Dr. Marc Faber is known as Dr. Doom because, unfortunately, he’s a contrarian whose dark forecasts have been right on the money. He publishes a pithy monthly investment newsletter called The Gloom, Boom & Doom Report.

Here are five questions and answers we plucked from a recent interview with the Daily Bell:

Question #1:

Daily Bell: Do you still expect hyperinflation?
Marc Faber: In my view, the debt level, especially in the US, if we include the unfunded liabilities of Medicare, Medicaid, Social Security and these entitlement programs, is beyond repair. And this will necessitate printing more money. Also, in my view, there is no real political will to address the issues, because who ever would cut entitlements, will not be re-elected. So we have a tyranny of the masses.

Questions #2:

Daily Bell: What has been your position on gold and silver? Do you expect the purchasing power of either or both to go higher?
Marc Faber: Well I basically focus more on gold than silver, although I am on the board of a company, Sprott Inc., that is identified with a very bullish view of silver. I prefer gold. My view is, yes, I have been positive for gold for the past 10 or 12 years and I could make a case that gold today is cheaper than it was in 1999 when it was at $252. Cheaper in the sense that if I compare gold to international reserves or to the increase in the credit markets in the world, I don’t think it’s expensive. And yes, I think it will go higher or, expressed differently, that paper currencies will go lower against the value of gold. But this will be an irregular process, and along with this move into US Treasuries and away from risky assets, I wouldn’t be surprised if the price of gold went down $200. It’s not necessarily a prediction, it just wouldn’t surprise me.

Question #3:

Daily Bell: What do you think of Ludwig von Mises?
Marc Faber: I have a high regard for all the Austrian economists, but I also have a high regard for other economists. They made many contributions to the understanding of economics. I have little understanding when it comes to Ben Bernanke because he disregards the entire importance of credit and is obsessive about credit growth. Also Alan Greenspan, I mean, credit expanded much more rapidly in the past 30 years. This is not sustainable. Maybe for 10 years, but not in the long run. That they completely disregard the danger of leverage will always remain a mystery to me.

Question #4:

Daily Bell: Is the dollar finished as the world’s reserve currency?
Marc Faber: It’s not finished as the world’s reserve currency; it will continue to exist for a while. But obviously there will be competition and there will be currencies people trust more than the US dollar. I think the US dollar has lost prestige. When I think of the 50s or 60s, the US dollar was worth a lot of money and people trusted the US dollar and also the United States. At that time, it was by far the leading economy in the world; that prestige will continue to be eroded.

Question #5:

Daily Bell: Here is a famous quote: “The federal government is sending each of us a $600 rebate. If we spend that money at Wal-Mart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy. The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US. I’ve been doing my part.” Is this really true?
Marc Faber: Well, actually beer is now mostly owned by foreign companies. In reality, America still has a very large manufacturing base and we shouldn’t underestimate that; there are some very good companies in America. At the moment, it’s meant as a joke. But it is true that the problem of America is consumerism. By encouraging this leverage on the consumer level, particularly in the housing market and on credit cards, which is the worst, America has lent to a consumer economy and an economy that doesn’t spend enough on investment.

Investments are infrastructure expenditures. They are expenditures for education, research and development, and plants and equipment. A lot of money has been channeled into wasteful government administrations. The smaller a government is, the more dynamic the economy will be and the larger the government is, the more stagnant the economy will become.

There are exceptions to this rule. The Nordic countries of Norway, Sweden, Finland and Denmark, have very large governments but I suppose in small countries, you can run the country like a country club where people essentially develop solidarity and say OK, we pay high taxes – but we have very good health care; OK, we pay high taxes but we have very good schools for our children. So let’s say in Norway and Finland you don’t need to send your children to private schools, but in America it would be difficult to send your children to government schools because essentially they are inefficient.

H/T: Lew Rockwell

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Tagged as: gold, inflation, Marc Faber, silver, US Dollar