Marc Faber weighed in with his latest thoughts and forecast for the second half of 2011 for Barron’s Mid-Year Roundtable. As usual, it’s a great bit from Faber…though I did feel slightly cheated we didn’t get to hear his hard-edged accent and slight disgust for modern Western society myself…
Barron’s: How does the world look from your perch?
Faber: The global economy is decelerating. After the financial crisis in 2008, it was supported largely by enormous fiscal stimulus and expansionary monetary policies. Now it is losing steam as fiscal stimulus wears out and QE2 comes to an end. There will be many more QEs, but not right away.
An economy is like the human body. There are periods when rest is required. In economic terms, that is a recession. Also, if you lived beyond your means by borrowing, you need a period of deleveraging. That has happened in the U.S. only in the corporate and household sectors. Private borrowing has been replaced by government borrowing, which means the overall level of debt hasn’t been reduced. That needs to happen. The U.S. needs to cut entitlement spending meaningfully. It would be best to impose a flat tax and cut government expenditures by 50%. A severe depression ensued when communist countries embraced capitalism. A major readjustment won’t happen in America unless there is a devastating crisis.
You’re cheery, as always.
(Note: If you get stonewalled by their subscriber wall, enter “Barron’s Mid-Year Roundtable 2011? into Google, and hit the first link that appears…it’ll get you in for free).
Hat tip JL for the heads up on this piece!