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This site is the inspiration of a former reporter/photographer for one of New England's largest daily newspapers and for various magazines. The intent is to direct readers to interesting political articles, and we urge you to visit the source sites. Any comments may be noted on site or directed to KarisChaf at gmail.

Monday, November 18, 2013

Marc Faber Fears "The End Of The Capitalist Economic System As We Know It" -- By Tyler Durden, Zero Hedge

"We already live in a financial economy in which the debt and capital markets exceed the value of the real economy by far," Marc Faber explains to Germany's Finanzen100, "and that's before the current formation of bubbles." His most ominous warning, and one that fits perfectly with the seeming insanity of Federal Reserve (and all developed market central banks) is that "the next time a bubble bursts, then the capitalist economic system as we know will falter."

Via Finanzen100 (Google Translate),


The numbers speak for themselves: In 1980, the market capitalization of the U.S. stock market was less than 40 percent of gross domestic product (GDP). The debt, measured in credit markets, was about 130 percent of GDP. Today these figures are higher, according to Marc Faber many times: The market capitalization has reached over 100 percent of GDP, the debt about 300 percent. This is consistent with figures from the consulting firm McKinsey. After calculation, the global debt still stood in 2010 at 158 ??trillion. In 2012, there were already $ 200 trillion - and rising. This makes for a worldwide economic power of slightly more than $71 trillion about three times.

It is a powder keg on which we sit. In a normal real economy, said Marc Faber, the debt and equity markets are small - and there in order to steer the accumulated capital into investments. Net interest acts as a regulator. That is, there are only those made with the capital investment that is truly an attractive return, so a higher yield than fixed-income investments bring.

Speculative bubbles encourage innovation

However, it can also come here to the formation of speculative bubbles, as Faber points out. They are there but small, focused on little damage. On the contrary, you might even be necessary because they enabled quantum leaps in progress and can only increase the production capacity. Such a bubble bursts, then prices will fall, and so more consumers can benefit from the development. Examples give it enough: Whether the railroad boom in the twenties of the last century, the Internet boom in the late nineties or real estate bubbles. When prices dropped after the bursting of a speculative bubble, it benefited from broad sections of the population.

Such bubbles are therefore an integral part of the capitalist system. They promote the progress and increase productivity. But the decisive factor: In a real economy, the amount is limited to credit, as much as the real economic performance. Otherwise, with quasi unlimited credit available, investment is driven purely by liquidity - not real economics. And this is even more true when the market interest rate is distorted, as explained Cindy Sweeting of Franklin Templeton. The capital costs are no longer currently being determined by the market, but distorted by the intervention of central banks. Short-term financing costs are close to zero in nominal terms and negative in real terms.

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