The World Is a Mess, But Junior Mining Stocks Could Double
SOURCE: [The Gold Report]- Marc Faber The world’s economy is in tatters and safe havens are few and far between, says legendary contrarian Marc Faber. The banking crisis in Cyprus has shown that even bank deposits are not safe. The publisher of the Doom, Boom and Gloom newsletter, surveying the world from his perch in Hong Kong, discusses the impact of unemployment in Europe, the economic slowdown in China, asset bubbles and the turnaround prospects for precious metals miners. Faber also reveals his investment strategy for these volatile times in this interview with The Gold Report.
The Gold Report: Marc, I recently interviewed James Turk who said that Europe is in a banking crisis, but that some countries are in worse shape than others. Are things on the continent as bad as they seem to be from the headlines in the U.S.?
Marc Faber: Unemployment is high in both Europe and the U.S., particularly for young people. One reason for the high unemployment rate is that it is very difficult to find highly specialized workers for industry. Perhaps that’s due to more university students studying non-user-friendly subjects, such as philosophy. The Western world is lacking in well-trained workers who can handle industrial machines that cost $10–20 million ($10–20M). But if I need a clerical assistant for financial services, I can find hundreds and hundreds of applicants.
TGR: A lack of skilled workers sounds like an economic problem, not a banking crisis.
MF: Mr. Turk is correct that there is a worldwide banking crisis. But the crisis was caused by bailing out the global banking system. Using handouts, the governments monetized the debt structures of the European Central Bank (ECB) and its subsidiaries in countries like Spain, Italy and Portugal.
TGR: If we were to solve the economic crisis, would that solve the banking crisis?
MF: In my view, the European economy will not suddenly recover. It has too many structural problems. One way that the so-called “banking crisis” could be resolved, though, is to let inflation rates rise. Asset prices would then shoot up, and loan portfolios would be better covered. But I do not really think that inflation is the solution.
TGR: It would be a painful solution.
MF: The danger is that the whole financial system could blow up due to the huge amount of derivatives still outstanding. Once again, excessive speculation is being fueled by artificially low interest rates, and asset bubbles exist everywhere.
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The World Is a Mess, But Junior Mining Stocks Could Double
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