David McALvany : With over 40 central banks setting rates at or near zero percent, there is the potential for problems to arise in almost every part of the globe, and perhaps this fits the earlier question: Where would you see opportunities, where would you see risks, and should we have any concerns lingering in terms of the old inflation versus deflation debate?Marc Faber : It all depends how you define inflation. Normally, some people think, like the Fed Chairman, that if consumer prices go up, that is inflation. He doesn’t look at rising stock prices, rising art prices, rising real estate prices, rising collectables pricing, or rising commodity prices, as a symptom of inflation. But these are symptoms of inflation. They arise usually because of too much money printing.
I look at it this way. Every inflation eventually comes to an end, and is followed by deflation. I just don’t know when the deflation in stock prices will happen. To some extent, it already happened in the gold market. To some extent it already happened in the real estate market. It hasn’t happened yet in stock prices, but that is likely to happen as well sometime in the future. And when it happens, I think the consequences for the real economy will be negative.-
You Don’t create Wealth in a Nation by boosting Asset Prices. You create Wealth through Employment and Capital Investment
Marc Faber : So if you want to boost equity prices, or asset prices, print that much money. But as I just tried to explain, you don’t create wealth in a nation by boosting asset prices. You create wealth through employment and capital investment in factories, in infrastructure, in education, and in research and development.
Marc Faber : you cannot create Real Wealth by Printing Money
Marc Faber : First of all, as an economist, I have to say that you cannot create real wealth by printing money. You can create illusionary wealth, in other words, asset prices go up, but the wealth of a nation comes from work, not from speculative gain, and it comes from productivity, innovation, and capital spending. It doesn’t come from consumption. Essentially, what we have done in the Western World is to increase demand through consumer debt over the last 20 years, and now through government debt, and both are very dangerous developments because they take demand from the future and [expend it] today. But both are not sustainable in the very long run.
