Marc Faber Transcript


Jim Puplava: Marc Faber, the editor of the Gloom, Boom & Doom Report joins us on the program. And Marc, in a recent newsletter, you talked about getting together with some prominent economists; many of whom have been lifelong friends of yours such as Gary Shilling and David Rosenberg. Now, those two were deflationists. Two of you at the get-together were in the inflation camp yourself and Eddie Ardini. I’ve always found it amazing how economists can look at the same data and come to opposite conclusions. Marc, what is it in your backgrounds and line of thinking that makes you come to different conclusions?

Marc Faber: Yeah, that’s a good question. I mean, I think that deflationists, they all have families. They go shopping, their families go shopping, they pay educational cost, they pay healthcare cost, insurance cost and they see the fees on local government services increasing, taxes generally increases. Then I find this hard to believe that they would endorse the concept of deflation. But obviously, they may think that the economy may collapse and that as a result of that, we may have deflation and that, therefore, you should buy long term US government bonds. And my view is, particularly in the deflationist scenario, where you would have like Prechter said the Dow Jones below a thousand. In that scenario, you wouldn’t want to be in US government bonds and in cash for the simple reason that in that scenario, the fiscal deficits — in other words, spending — would exceed tax revenues even more than if you were actually optimistic about the economy. Just consider — if the Dow Jones went below a thousand, what kind of an economic environment would we be in? We would be in a total credit collapse. We would be in a total economic collapse. And we would have a complete corporate profit collapse. And in a corporate profit collapse and in an economic depression, what do you think would happen to tax revenues? They would collapse, as well. And so the revenues of the treasury would decline very meaningfully and the fiscal deficit, which is now running, say, optimistically set at one and a half trillion. If you counted the unfunded liability stats are accruing every year. Probably the fiscal deficit is more like two to two and a half trillion dollars. But let’s say one and a half trillion dollars. If that happens, the Dow Jones below a thousand, corporate profits collapsing and revenues collapsing, then the fiscal deficit for sure would be two to three trillion dollars. And in that environment, the quality of credit of the US — as was suggested by Moody’s yesterday — would decline and US government bonds, which I think are already today junk bonds, would go and yield much more than less than three percent of what they’re yielding at the present time.

So particularly, in the deflationary scenario, you don’t want to be in government bonds.

Jim Puplava: You know, I was reading that you got your PhD; I think it was at the age of 24, if I’m correct. How would you contrast the world as it existed back then, Marc, when you got your degree and the world today as it exists? And more importantly, working in the real world and running your own business, do you have a different view now of how the world works versus your days in academia?

Marc Faber: Well, first of all, I grew up in the fifties and sixties. I was born in ’46 so in the late fifties, I was, say, twelve to fourteen years old. And I have to say, in general, we were much more free than we are today. We had much more freedom to do things and to do stupid things. Today, everything is controlled — not only in the US, but also in Europe — they have become police state where everything is controlled and checked upon either by the police or the IRS or by the PSA or whatever it is. But you are restricted in every movement you make, basically.

Secondly, at the time I grew up, we still had fixed exchange rates. We had Bretton Woods — in other words, a quasi gold standard, which no longer exists today. And the ability to print money today and to run huge trade and current account deficits is much higher today than it was at that time. In ’71 under President Nixon on August 26th, the US went off the gold standard and that led then to the inflation of the seventies and the gold price rising from thirty dollars to eight hundred fifty dollars.

Jim Puplava: I want to come back to your recent newsletter where you emphasized the very thing you just mentioned — that the importance of having economic choices and the importance that those choices play or contribute to one’s personal happiness. I had a recent conversation with a friend of ours and we had a discussion on those choices are being limited; especially here in the US. And one thing that we were talking about, Marc, and you’ve commented on this in the past — in the US, we are seeing wealth disparity is growing where wealth appreciation is occurring at the upper income levels while at the lower end, debt has exploded. So you have a wealthy person who has probably a lot more freedom of choice, and then you contrast that with a person that’s living on entitlements who has no choice but to vote for a political party that will guarantee the continued payment of those entitlements. Marc, the disparity of wealth in the US has never been larger and a lot of this, I think, as a result of the Feds’ reckless money printing propensity. Now politicians want to tax the rich more because they are holding the majority of the country’s assets. If you were president of the United States, how would you rectify this wealth imbalance without jeopardizing the country’s growth prospects?

