Faber sees 'colossal mess' brewing in West

The Swiss investor expects expanding debt burdens and never-ending deficits in Western nations in the next 5 to 10 years. He also says the S&P 500 could see a 20% drop.

By MSNMoney partner Oct 22, 2012 9:56AM

CNBC logoBy Antonia van de Velde


The debt burden in the U.S. and other Western countries will continue to increase, Marc Faber, author of the "Gloom, Boom and Doom" report told CNBC on Monday, leading to a "colossal mess" within the next five to 10 years.


"I think the regimes will try to keep the system alive as it is for as long as possible, which means there's no "fiscal cliff," there's a fiscal grand canyon," Faber told CNBC's "Squawk Box."

Faber argued that the political systems in place in the West would allow the debt burden to continue to expand. Under such a scenario of never-ending deficits, the Western world would rack up huge deficits.


One day, the system would break, he said.


"Eventually, you have either huge changes occurring in a peaceful fashion through reforms, or, usually, through revolutions," he said. The U.S. is getting closer to such a revolution, he said, as is Europe.


"I think the time frame would be within five to 10 years you have a colossal mess … everywhere in the Western world," Faber said. "I think the deficit here (in the U.S.) — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see."


Bureaucracies in the U.S., as well as Europe, are far too big, he said, and are a burden on the economy.


"My medicine for the U.S. is: Reduce government by minimum 50 percent," he said. "The impact would be immediately an improvement in the economy."


Faber believes the Chinese and Japanese stock markets could see a rebound, while in the U.S. the S&P 500 is likely to see a 20 percent downward move.


"I think here we're going to go down 20 percent from the recent top at 1,470. The technical position of the market is poor and the corporate earnings are worsening. . . . I think there's hardly any growth," Faber said.


Four months ago, Faber turned his attention to European stock markets, attracted by the low valuations.


"Greece, Italy, Spain, France, Portugal, they were four months ago at the 2009 lows or even lower," he said.


Faber recommended buying European stocks at the time and for the first time in his life bought them himself.


"I did it simply because the valuations were low. Since then, Greece is up 65%," he said.


He would no longer buy European stocks, he said. "I expect a correction but no new lows," Faber said.


Now he is focusing on Asia.


"In Asia, Thailand from the 2009 lows is up 250%. Other markets like the Philippines, Indonesia, Malaysia, Singapore, are up by a similar amount," he said. The Chinese benchmark index on the other hand was at 6,000 in 2007, now it is at 2,000.


"I think China and Japan could have a rebound here. If Greece could rebound by 65% the greatest garbage could rebound by 65%," Faber said.


© 2012 CNBC.com

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Oct 22, 2012 3:53PM
What we have now is NOT colossal?  Yikes.
Oct 22, 2012 3:51PM
...Obama didn't improve the situation with adding $6 trillion in debt.
Oct 22, 2012 3:51PM
Oct 22, 2012 3:50PM
the america I use to know is  no longer. i am ashamed of our reps they sit on their ivory thrones while kids are sent to be killed in countries for no ryhm or reason. let them get off their flabby asses and go themselves. I fought in a war that made no sense and there hasn't been a reason for an american to die for nothing.
Oct 22, 2012 3:49PM
Hal of you want to blame the Republicans, and the other half want to blame Obama.  You don't want to admit that this has been coming for years with the something-for-nothing attitude everyone has been having and passing on to their kids.  Success is measured in what you've gotten away with or somehow bilked out of someone else or cheated out of the government and not gotten caught.  Is no one happy with doing a good job and getting paid for it anymore?  Is no one willing to take any personal responsibility?  Not one piece of advice I've heard ever includes something like sell your house and buy in cash the smallest house you can afford to pay in full with the lowest property taxes you can find.  How about that?  Buy a house that you can actually afford with property big enough to grow some of your own food.  If things are going to be as bad as you people are making out that nobody can depend on their investments, on Social Security, on having a job with the government or the private sector, well, you are going to have to depend on yourself, aren't you?  What good is a gun if you have nothing to defend?  You are going to lose your home first if you can't heat it and can't make the payments.  You can do without air conditioning, but if you live in a climate where you need to burn oil or gas, I guess you had better think about how you are going to stay warm.
Oct 22, 2012 3:48PM
Dems are incredibly stupid and racist to believe that Obama has done anything to help this country pull out of the quagmire.  And as for it all being Bush's fault, remember that it was the Dem Congress, both House and Senate, that really brought on this mess, including then Kid Congressman Obama.  Two years of Congress and now 4 years as President, and during this 6 year span we have hit all time lows in pretty much every category measurable.  It is 100% totally the Dems and Liberals fault, and now we need a grown up to come in and fix it.  That would be Romney.  Obama is a little boy playing a grown up game, and he is losing.  Unfortunately, when he loses we all lose.
Oct 22, 2012 3:47PM
It'll be interesting to see how the idea of revolution mixes with the general apathy of the populous that has become the United States.  Who are these masses that are going to rise up? 
Oct 22, 2012 3:46PM
I say keep voting them out of office....every four years...because they can not pay them all off....I know the Crown extension - the Federal Reserve prints the money...and has a black budget for all of those greedy sell outs.....but given enough rotation...you will not be able to shut them up....they will eventually talk.....and spill the beans....on the whole lot of the rest of the corrupt congress and house. KICK THE FEDERAL RESERVE OUT..!!! ALL THOSE GEEZERS HAVE ANOTHER TEN YEARS BEFORE THEY ALL CROAK...!!! GOOD RIDDENCE...!!! THAT WILL BE THEIR SICKENING LEGACY...!!! CORRUPTION FAILS...!!!
Oct 22, 2012 3:45PM

We are in the same situation as we were in 2005.


