In this stark and sometimes disturbing discussion, Jimmy Connor speaks with “Dr. Doom” Marc Faber, who offers his brutally honest assessment of the global and U.S. economies, asserting that while financial markets may be at all-time highs, the real economy is struggling, particularly for the middle and lower classes. He says the severe wealth inequality exacerbated by central bank interest policies that — contrary to popular belief, actually inject more liquidity into the hands of the wealthy — even as the middle class is about to be hit by what he says is an unfair tax due to tariffs. Faber also goes hard at politicians and weighs in on Elon Musk’s new party, while discussing the decline of the U.S. dollar’s long-term purchasing power, preferring precious metals like gold, silver, and platinum as stable anchors against currency debasement. Ultimately, Faber warned that the current path of excessive government intervention and wealth disparity is creating an “unstable environment” that could eventually have severe repercussions, even for the super-rich.
Key Takeaways:
- Why The Financial Markets are Not the Economy
- Manufacturing Hasn’t Shrunk in the U.S., the Jobs Have
- Elon Musk’s Party Could Sway Elections
- Monetary Easing Helps the Wealthy
- Why Gold and Precious Metals are the Safe Bet
- Wealth Inequality is at an All-Time High and Will Lead to Disaster, Even for the Rich
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Marc Faber 0:00
The market for equities in the US is highly priced considering the geopolitical conditions. I mean our friends who are well informed. I think we headed into World War Three and so forth, and I think the social environment is actually dangerous.
James Connor 0:28
Mark. Thank you very much for joining us today. How are things in Thailand?
Marc Faber 0:32
Everything is fine, except the economy and the political situations are not particularly good, but it’s nothing unusual. So life goes on. And I think that, you know, it’s a funny thing, people always say that, or the economists and the academics, they say that Thailand is a failed state, because in the last few years, the country hasn’t grown much, and it hasn’t done well economically, compared to, say, cities like Singapore or Malaysia, compared to Malaysia, the country has fallen back In terms of education and so forth and so on. But despite being a failed state, it’s remarkable that so many people like to be in Thailand. They enjoy the country, and they like to retire here. So we may have to define what is a failed state. I mean, maybe the US is a failed state, I don’t know. Or maybe European democracies are failed states. If I look at France and Germany, then I don’t get the impression that they’re very successful societies at the present time. So I think it’s a for me, it’s a pleasant place. And I work here. I have my business. It’s not a local business, but an international business, and I still have an office in Hong Kong that looks after my accounts and so forth. So for me, it’s an ideal place, and it’s ideal at my stage, at the stage of my life.
James Connor 2:31
Well, I have yet to have the pleasure of visiting Thailand, but it’s definitely on my list. I hear so many great things about it, and when I hear you talk about a failed state, I can’t help but think about Canada. I’m based in Toronto, as you know, and we’ve had this liberal government here for the last 10 years, and our economy has basically been stagnant for the last 10 years. But anyhow, it doesn’t matter where you go in the world. Every country has its issues. But I want to move the conversation now toward the economy, in the global economy, and also the US economy. And I have to say, like the last few months have been quite frustrating. And to say we the last few months have been volatile, it would be in massive understatement. We saw the S P top out in February at 6100 went down to 4800 in April, and here we are. Now we’re in July, and it’s right back at 61 6200 trading at or near all time highs. And as an investor, it’s been frustrating as hell, because I kind of got sucked into that move we saw back in April. I raised a lot of cash. I’m still sitting on gold, which is good, but I missed out on this move. The s, p, just ripped 20 or 25% off its lows. Many stocks had massive moves off their lows. Nvidia, it’s up 80% from its lows. And so I missed out on all of that. But having said all that, what are your views on the global economy and also the US economy? Do you have any concerns? Well,
Marc Faber 4:01