Marc Faber: Well, I think that, you know, as I look at a country like Singapore that was really very poor in the seventies and how they became affluent, or Taiwan or South Korea, it’s usually a long process. I mean, it can’t be turned around in three days or in three years. And I think in the US, instead of wasting huge money on entitlements, what I would do is to implement an educational system where people with less means — in other words, lower income groups — have the opportunity, actually, to go to very good schools. That implementation, how it’s done, probably the best it’s done through the private sector with subsidies and not through the government sector. But it can work through the government in cases where countries are relatively small. In other words, that would imply that the educational system is a municipal or State affair because in small countries like Norway, Finland, Holland, the Netherlands, in other words, and also in Denmark, the educational system is a very high standard. And people actually pay very high taxes for it. But they also get something back for it. Equally, they pay very high taxes and they get first class medical care. So it works in some cases. In other cases, where countries are very large where there is a lot of abuse, where there is less sense of nationalism and a club mentality, it works less well.

Jim Puplava: Yesterday before Congress, Congressman Paul pointedly asked the Fed chairman if he believed gold to be money. After a pregnant pause, Marc, Bernanke stated, “No,” but then elaborated by saying that gold wasn’t money in the same sense that treasury bills aren’t money. How do you explain this convoluted logic? A dead instrument versus an asset.

Marc Faber: You know, what is money? That’s already a big question because, say, if I go out to night and I have no cash in my wallet but I have a credit balance, say, of a million dollars in either American Express or MasterCard, with a credit card I have money. The proviso is, of course, that someone accepts a credit card. But it works that particular night. So in that sense, it’s difficult to decide precisely what is money. But I would say the general accepted definition of money is that money is a medium of exchange. In other words, you can exchange goods and services for what you have; that it is a store of value and that it is a unit of account. And so if we look at these three attributes of money, then I would say as a store of value, of course gold is much better at the present time than a US dollar or any other paper currency. Secondly, as a unit of account, say, the US that we’ve been growing up three percent in real terms for the last ten or twenty years. I’m not sure that this is true because if I adjust the US dollar for each depreciation against a unit of account that is relatively stable like gold, then I could argue, well, actually the US economy — in dollar terms — has been expanding by three percent per annum. But in real terms, in true real terms — not in real terms as measured by American statisticians that rely on Bureau of Labor statistics inflationary figure — if I measure it in true real terms, then I could say the US GDP I’ve actually contracted, which may not be correct. But for sure, the standard of living of the typical household — and I’m not speaking here of the partners of Goldman Sachs — I’m speaking here of the typical household has come down in the last twenty years. I would even venture to say that relative to the rest of the world, the peak of US prosperity occurred sometime in the 1950s because at that time, countries like Brazil, China, India, even the European countries, they were poor because the European countries had suffered from World War II much more than the United States. The US, to some extent, benefited from World War II. So my argument, distinctly — it’s very difficult to measure economic growth, very difficult to measure prosperity. But all I can say — when I started to travel the world in the seventies and I went to, say, Latin American countries, to Eastern Europe countries, to Asian countries — all these countries were way behind the US, way behind the US in every respect. And today, the infrastructure in most of these countries is actually better than in New York, Los Angeles, San Francisco. Also, it’s natural because these countries put their infrastructure in in the last ten, twenty years whereas the US — and that is another problem that nobody, or very few people, talk about — the problem of the US is that they grossly neglected their infrastructure for the last twenty years. In other words, they have the same trains, they have to run on the same rail track and that hasn’t been modernized by and large. They have the same subways that they had fifty years ago and so forth. And much too little as the percent of the economy has been invested. It’s all been spent. Consumption. And that doesn’t create wealth. What you consume, what you eat is gone. What you use in gasoline and burn is gone unless it’s used for running factories that produce something. So basically, the US economic policy, it’s not just a monetary problem. But the entire economic policies have been to perpetuate an American dream and live beyond means for the last twenty to thirty years. And that’s just not realistic. It was built on borrowing more and more to offset the declining income in real terms — you know, those inflation adjusted terms. And now, the power of to borrow more is gone.

