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.
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
More from CNBC
I've been advocating for my clients to deleverage themselves as much as they can for a few years now- but thanks Marc Faber for backing that up for us.
But revolution ? Our 2nd amendment, and those who embrace it, will keep those who want to throw it all away in check. I don't think Europe has anything close to this great right we have in America.
The way Obama has been operating the government since he took office it seems like his (not so) hidden agenda is to create a crisis so severe that it will call for extreme measures like a wholesale move toward Socialism.
old man 76: "The whole world is more or less on a down hill slide. Money, power and greed are the top priorities of people. If you expect to have some one make a world where life is easy then your are ready to be committed. People are just going to live with less. Fewer cars,electronics, smaller homes, fewer toys and such."
It's the cycle of wealth that flows towards the elites, until there is social unrest and then it flows back to the masses for a while, either by revolution or political realignments and wealth redistribution. This cycle is nothing new in history.
. . the government is losing its CREDIBILITY......not addressing the needs of the peope
Banks that are too big to fail ??
Wall Street's Diveratives ??
......Foreign Aid for nothing.
..Free Trade agreements costing JOBS....
Why will be fund Afghanistan till 2024 ???
..PEOPLE CAN NO LONGER BELIEVE WHAT OUR GOVERNMENT SAYS
LETTER TO THE RULING CLASS:
You control our world. You’ve poisoned the air we breathe, contaminated the water we drink, and copyrighted the food we eat. We fight in your wars, die for your causes, and sacrifice our freedoms to protect you. You’ve liquidated our savings, destroyed our middle class, and used our tax dollars to bailout your unending greed. We are slaves to your corporations, zombies to your airwaves, servants to your decadence. You’ve stolen our elections, assassinated our leaders, and abolished our basic rights as human beings. You own our property, shipped away our jobs, and shredded our unions. You’ve profited off of disaster, destabilized our currencies, and raised our cost of living. You’ve monopolized our freedom, stripped away our education, and have almost extinguished our flame. We are hit… we are bleeding… but we ain’t got time to bleed. We will bring the giants to their knees and you will witness our revolution!
The middle class that built this country
Copyright © 2014 Microsoft. All rights reserved.
Breaking up big banks is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.
VIDEO ON MSN MONEY
Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'