Before the market crash I looked and said is this house worth 1 million dollars?  No way. and then Boom.


Now I look at Home Depot earnings up and only three cashiers in the store, I remember the time when 12 cashiers could not handle the volume. Then I look at the paint. 19.00 for a two gallon Kills primer just 8 months ago and now it is 26.00 for the same amount.


Anyone reading this can figure out the Inflation or devalued dollar and the corporate profits seem to be manipulated because the profits reported  from smaller customer base  comes from the mark up of the retail price  So I ask you this? Can you afford to paint that room? Or change that door or lock?  I see the next boom involving the consumer confidence number when we would rather put milk on the table than throw a fresh coat of paint on the living room wall.

Oct 22, 2012 3:45PM

The S&P might drop 20%?!?!?!  Yawn.

Oct 22, 2012 3:45PM

can you say ,,,,one world order ? its all been foretold before,,,,,you cant keep  peeing on a forest fire and expect it to go out,,,,,,remember when the government kept telling every american to spend to money,,,buy more things to help support the country,,,,,,you cannot ,,,cannot keep up an economy just buy consumerism,,alone,,,you MUST make something,,,produce something,,,manufacture something,,,,,,heres the solutions,,,,,,


1)Cut the government,,,,big time,,,,,,too wasteful,,,,,cut where it makes sence,,,not the defence of the country,,,,not the poor and downtrodden,,,,cut those who can and should work,,,,,


2)JOBS JOBS JOBS,,,,,Tangible goods jobs,,,,,is it that hard to figure out,,,my god,,,,modern tech jobs combined with older school manufacturing jobs,,,,gees,,,and these so called politicialns are our brain trusts?


3)Stop climbing into bed with every country that then stabs us in the back,,,,,the governments role is to protect the United States of America,,,,,and protect those who are persecuted ruthlessly,,,,,everyone else,,,either cut them off and be done with them or hit the restart button on them,,,


4)Stop playing the citizens of this country against each other.Stop paying for things that the gov has no business paying for or mandating,,,STOP PLAYING POLITICS WITH OUR LIVES.


5)JOBS,JOBS,JOBS,,,,,,,Not government jobs either who get cushy overpay ,.,,,,,,real manufacturing jobs,,,,again,,,its not that hard people,,,,,


6)Stop caving into madmen,,,,,,if they are evil and persecute innocent citizens,,,,get rid of them,,,,no  leader or country has a supreme right to rule that land if they are murdering their own under ruthless laws or are a obvious threat to their neighbors,,,,if they cannot rule justly of themselves,,,,then they should be disolved and overseen buy those who can,,,,


but then again this is just an opinion on this silly page,,,,the world wide fires have already been lit,,,,and all we can do is pee on them,,,,,it wont work,,,,,,,best thing to do is prepare as best you can,,,and know in your heart you are right and just and have the deepest faith you can,,,,,

Oct 22, 2012 3:44PM
We need to hear this more often. Perhaps it will help us adress the problems. I doubt many people will pay any attention until our tv's stop getting signals.
Oct 22, 2012 3:41PM

Time to shrink government.  Ya, that will happen.

Oct 22, 2012 3:37PM

Every payday....a bag of rice and a box of ammo.

Getting ready...

Oct 22, 2012 3:36PM
It's what you get when you have a Gangsta for president.
Oct 22, 2012 3:36PM

It's Wall Street.  They induce us to borrow more than we can afford, inflating the value of the collateral.  When the bubble bursts, there's still plenty of debt, so they demand a bailout.  The results are anything from a Great Depression to the Great Recession.  But they'll fix it for us, if we just deregulate them.

To get the economy rolling again, we're induced to borrow more money than we can afford, inlfating the valued of the collateral.....  It's a death spiral.

The capitalists could always claim to be better than the communists, but what of it?  If someone said you were better looking, & sang better than a rhino's rump, would you really feel complimented?

The communists failed in Russia, decayed into a bizarre national socialism in most of the other communist countries, & in North Korea, actually devolved into an inherited monarchy.

It's time for capitalism's fall.

Oct 22, 2012 3:34PM
within the next couple of years the entire government will be ran by the biggest gun. for now it is money. we will always evolve. start buying ammo and guns. eventually you could be running the world. 
Oct 22, 2012 3:34PM
Unfortunately, this is about the practical thing I have heard anyone say lately.  
Oct 22, 2012 3:34PM
People do not have to live with less....THose greedy MF's dont have to steal as much....!!! FOR THE GREEDY CROWN AND IT OTHER PUPPET MASTERS It is all or nothing and FOR THEM IT IS GOING TO BE NOTHING...!!! BRING THEM ALL DOWN ONCE AND FOR ALL....!!!
Oct 22, 2012 3:33PM
When a Republican, Independent, or Libertarian reads that : "All men are created equal", they understand that we all have a chance to excel to greatness or fail to obscurity.

When a Democrat reads "All men are created equal", they insist, that if anyone else succeeded, the government is mandated to make that success a given .................... directly from funds stolen from those who succeeded without governmental help!

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