Jim Puplava: In a recent issue — and this relates to your infrastructure here — in the Gloom, Boom & Doom Report, I see that you travelled recently to the Gold Coast of Southern California where I live, including Newport Beach and Laguna Beach. I think, Marc, what distinguishes you from a lot of economists that I read is that when you travel, you actually do your own research by talking to real people — real people with real jobs. And you noted that Californians universally complained about the strict regulations and burdens imposed by our State and that seems to be getting worse. But what I want to know is when you travel throughout the world — Asia — and mingle with people there, what is it that they complain about or fear the most?

Marc Faber: Well, in general, I think that when I look at Europeans and Americans, they basically complain about more and more regulation and that is one of the problems. You have, on the one hand, easy money; in other words, money printing, expansionary monetary policies. And in theory, what Keynesian would call expansionary fiscal policies; in other words, the government takes a larger and larger role in the economy, which I think is actually strangling the economy; not proactively promoting economic growth. But at the same, you have more and more regulation whereby especially small businessmen that can’t afford an army of lawyers and accountants and auditors to a bypass regulation and avoid taxation like the big corporations such as News Corp and GE can do? These people have no appetite whatsoever to hire more people. Zero appetite. They say I’d rather earn a little bit less and have less headache with the government. Because they argue the more tax we pay, the more the government will harass us. And in Asia, there’s a different view of the world. You have, essentially, people that were extremely poor, particularly in countries like India and China where twenty years ago, nobody dreamt that he would ever travel, that he would ever had a car or a motorcycle or a house. All these people have it now or are getting it. And so there is a much more upbeat atmosphere, like when you are a sportsman. As you improve, as you beat your competition and you improve in your rankings, you are upbeat, you are optimistic. Once you reach the peak, like a fighter and then you start to go down because it’s not that your talent goes down necessarily, but others are getting better. Obviously, it’s an atmosphere that is totally different. It’s a deficit atmosphere and this is what is engulfing the western world. Most people in the western world, they think that their children will not live the same living standards live they lived and they start to think that their living standard is not the same than their parents’ living standard was.

Jim Puplava: Just as an aside, by the way, what did you find most alluring about Southern California from your travels here?

Marc Faber: [laugh] It’s a gold mine. The girls are very friendly. In general, people are very friendly. I mean, everybody talks to each other. And I have to say, this is still a great quality of the US. If you go to the Midwest or you go to the South or you go to Southern California, people talk to each other in a pub and they enjoy each other’s company and it’s a very nice atmosphere. And that you don’t find in many other countries to the same extent.

Jim Puplava: Oh, I thought you might’ve said it was our picturesque landscape.

Marc Faber: Well, the landscape is particularly picturesque in terms of females.

Jim Puplava: [laugh] I want to come back to our discussion here on Asia. Do you find it ironic that the East is becoming more capitalistic while the free West is becoming more socialistic? And carrying that one step further, Marc, can you foresee a day when the East actually becomes more democratic than the West?

Marc Faber: Well, I mean, we have in the East not true democracies. But for some funny reason, we have a lot of economic freedom. It’s just that you have to be careful not to step on the government’s toes in terms of criticizing them too much. I mean, the way I criticize Mr. Bernanke and the way I criticize Mr. Obama, for sure, I couldn’t do in China. For sure. And it would be viewed very negatively. Say I live in Thailand and I’m not here frequently. Or if I went really after the government here, I think I would have to be somewhat careful. This is still a great quality of the US. No matter what you say against American leaders, whether it was Mr. Bush or Mr. Obama, criticism is still accepted.

Jim Puplava: You know, I have heard you say countless times that you know that the Federal print, print and print more. In fact, if we take the recent Fed Minutes released this week and Mr. Bernanke’s testimony this week, it would imply that more printing is on the way. With the help of Bernanke, many of your rather prescient calls have been realized, but not quite all of them. You were one of the first, to my knowledge, to predict the possibility of a hyperinflation in the US. And that may seem hard to believe for many Americans. Marc, if you were to take that hyperinflation scenario and put it on a scale of zero to one hundred with one hundred being the most probably, how would you rate the chances of hyperinflation here if we continue to do what we’re doing?