I think that we have to distinguish between the economy and financial markets. The economy globally is not doing particularly well. I mean, we also have to define what are we discussing when we talk about the economy. The economy is basically the prosperity and the well being of many different households. If we look at the typical household in Canada, if we look at the typical household in Great Britain and in the in America and so forth, and in western democracies in general, I can, in good conscience, say that the typical household is suffering his standard of living has gone. Down, or he is living off his savings. In other words, he needs to draw down savings to maintain the same standard of living. And young people, they are suffering from high cost of living. In In other words, whereas their parents were able to buy a house at the reasonable price, nowadays, we have precise statistics that housing in America is at the most unaffordable level it’s ever been we measure affordability of the price of a typical house in America compared to the typical income, the median income and the affordability is very low. That’s why the housing industry the prices are still close. To recognize they’ve been coming down in most cities, somewhat especially condo prices, also in Vancouver and in Toronto and in Montreal. But in general, I would say the affordability issue is a problem for the lower income recipients and the middle class and the upper middle class the super rich. And this is something that is very interesting. The Fed and other central banks have been increasing interest rates now people, including economies, they consider an increase in interest rates as a tightening move in monetary conditions. But I think we have to redefine that that that thought, because you can have an increase in interest rates that creates additional liquidity, because the money is concentrated among wealthy people, and so you Take my position and my company’s position, the worst position was in the year, say, leading to 2020 22 when interest rates were zero, because we maintain cash positions And we have bond positions and so forth. So when interest rates were zero on the deposit position, we didn’t get any income. But now I’m getting on all the money that we have, on deposits and so forth. And with brokerage accounts and investment banks, I’m getting four to 5% interest. So actually, my cash flow has never been better than now. I hate to say it, because I’m living in a city where most people, the majority of people, is struggling, and I can tell you, it’s depressing to see so many people who have really nothing, nothing. They have nothing that they have to earn money today to pay for the food of tomorrow. For me, it’s very disturbing, but this is what the Fed and other central banks have created, this huge wealth inequality and the two tier economy, the economy of the rich, is doing wonderfully well. The economy of the typical American, the typical citizen in the western world is doing badly, and the tariffs that Mr. Trump is proposing is going to make the situation even worse. Why? Because ordinary people buy groceries, they buy goods, TV sets and hand phones and so forth in department stores, or they order it online at Amazon and so forth, they will pay the tariffs. This a tariff is a tax, nothing else is a tax that the government steals from ordinary people, the rich people, for them to buy a mobile phone, for them to buy grocery is nothing in comparison to their income. It doesn’t show up in the balance sheet, in their expenditures. What shows up is. The ownership of a private plane, the ownership of a yacht, and so forth that shows up, but these items are frequently bought in the name of a corporation located in a tax free haven in the Cayman Islands or in Bermuda or wherever, and so the rich people are hit the least by the tariffs. In fact, if you have a private plane, you can smuggle in your cognac and your red wines and whiskeys, the expensive stuff, nobody checks really at the custom. This is the reality of tariffs, and I oppose it on both economic for economic reasons, that it’s a tax increase that is very unfair, and also on on grounds that tariffs lead to protectionism, and then other countries impose tariffs as well. It reduces world trade. And I don’t understand the reasoning of these protectionist people, why you would want to manufacture a TV set in America where the cost of manufacturing would be much higher than buy the TV set from Taiwan, South Korea, Vietnam, China, that I is mind boggling. Is like someone in Alaska saying, I want to produce wines in Alaska, when the wines can be produced in Morocco, in Algeria, in Italy, in Spain, wherever where the climatic conditions are much better for the production of wines.
