Marc Faber on Capitalism: It Could Collapse

Other than the reserve currency status of the dollar and the size of the western military industrial complex, it is difficult to see what is supporting the western economies.

Faber's forecasts have been reasonably accurate over the past few years, however, it would be difficult to call the existing system where almost 50% of all US engineers are employed by the government or a government contractor capitalism. It would be difficult to call the AIG and GM deals love children of capitalism. It would also be difficult to call artificially low interest rates controlled by a central bank employing quantitative easing the hail Mary plays of capitalism.

Marc Faber: Capitalism Could Fail

Monday, May 18, 2009 11:41 AM

By: Dan Weil Article Font Size

Investment guru Marc Faber says the financial system must be cleansed to save capitalism.

"I think the final low in markets will occur when the system is cleaned out," Faber told CNBC.

Unless that happens, "the way communism collapsed, capitalism will collapse," he says. "The best way to deal with any economic problem is to let the market work it through."

He sees the Federal Reserve and other central banks continuing to print piles of money. And the outcome won’t be pretty.

"The U.S. government for sure will go bust,” Faber says. “That I guarantee you. Not tomorrow, but it will go bust."

He isn’t optimistic for the fate of the global economy either.

“I don’t think that the global economy will recover anytime soon,” he says. “And we have to define what a recovery is.”

If economic output drops far enough, a mere revival of inventories can push growth up a bit, creating a mild rebound, Faber says.

“I take 2006 and early 2007 as the peak of prosperity in this long cycle, and I don’t think we’re going back there anytime soon.”

Many other experts share Faber’s bearish view of the global economy.

“The debate will continue on whether it’s going to be a V, U or L-shaped recession,” former World Bank president James Wolfensohn said at a recent conference.

“My own judgment is that it’s more likely the latter. I don’t believe we’ll get a quick fix any time soon.”

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