Marc Faber: Well, actually, it hasn’t happened yet. But you understand, hyperinflation is an inflation that gets out of hand after a period of relative calm. I mean, in Germany, prices started to increase in, stay in the hyperinflation in 1918 after the war, 1919. And they only really exploded on the upside in ’22, ’23. And the same happened in Argentina, in Latin America. So I’m still wondering where they can happen. And I happen to think that the likelihood has actually increased for the following reason. You know, if you go back to, say, January 1st, 2011, we were all celebrated New Year and a week earlier, we had Christmas. Who would have thought that the Middle East was in the process of blowing up? Who would have thought that NATO countries, that the bankrupt like Italy and not in a much better position like France would go to war against an idiot in Libya? I’m not saying he’s a nice person. I’m saying he’s an unpleasant character. If you went after all the unpleasant characters in the world, you would have to go after like a hundred eighty countries. So even worse than the other one. There’s no reason to be in Libya, no reason whatsoever. It’s a complete madness to fight in Libya. And if you fight, you have to fight to win. But they haven’t won in three months. He’s a man alone. He’s going to be a hero of the Revolution to stand up, whatever he dies of, eventually he’ll be removed but he’s a hero of the Revolution — a man alone, standing up against the imperialistic, capitalistic, colonialist Western world. And I think what will happen eventually is the US — if you read papers in the US and study, it’s all about how do we contain China. The Western world knows — including western Europe and the US — one way to control China is to control the oil in the Middle East. And if they control the oil in the Middle East, they can switch on the tab or close the tab to China. Because China, Japan, Taiwan, Laos, Korea, Hong Kong, they get ninety five percent of the oil from the Middle East. That is not the case for the US. The largest supplier of oil to the US is Canada and a large supplier is also Mexico and Venezuela and East Africa, Angola, Nigeria. The Chinese are a hundred percent on Middle Eastern oil. And the US and western powers, they will go and destabilize the Middle East and then try to control it. Well, obviously, they can only go this far because first of all, it will take a lot of money. They now, they are engaged in Libya, they’re engaged in Iraq, they’re engaged in Afghanistan. Next station, they have to be engaged in Pakistan, which is gradually shifting its alliance to China away from the US. Now, when the US went into World War II, debt to GDP was a hundred forty percent and they didn’t have unfunded liability for Medicare, Medicaid and Medicare. Now they have the unfunded liabilities and they have debt to GDP of three hundred seventy nine percent officially. But with the unfunded liability something like eight hundred percent. They’re not in a position to finance the war unless they print money. And so I think the geopolitical picture will eventually lead, in my opinion, to much higher inflation rates than what we’re seeing now.

And by the way, I think the inflation in the US is already much higher than what is being published by the media. And we know now about the media since Mr. Murdock is the largest media machinate. And since he, for sure, because I know some people who used to be in leading positions at News Corp in Asia — he calls them every day. He checks everything that they do. He knew about the hacking in Britain for sure. And he sanctioned it.

But this big business. Big business is dirty. But why is it dirty? Because it’s been made dirty by the government.

Jim Puplava: Speaking of this hyperinflation scenario, and we’re hearing more evidence and reading more evidence that the Fed is going to print more money. But when they print money, Marc, they can’t always direct where that money flows. Recent money creation helped to inflate stock prices. You have gone on record and you believe that the US stock market has topped out in this year. On the other hand, Mr. Bernanke is ready to print money again. If he continues to print money, I guess, would you retract that statement about the market top? Or do you think that the money is more likely to flow in some asset category that we can’t quite predict at this moment?

Marc Faber: Yeah, this is a very good point. And I’d just like to mention that I frequently criticize Mr. Bernanke, but the true reason I really criticize him is that he has maybe some knowledge about economic expansion and contraction and booms and busts in a closed system. But he has no clue whatsoever about international economics. Because if you look at the last ten years of economic development in the world, the US went into a boom that created the NASDAQ boom, money printing following the bailout of LTCM, money printing ahead of Y2K and then the NASDAQ bubble burst and then more money printing that then produced the credit bubble and the housing bubble and so forth. But where the money really went to in terms of investments and production and wage gain and the increased consumption was actually in Asia, where as a result of the US trade deficit, countries have a huge trade surplus which boosted the economic activity. And so what you said is absolutely correct. We can drop as many dollar bills onto the United States, but we don’t know where the money will flow to. It flowed into the NASDAQ until March, 2000. Then it flowed into the housing market until 2006, 2007. But basically, where economic activity was occurring and boosted was outside the US. And the more the US will print money, the more, in my opinion, the dollar will depreciate against some currencies — maybe not all because the Euro, it’s certainly not more desirable than the US dollar — but it will continue to depreciate against strong currencies like gold and silver, platinum and, probably, palladium. I mean, I feel sorry for Mr. Bernanke because he really doesn’t get it. He doesn’t understand. He’s a typical academic. You know, a typical academic is a professor of medicine that knows everything about how a patient becomes sick but doesn’t know how to cut something like a butcher and therefore, can’t operate on a patient. Mr. Bernanke academically knows everything, but has no clue about the real world. No clue whatsoever.

