Marc Faber on Bubbles

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Link for my earlier interview with Marc Faber

http://smartinvestor.in/market/story-20156-storydet.htm


Since you have been tracking so many crisis and bubbles would like to know what is common about them?
The most common point about every crisis is that in that period there was excessive debt growth, excessive credit growth, excessive leverage and excessive speculations that came about because of the excess credit growth. But the Federal Reserve does not seem to understand that. That is the most common.

The other point I would like to mention is that during such crisis, governments should actually do nothing and let the market adjust from the downside. This is because as prices decline and drop, the affordability improves again and at some point buyers come in and as a result the system is cleaned.

However, if governments intervene with fiscal and monetary measures as the US has done, it sows the seeds for the next crisis. The crises in the post 1980s period such as Tequila, 1994, LTCM, 1998, Nasdaq bubble 2000 are all indicators of this trend. The measures led to formation of a bubble which then caused bubbles in other sectors of the economy. Therefore in my view the interventions which always happen nowadays in the Western democracies are actually not desirable. 




What is your view on India in comparison to China and which country holds more growth potential?
India's long term economic growth should get supported by its huge and growing population. But in the case of China, after it's really incredible economic growth over the last 25 years, the country will slow down. For China, 10 per cent economic growth rate is not sustainable in the long run. India has been built up on much lower level of economic development and has the large growth potential. So far in India, infrastructure has not been put in place, I mean the country's infrastructure has improved but still needs to go a long way. And unlike China, the consumer markets in India are not saturated. For instance in China everybody already has mobile phones and refrigerators. But in India, markets are still not saturated therefore the growth potential is high probably for the next ten to fifteen years.

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