James Connor 12:05
There’s so much happening in the world right now, especially when it comes to geopolitics, and if you need help understanding how these events will impact your financial future, consider having a discussion with a professional financial advisor. You can find out more information@wealthion.com slash free. Once again, that’s wealthion.com/free now back to the show. So I like your analogy about winemaking, because you’re right. You would never make wine in Alaska, right? You’re going to do it in a climate, in a location that where grapes can grow, and they can grow very well, but you raised a few good points here, and I just want to touch on one of them. And you were talking about the wealth disparity that we’ve seen now. It’s never been wider between the rich and the poor. And you look at Jeff Bezos, who just dropped $48 million on his wedding in Venice. Okay, that’s one extreme. And then at the other extreme, you got people in the US and in Canada, they’re working two or three jobs just to get by. And I see this all the time, and I think we saw it in q1 numbers too. We saw many companies, including Walmart, McDonald’s, Starbucks, so many companies came out with profit warnings saying people just aren’t coming into their stores. They’re just not spending as much money, and they’re not because of all this uncertainty, the other thing you touched on was this affordability issue, and I really see this in Toronto, and I have three young kids, two of which are in university, and they’re going through this right now. Thankfully, they both have internships, but many other friends do not have summer jobs this year, okay? And a lot of that has to do with the uncertainty. And I’m going to throw a few numbers at you Mark, just to give you some sense of what’s happening here. The unemployment rate in Canada is 7% in Ontario, which is the largest province in Canada, it’s population 15 million. The unemployment rate is 8% in the city of Toronto. It’s approaching 10% youth unemployment, which is 15 to 24 in the country of Canada, it’s 14% mark. We haven’t seen that since the 1990s so that gives you some idea of what’s happening here. But where I want to take this now is to the US, because we just saw non farm numbers for the month of June, the unemployment rate was 4.1% down from 4.2% and I have to admit, these unemployment numbers are hanging in quite well in the US. How do you explain that? And why aren’t we seeing the weakness in the US that that we’re seeing in Canada, for example?
Marc Faber 14:38
Well, it’s difficult to tell exactly, but it would seem to me that in the US, the unemployment rate is low because a lot of people don’t file for unemployment benefits because they get other benefits that are superior. Barrier to unemployment benefits. My view would be also that in an economy, a lot of people use services which previously they performed themselves. Say, a household, a typical household, say, my grandparents household was the man works, the woman is at home and takes care of the household. My grandmother, she got up, and then after breakfast, she started to cook for lunch. It took about three hours to finish the meal. For lunch, because that was the main meal. The dinner was then a more simple meal, but the lunch was a whole expedition. And after lunch, she went to take a rest, and then the whole household centered around preparing dinner and cleaning the house and the looking after the garden and so forth and so on. A young couple doesn’t have that lifestyle anymore. Both people work and when they go home, they order food online or or they go to restaurant. Now, the restaurant visits have diminished, because for many people, it’s cheaper to order food to their homes and eat at home and drink a bottle of wine at home and so forth. But couples that go home and are together at home and eat the food they cooked for two or three hours. Forget it doesn’t exist anymore. And so the service sector has expanded dramatically. Whereas, say, and I have to define this one always says, manufacturing has shrunk in the US, this is incorrect. The manufacturing jobs have shrunk. They have become smaller because of automation and efficiency gains. And I suppose like agriculture, agriculture used to occupy 80% of the population in the 19th century, but when they invented the tractor and the Combine machines and all the agricultural machines, one farmer today, he can alone farm As much as 3000 people before I’ve been on farms. One farm, I mean, the guy was very clever, and he was a mechanic. He could just solve a lot of different problems. But with his tools and machines, they are, of course, expensive. He looked after a piece of land that is gigantic. There’s not a single farm in Switzerland as large as a farm in America doesn’t exist. So you know that the manufacturing employment is going to go down, which is a good thing that a lot of things that require work with hands is transferred to China, Vietnam and other countries now Trump in his economic ignorance I want to state this, the president of the US is the most ignorant but greatest interventionist that we ever had in government. He is naive and incompetent, but I would have voted for him because he’s a much better alternative. I mean, you talked about Canada and the little progress in Canada and so forth, and the economy and so I don’t need any speeches about Canada. All I need is to see Trudeau. Justin Trudeau, that is enough. That is the worst leader a country can have, a complete, incompetent, ignorant and his bordering madness that is the leader of the world. Western world. The typical leader of the Western world, they’re all cuckoo. You look at Macron, you look at s in Germany, all these characters, they’re mad. They’re mad.
James Connor 20:16
How do you explain that? It’s almost like these individuals that want for pub, run for public office. They have some sort of, I don’t know, narcissistic qualities, right? Like, you know, you talk about Justin Trudeau like he had zero qualifications become the leader of a country or the leader of anything. The guy was a teacher, with all due respect to teachers out there, what they do is very important. But this guy could not, knew nothing about business. You knew nothing about the economy. How the hell did he ever become the leader of a $2.5 trillion economy? It’s not even 2.5 trillion. It’s 2 trillion.