Jim Puplava: This brings up a point. Listeners to my show already know that they should own gold and silver. I’ve been telling them that for about ten years. What I find fascinating, Marc, in many of the investment conferences that you speak at around the globe, when you ask how many of the attendees own gold or own more than five percent of gold in their portfolio, very few people raise their hands. And the only conclusion I can draw from listening to this or reading this is that worldwide, investors are grossly underweight in gold and that would imply to me that precious metals — and especially given the fact that we’re more likely to print more money — have much further to run.

Marc Faber: Yes. First of all, I have to make an observation. A bubble occurs after several years of price increase. It’s like the NASDAQ performed well between 1990 and 1998 and then it went ballistic. And between August ’99 and March 2000, the NASDAQ doubled. In other words, at the tail end of a trend, you get an annual appreciation of a market where it caught them recently or where it was the NASDAQ or housing, that almost goes vertically. Nikkei had a similar type of pattern. At the end of the boom market in the 1980s, the Nikkei went up at an annual rate of, I don’t know, seventy percent or so. And this hasn’t happened in the gold market. And I tell you, seeing as I have a website, GloomBoomDoom.com, and a newsletter, from my readers’ inquiries, my sense is that most people have actually already sold their gold. Where continuously, people are told invest in all gold has stopped out, it will go down. And there were clowns that told them that gold was a bubble — recently. I mean, about a month ago, there was even a Fed member, a governor of the Federal Reserve, that said, “If I had any money, I would short gold.” My comment to that is if you’re a Fed governor and you have no money at all, then something is wrong with you in the first place. You shouldn’t be a Fed governor. Secondly, I wished he had borrowed money and shorted it because since then, it’s up like a hundred dollars an ounce.

So I agree with you. I mean, I was at the Resource Conference. This is one of the largest Resource Conferences run by Standard Charter Bank in Hong Kong. All the miners are there and all the bigshots in the commodity space. And investors that are interested in commodities are there. Ask the audience and you would think that these people have an exposure to gold. Only about five people in an audience of like four hundred had more than five percent of their assets in gold. I find this amazing. I was already at two hedge fund conferences. These are relatively intelligent people. You’d think, but none of them had any exposure to gold personally. I said to them, “You’re all intelligent people. How can you not have any gold at all? Don’t you see what is happening with the money printing in the world?” Where people, they look at gold, okay, it was two hundred fifty two dollars in 1999. It’s not fifteen eighty. They think it’s expensive at this level. What they don’t consider is by how much credit has increased over the last ten years, by how much the world’s population has increased over the last ten years, by how much the supply of gold has increased. It’s not increasing, it’s actually contracting. In the next five to ten years, the total gold supply in the world will go up by three times at three point eight percent. No more. You know, you mine something, it’s gone. It’s no longer there. And so the supplies that is no longer there is like oil. You burn it, it’s no longer there. So every oil well around is dry over time.

Jim Puplava: Looking out over the next ten years, I think it would be safe to assume that it’s going to cost us more to live — no matter whether it’s energy, food, etc. — looking at the investment markets, Marc, I know you stress the importance of diversification. But if you had to choose only one investment and you could not change that investment for the next ten years, what would that investment be?

Marc Faber: Well, basically, I mean, I would say we look at different asset classes. So we cash, we have government bonds, we have corporate bonds, we have real estate, we have equities and we have commodities and precious metals. And so the question is, you know, where do you put your money if you and I go away to an island or to jail for ten years and we can’t make any transactions and we come back in ten years’ time? I think if the objective is the maintenance of purchasing power, in other words, you just don’t want to wake up in ten years’ time when you come out of jail and what you have is worthless, then I would say that probably gold is the best alternative. If the question is how do you maximize profit, probably there may be more profit in equities because, you know, we have abysmal performance of equities in the last ten years. And particularly in the US, as a result of the decline in the value of the US dollar, equities would seem to me to be not particularly expensive. I think what would be dangerous for you and me would be to put all our money in US dollar cash and in US government bonds for ten years and then come back and maybe find out that we can buy with a hundred thousand dollars just a cup of coffee — or not even that.

