right. But I don’t know what’s better a bunch of Central planners making the decisions there. There’s lots of corruption in those systems. Do you know
Marc Faber 17:53
Yeah, but you know, if you look at sports games, where they American football, or soccer in Europe, for crypto Canada, there are rules. And the capitalistic system needs that someone enforces the rules. But it’s morphed into a system where people with money, they can bend the rules, through lobbyists and all kinds of questionable characters. I mean, the Muller investigation in the US, and the bar investigations don’t interest me a lot. But it’s fascinating to see how they all lie. Mm hmm.
Jason Hartman 18:39
Right. Yeah, absolutely. Of course they do. Of course, they do. Of course they do. In terms of these unfunded mandates. I mean, we’ve got maybe anywhere between 60,000,000,000,200 and 20 trillion. If you look at Laurence Kotlikoff work on a subject in these unfunded mandates over the next 15 years. I mean, it just seems like they’re going to create inflation, there is no way to avoid it. They have to print pay for that, right. Well, in theory, they could cut the benefits.
Marc Faber 19:13
tried to cut the benefits of the police, the retired policemen, or firemen. They will rebel.
Jason Hartman 19:22
Oh, of course they will. But but it was even just regular austerity, like we saw in Greece or in you know, any number of places. I mean, it’s Don’t let me retire at 49 don’t pay for my college, etc, etc. You know, that people take to the streets and it’s violent. And
Marc Faber 19:39
yeah,
Jason Hartman 19:41
that’s not going to work. The way to do it is through inflation. as ugly as it is. It’s really a pretty good business plan for governments and central banks. It’s the only sort of way that people don’t instantaneously notice. You know, you boil the frog slowly as it were right?
Marc Faber 19:56
time they will know. I mean, every ration Of course, eventually ended relatively badly. But explore reforms and some of the reforms were successful and some are not. But the inflationary path or road, they can postpone the problem for a long time.
Jason Hartman 20:17
They sure can. They can keep kicking the can down the road, they sure can mark, give out your website and tell people where they can find your newsletter and such.
Marc Faber 20:25
Well. The last thing I just wanted to say, I mean, the only thing that can really hurt or maybe make it inflationary unworkable is really a severe asset. Race. I mean, oh really collapse is the stock market really collapses. And he we have massive defaults in the corporate debt market that will be difficult to fight with additional liquidity. That is that the problem is we have grossly inflated asset markets grossly. And we have lots of companies they will go bust. I mean, as you raise the issue of Tesla is an example of a company that probably should have gone bust a long time. Oh,
Jason Hartman 21:15
I agree. The emperor has no plan anyway.
Marc Faber 21:17
Temporary long, but the website that I have is gloom boom. doom.com. All in one word. I repeat gloom. Boom. doom.com. Excellent. Mark Farber, thank you for joining us. Well, my pleasure. Take care.
Jason Hartman 21:36
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