Marc Faber Predicts Last-Minute Greece Agreement

FABER: Yes. I like my Bloomberg terminal.

RUHLE: I like that.

WEISENTHAL: And perfect answer.

FABER: No. I still like the price of metals. They may still come under some pressure, who knows, but in general the debt, the world is indebted and the debt burden is so high that there won’t be any substantial economic growth. Now Japan with Abenomics, they just reported for May that the industrial production was down 2 percent. So money printing doesn’t solve all the problems.

FU: Money printing doesn’t solve all the problems. Yet China is trying to do what it can to bolster its economy. We heard about the interest rate cut, the surprise cut over the weekend. What is your interpretation of that move? Was it aimed at keeping the rally going? Was it aimed at addressing a liquidity shortage?

FABER: My sense is that the Chinese economy has weakened very substantially. The stock market went up from a year ago by more than 100%. I have maintained that the market would correct at least 40%. I think we are down 20%. I think another 20% is likely. But longer term, as you know, the U.S. since 1800s to today have so many recessions, and the Civil Wars and World Wars and so forth, and was still growing.

I’m still reasonably optimistic that the Chinese economy after a slump will come out OK. But they need to lessen in terms of borrowing less, in terms of reducing debt and leverage, as do all the other countries too. But you understand, following the 2008 crisis the central banks allowed governments to borrow even more because of their artificial low interest rates. So basically, global debt as a percent of global GDP is up 30% from the 2007 level.

It’s not going to end well. That’s for sure. Whether Greece is the catalyst, who knows. But definitely the markets are reacting on the downside, and largely because corporate earnings will disappoint. First of all, wages are going up. They will squeeze corporate profits.

Number two, interest rates won’t go much lower. So as they don’t go any lower it also squeezes corporate profits. And number three, the most important economy for emerging markets was China. And China is now growing at maximum 3% to 4% per annum.

FU: Three to four percent, according to Marc Faber. So given all of that, Marc, do we presume that the Federal Reserve is unable to move ahead with its September timetable for an interest rate increase?

FABER: It’s my view the Fed under its (INAUDIBLE) Mrs. Yellen will not increase interest rates for a very long time. And if they do it will be by an eighth or a quarter percent just to see what the market reaction is. But I personally doubt she will do it this year. They’ll find an excuse not to do it.

RUHLE: But should they? I mean what are the unintended consequences of keeping rates where they are? If the U.S. economy is doing well, shouldn’t we focus on that, or shouldn’t she, excuse me.

FABER: Do you really think that the U.S. economy is doing well? I — that’s not my impression. I think the typical household is squeezed very badly. I was recently in a limousine, and then we talked about this and that. And the limousine driver told me his health care premium was — and I mean the insurance premium this year will go up 39%. So I believe that actually most households are struggling, but they’re borrowing again. Most households in the U.S. have no savings. I believe that the U.S. economy will badly disappoint within six months.

RUHLE: Marc, you just carry an umbrella all day, every day, just always rains in Marc’s town. Marc, thank you so much for joining us this morning, the one and only Marc Faber. He’s the editor of the “Gloom —

FABER: Actually in Thailand we have a shortage of rain. We have a cloud.

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