Jim Puplava: You know, I’ve often heard you advise your readers to diversity their assets not just by asset class, but also by geographic location. Would you be kind enough to describe just what it is that you exactly foresee? In other words, just what is the end game, in your opinion?

Marc Faber: Well, basically, I mean, since I’ve travelled a lot, I’ve seen people in Australia, they were Jews, they came from Eastern Europe, they arrived in the course of World War II or just after the war with nothing at all and then they made money in Australia. But the ones that arrived with some capital, they had an advantage. That's been the Chinese, I had a friend, he was working for a client of mine and this client of mine was one of the richest Chinese in Hong Kong because his father had been a comprador for Jardine and he had been a general in the army of Chiang Kai-Shek in charge of supplies, that the type of general, they make a lot of money. Because by procuring goods, you get a big cut. In any event, my friend’s family in Shanghai had been much richer than his bosses family at that time. But all their assets were in China and when the Communists came in, they lost everything. Everything. And another friend of mine, he came in 1975 to see me in Hong Kong. He was working for the family in Vietnam in Saigon. It was the richest family in Saigon. They owned the real estate on, say, the prime street in Saigon, which would be the equivalent of Park Avenue or Madison Avenue in New York. The whole street they basically owned. He came to Hong Kong and while he was in Hong Kong talking to me, Saigon fell. He lost everything. The family, luckily, the father lives already in Hong Kong and had some money there but having not much compared to what he had in Saigon. So all I’m saying — if you’re prudent, you should have custody of some of your assets in the US, some in Canada, some in Australia, some in Europe and some in Asia, Singapore or Hong Kong. But if you have it all in the US, I can tell you already today it is extremely difficult for a US citizen to open an account with a bank overseas. Most banks no longer take US clients because of the new regulatory environment. So you have, officially, you have free exchange rate, you have free money flow. But in practice, you already have implemented some foreign exchange control.

Jim Puplava: A couple final questions, if I may. Something that has struck me about this environment and more recently, it seems that whenever you have money printing of any kind, it usually leads — in one form or another — not only to a bubble, Mark, but in fraud. For example, in the 1990s, we had the Bre-X scandal, in which a penny stock, a gold mining company claimed they had enormous reserves, which later proved to be falsified. Then in October of 2001, Enron was exposed for its off-balance sheet liabilities. Then, of course, we had recently the Bernie Madoff scandal. And now we have Sino-Forest, a widely touted and widely held Chinese forestry company that it had investors, such as the prominent hedge fund manager, John Paulson. Is it my imagination or does it seem like the number of scams has dramatically increased? And if so, Marc, how would you explain this?

Marc Faber: Well, basically, easy monetary policies create greed and bubbles. And one of the symptoms of bubbles and investment manias is always the proliferation of fraud, embezzlement and dishonest practices. And we had also, in the US, I mean, basically, I would say Fannie Mae and Freddie Mac were a complete fraud. But of course, the government will never admit that. I think the US government is a complete fraud, with the exception of some decent people. But by and large, it’s a fraud. It’s a Ponzi scheme. And in China, obviously, we have a country that is growing very rapidly. And it’s caught the attention of the world and of relatively unsophisticated people — dentists, doctors, whatever it is, professional. They think we have to buy some Chinese companies because China is growing very rapidly. And so where there is demand, the supply comes in. A lot of fraud companies are listed in the US and elsewhere. And then they basically are revealed as being fraudulent. This is only natural. But I would say when people discuss China — is a bubble or not a bubble — the fact that there are so many fraud companies in China would point out to me or show me that there is a bubble, very clearly. Latest money printing by Bernanke has basically produced not necessarily a bubble in the US, but it’s produced a weak US dollar, which is a symptom of inflation. And it’s produced bubbles elsewhere in the world.

Jim Puplava: A final question. And this brings it back to something that we have been discussing throughout our discussion this morning, and that is gold. I recently read a report where the average American has ninety percent of his assets, which includes his home, in US dollars. We’ve heard on asset allocation, you will often hear, well, you should have at least five percent in gold and as you have commented, it’s hard to find people around the world that have five percent of their portfolio in gold. Given the probability that they will sacrifice the dollar with all this money printing, Marc, what do you think is a reasonable percentage to hold in gold, given this macro environment and the fact that the US has extended its spending? It’s spread out in three countries with wars, it has unfunded entitlement. And the only way out that I see for these politicians is to print more money. So given these scenarios, what is a good percentage to have in gold to protect oneself, especially when so many Americans have their money all in dollars?

