Excerpts from Marc Faber's talk

Marc Faber was in Singapore recently. Below is an extract from Kevin's blog:

a) the decade up to 2007 was a lost decade. There was no wealth creation only asset inflation from excessively soft interest rate policies by the Fed which tried to use low interest rates to get itself of every problem including LTCM.

b) this same soft interest rate policies as well as fiscal policies might aggravate and prolong the current downturn. These same policies will once the deflation cycle has ended lead to a period of rampant inflation

c) despite low interest rates and aggressive monetary and fiscal policies - the world is entering a severe and prolonged period of deflation due mainly to deleveraging - which is only about how done.

d) the waves of selling in all asset classes comes from this deleveraging process which enters period of accelerated selling when certain asset classes are downgraded to junk status.

e) another big bubble yet to burst is US Treasuries - its only a matter of time before this happens
f) the recent US$ strength comes from the decline in the US Trade deficit and is only expected to be for a short while, ie expect US$ weakness later this year as the destruction of wealth in the US will take many years to rebuild. It took the Dow more than 20 years to recover above its post 1929 depression levels, ie such a massive crisis usually damages the economy and society for some time
g) they expect the UK economy to be more badly affected than the US and the British pound to become the British peso
h) China can become a new source of demand for the global economy but this will take time. They felt that China would struggle to do 8% GDP growth this year with a more likely figure being 4-6%