Marc Faber 20:48
Look, I don’t know. This is a reason. I seriously question that democracies will survive. I don’t think so. They all bring in. In business, in general, someone is completely incapable the ease out. But in politics, they’re shot upstairs. You look at Leiden in in Europe, the leader of the EU she was completely incompetent in many different positions, and what was the result? She went higher and higher. Is, I mean, amazing, but this is the fact, but specifically on the economy people say that this politician doesn’t do anything, and so forth. For me, politicians that don’t do anything are the best, because the best, as we know from Adam Smith and from the experience of the 19th century is little government and a free market. And the free market gives incentives to people to work, to move, and if they work hard, they earn more. If they work less than, they earn less. And so that is a huge incentive for business to prosper. And the huge incentive is, of course, failure, when people can go bankrupt, when companies go bankrupt, then they hustle to essentially innovate not to go bankrupt. In other words, they develop constantly new products and so forth. But nowadays, the system under the socialists and the world improvers, we have now this new class of people. Anyway, under this influence, it’s now no longer acceptable that companies go bankrupt, so the government steps in with subsidies and so forth. This is, of course, a complete disaster, because eventually every company will be subsidized.
James Connor 23:15
So the President has only been in power for six months, so a lot can happen, and he’s making a lot of changes to the economy. So I guess time will tell what’s going to happen here. But it sounds like you’re quite, quite critical on what this administration is doing to the US economy in terms of tariffs and the trade wars, etc. Where do you see the US economy going in the back half of the year? Do you think we’re going to start seeing a lot of believe,
Marc Faber 23:42
seeing a lot of believe? I mean, we have to define what is the economy. Is it the economy of the 0.1% of the richest people of Bezos, and, I mean, I’m happy that he has the money. The worst would be that someone in government would have that kind of money. You understand, I like an entrepreneur to look after money. I don’t like the government to look after money. Bezos has done a if you have to judge socially, Bezos, what has he done? He’s done a great job enabling people who live anywhere in the world to buy his products and at a reasonable price. I’m sure there are, you know, websites that can sell things, maybe a bit cheaper than Amazon, but Amazon is reliable, so it’s like nowadays the socialists always attack, attack the so called robber barons. The robber barons were people like Carnegie in steel and other people in railroads. Yes, and in coal mining and in food packaging and so forth and slaughterhouses and so forth. These were the robber barons, the Rockefellers also, and so forth. But what they did, these people do, they lowered the transportation cost from New York to San Francisco by 80% by building railroads. They took their own money, and they took their own risks, and they raised money and so forth. So the 19th century, we didn’t have a central bank, and what happened the country America grew from 4 million people in 1800 to 80 million people in 1900 and in 1900 the price level was no higher than in 1800 is this bad? I wish we had the robber barons today, and we have, to some extent, except in many ways, their productivity improvements are not what it was in the 19th century, but I think companies like Amazon have actually increased the productivity of most people because they can order goods Without wasting time and going into shop and so forth. So
James Connor 26:28
we’re going to see, I think,
Marc Faber 26:33
that the media principally, and some government officials and the academics. The academics, of course, they hate people like Bezos because he’s successful. The academics are sitting in universities. Most of them have a salary, but nothing special. They hate successful people. They hate Elon Musk, not that I have a great admiration for him, but at least he’s done something, and he was very clever at extracting subsidies from the government. His wealth comes mostly from subsidies. And he attacks the government. I like that. It’s a very bold move by him. He stands to lose a lot.
James Connor 27:36
So he’s coming out with a new party, the American party. What are your thoughts?
Marc Faber 27:41
Well, Walter, the philosopher and critic, has said, it’s very dangerous to be right when the government is wrong. That is my advice to him. I like that so he can have a you understand, he can have a deciding influence. He can have a very small party, and he can side with one side or the other side. And by doing that, he can have great influence on political events in the US. He can basically blackmail each side, and each side is not particularly competent, as we have seen now,
James Connor 28:30
but it’s going to be very distracting. I mean, look at Tesla. Tesla’s losing $50 billion a day in market value.
Marc Faber 28:39
Well, the value of Tesla is in bubble territory when you compare it to the other automobile manufacturers and so forth, there’s nothing special to Tesla. It manufactures a product with batteries. I, personally, I would never buy a battery car. And many people are similar to me. I don’t have a car. I ride motorcycles. My motorcycles, they use that much gasoline as a car or more.