Marc Faber: Well, I think it’s a very good question. And in the course of my life, I think that if I followed what the Jews are doing, you’re usually on the side of the winners in terms of money. They’re very smart at making money. And I have numerous Jewish friends that have either like eighty or a hundred percent of their money in gold, silver, or gold/silver mines and so forth. And I have other Jewish friends that have between thirty and fifty percent of their money in gold and silver. So I personally have less. I have like now maybe twenty percent of my money in gold and silver and in mining stock. But on any meaningful decline, say if gold, and we can’t rule that out and I’m saying that in every newsletter I write — a correction can occur that is meaningful. Like gold started its bull market in 1971. And it reached a peak in ’74 of a hundred ninety seven dollars an ounce. And then between December ’74 and August ’76, at the time the Dow Jones went up very strongly because Dow Jones bottomed out in the bear market of ’73, ’74, in December ’74. But during that time of stocks going up, ’74 to ’76, gold went down by more than forty percent — from hundred ninety seven dollars an ounce to hundred four dollars an ounce. There’s a big, big correction. But then gold went up eight times. And I’m saying, you know, you buy gold today — I don’t know, maybe it goes down a hundred dollars. Maybe it goes down two hundred dollars. But looking at all the factors we discussed, I don’t believe that we are in a bubble stage. Because I lived through the last bubble in the late seventies. I can tell you, the whole world followed the gold market day and night and traded gold twenty four hours a day like the whole world traded NASDAQ stock twenty four hours a day in ’99 and 2000. That hasn’t happened yet. We don’t have a heavy waiting. We don’t have a heavy kind of euphoria about gold at all. I know so many people, they bought gold, they paid three, four hundred dollars. Where was that thousand, they sold it? They sold it at twelve hundred. And that price has never really corrected, it never goes back. It never goes back. They’re sitting there empty. All I can say, the risk today as an investor is not to own gold, but it’s not to own any gold. If you have no gold at all, I think you’re taking a risk. And my advice is simply every month you put some money aside and you buy a little bit of gold. Depending if you’re very rich, you buy every month a ton. If you’re very poor, you buy every month an ounce or whatever it is, or a gram. But every month, you accumulate. You don’t worry about the price. Look to it and you just buy every month a little bit. And your grandchildren will be very happy about that unless the US government takes it away. That is a possibility with Mr. Bernanke. You just look at him. He’s basically not a particularly honest character.

Jim Puplava: I couldn’t agree more, Marc. Well listen, as we close, I want you to give out your website and your newsletter and I want to thank you. I always look forward, Marc, to reading your letter each month. It’s not only sometimes entertaining, but it always makes me think. And I have learned an awful lot reading you over the years. So give out your website, if you would.

Marc Faber: Well, Jim, it’s very kind of you to say so. And I’ve learned from you a lot and I mean, we’ve been friends for a long time, as well. We don’t meet frequently because I travel a lot so I have a very busy schedule and you’re also busy at this and that. But anyway, the website is GloomBoomDoom.com.

Jim Puplava: And once again, GloomBoomDoom.com. Marc, as always, it’s a pleasure speaking with you and thanks for coming on our program.

Marc Faber: Well, thank you very much. And I wish you and all your listeners a very happy summer. And it’s very important to laugh a lot in life. And I have to say, in Southern California, I was with a few friends and we just giggled the whole time. We had a great time. And this is also the good, you know, in America you can’t say all is bad. The good part of America, some people are very nice. Whenever I go, I was recently actually is very funny. I was in America, I had to take four flights. All the four flights were delayed and as a result, I missed two connections. I had to sleep at the airport in Chicago, to sleep to the airport in Kennedy, in Jamaica. There you go. And these are places that airlines, they give you a hotel — of course, not the luxurious Four Seasons type of hotel. But then you go to these local bars and to where it’s very funny. You meet a lot of people and you see the true America. All the people are very friendly and conversant. It has many, many good sides, America. It’s the government that is horrible and, in particular, the present one.

Jim Puplava: Well, Marc, please come back and talk to us again and come back and visit us here in Southern California. It’s a great place to live.

Marc Faber: Thank you very much.

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