James Connor 29:27
Now I want to go back and ask you about the US economy, because I want to push back a little bit okay, because you you said you have a lot of concerns about it. But once again, when I look at some of these stocks that have moved here in the last few months, I’m going to throw a JP Morgan, this is one of the first companies the reporting here in the coming days, but this thing’s had a massive move off its lows. It’s trading at 2.5 times, book significantly higher than any other bank company. But nonetheless, the banks are a good barometer of what’s happening in the economy, because they’re lending out money to corporations. They’re. Lending out money to individuals, and yet they’re doing so well. How do you explain that, if the economy is in such dire straits,
Marc Faber 30:08
the explanation is this, in my view, when you are in a monetary, monetary easing cycle and when you create monetary inflation by increasing the quantity of paper money. Nowadays it’s electronic money, you have to look at, where does the money flow first? Too? Does it flow to the guy on the street first? Or does it flow when the Fed creates money? Who gets the first money balloon? It’s the banking industry, the insurance industry, and then it flows down into the economy and into the credit system of ordinary people. But the ordinary people are at the low end. They get, say, 3% of what of the money that was created at the top. So the money that is being created by the Fed boost the profits of the financial intermediaries, the financiers, as we call them, they do very well, and then corporate profits do very well because they inflate under the illusion of wealth. Wealth is being created in terms of profits and and this wouldn’t be the case, but it’s the case because of the opening of China and other emerging economies that have kept goods price inflation low. There’s very little goods price inflation in the system. There’s a lot of inflation, I mean price increases in industries that are regulated by the government, that goes up in price that I assure you, and so the profit picture is favorable and the banking profits are there as long as the money is being printed. And I said to you at the beginning of this interview, the fact that interest rates go up does not necessarily mean that money is tight. I can see I am in an investment advisor, I deal with rich people and so forth. I can see plenty of liquidity. There’s no tightness of liquidity, none whatsoever. Now there may be tightness of liquidity for the small businessman. He has a small shop. He knocks on the door of a bank and says, I want the loan because business is bad. Well, it’s very bad. Common sense to ask someone to lend you money and tell him that your business is bad. You should say, my business is brilliant. Please lend me money, but nobody will lend the small guy money is a waste of time. They will use the money to speculate in foreign exchange, to speculate in precious metals, to speculate in the stock market, to speculate in the bond market by being long or short, but to lend money to the small businessman is a losing proposition. Losing proposition. You lend money to an individual who has a credit card, then you can go after his assets if he doesn’t pay.
James Connor 33:59
Mark, I want to ask you about the US dollar now, and the US dollar has been under pressure. In fact, it’s had, it had its worst six months to the year since, I think, over 50 years. And this is another thing that’s hurting me. I because I’m based in Canada, I have a lot of us investments, and of course, those investments, they’re doing well, but at the same time, they’re in USD, so that’s going down. So So make it on one like the S and P is up 5% on the year, but the US dollars down 10% on the year. Where do you think the US dollar is going in the coming months? And do you think this downward move is going to continue?
Marc Faber 34:37
Well, I think you’re asking the wrong people, because it would be difficult to find someone who is more negative about the US dollar than myself. Of course, in the last few years, the dollar was strong, but in a broad in a structural downtrend of A. Currency, you have counter trend moves. And so the dollar was strong for a few years at that, I admit, but we have to also define against what and so forth. Part of the strength of the dollar was that other central banks have been even worse than the US central bank. I mean, you take Japan, you have zero interest rates to speak of, but the cost of living increases of around 3% so you have strongly negative interest rates. And the same. In Switzerland, we have zero interest rates. And when I read service by McKinsey and all these agencies that know everything in the world, then Zurich, Geneva Bern Basel are among the top 10 most expensive cities in the world, you understand, but the Swiss government says we have no inflation. So how come you have the most expensive city in the world if you have no inflation? I think the way inflation is measured should be different. But anyway, what I’m suggesting is the dollar was strong because other currencies were even worse. Now, can we determine the value of the dollar in terms of euros, in yen and so forth, that are not desirable assets as a store of value. You understand, I look at, say, gold, silver, platinum, as an anchor of monetary stability. So when I started to work in 1970 $35 bought one ounce of gold. Now I need 3300 whatever. So tell me, did gold go up or the value of the dollar went down against the anchor of stability, which is the US dollar. Now that the gold price, in my view, you can say gold went up, and I say not gold was stable, but the value of the dollar, the purchasing power of the dollar, has gone down massively, and so have other currencies. They also went down massively against gold, silver and platinum, and I think it will continue. In fact, my argument is, dear God in heaven, please keep Donald Trump alive for as long as is possible, because he’s a present from you for us gold holders. He’s a gift to the world, for people that own gold. And I don’t understand we have a Treasury Secretary, and everybody says he’s so smart. Yes, maybe he was smart, but maybe he wasn’t, that the fact that someone is in a hedge fund doesn’t make him necessarily smart, especially if the hedge fund is run by George Soros. Now the thing is this, if the treasury secretary in the US had or the previous one, the previous one was hopeless. Yellen was a complete hopeless character in terms of running the Treasury. And Bernanke, not much better. But if these people were so smart, why didn’t they issue paper money dollars to the world and accumulate precious metals themselves. They could have bought, they could buy today, all the supply of platinum in the world. And the platinum prize now was at the 122 years low against gold. Recently, the platinum price, in my view, could easily go and sell at the premium to gold. All you would need is BlackRock and two or three other funds to accumulate platinum. The Treasury in the US could do it. I think the best advice I can give to Russia and to South Africa is to squeeze the platinum market. I mean, the platinum market is very small, whereas the silver market, when the hunt brothers in 1979 1980 squeezed the silver market. Now it was a big market, but the platinum market compared to gold and silver, is tiny. So if you talk about the dollar, I think the direction of the purchasing power of the dollar has to be like in the last 100 years down and under Trump, this decline in the purchasing power will, in my opinion, increase, not diminish, because Mr. Trump has no regard for debts, and he has no regard for paying debts. That is the crucial issue. When you lend someone money, the most important is, does this person feel bad not repaying his debts? If he feels good about you know, if it makes him feel good of repaying debts, he’s a good person. Is a good creditor. But if you have people that disregard repaying debts, as Mr. Trump has proven repeatedly, not once, repeatedly, in his business career, then he’s unsuitable to borrow money, but he will borrow money more than anyone else would have done. And there’s they are agencies in America, economic think tanks and so forth. They have calculated that under Mr. Trump’s policies, the deficit will go up more than otherwise would have been the case. So to answer your question, I think individuals should still own precious metals, not 100% the other things that will do better than precious metals, but I think as a reserve currency, if you have a portfolio of different assets, I would own some precious metals and not store them in the United States, not in the US, elsewhere.
James Connor 42:19
And before I let you go, why don’t you first tell us where, if somebody would like to read more about you online or read your research, where can they go?
Marc Faber 42:29
You’re an optimist. I’m not sure anyone would want to read what I’m writing, but I have a website, gloom, boom, doom.com, and the various products are offered there. And I mean, anybody can google my name and define essentially where I am,
James Connor 42:54
and we will include that information in the show notes. Mark, once again, I want to thank you very much.
Marc Faber 42:59
Well, I thank you very much, and I wish your readers a lot of success. I mean, I think the market for equities in the US is highly priced considering the geopolitical conditions. I mean our friends who are well informed. I think we’re headed into World War Three and so forth. And I think the social environment is actually dangerous. With the wealth inequality that we have nowadays is not healthy forest society. And I’m an ultra capitalist. I understand the wealth inequality, and I favor wealth inequality, as in, people should be rewarded who work hard and so forth, but the fed by printing money has made things much worse, and it will lead to an unstable environment that will hit the cross of the super rich, very hard, eventually, Eventually,
James Connor 44:19
interesting thoughts. And with that, why don’t we end it right there? Mark once again, thank you. Stay well.
Marc Faber 44:26
Thank you very much.
James Connor 44:29
There’s so much happening in the world right now, especially when it comes to geopolitics, and if you need help understanding how these events will impact your financial future, consider having a discussion with a professional financial advisor, you can find out more information@wealthion.com slash free. Once again, that’s wealthion.com/free you.
