Faber has consistently warned since the late 1990’s that this dynamic would come to pass as the West and the U.S. in particular exported its industrial infrastructure and binged on consumer junk fuelled by easy credit while the emerging economies of east Asia used the proceeds to focus on production rather than consumption to become industrial powerhouses.
He went on to say,
“In the countries that opened up post breakdown of the socialist/communist ideology – China, Soviet Union, Eastern Europe - and India of course we have an entire generation who will earn much more and will have a better standard of living than their parents had.”
He highlighted certain factors that are leading to this lower standard of living for young western people. Banks now generally charge more to hold one’s money than the interest they pay out. He cites the yields on Swiss ten year bonds at 0.46% as an example of how people, and especially young people, are disadvantaged relative to previous generations.
“These people will not enjoy the compounding impact that I enjoyed having started to work in 1970 when bond yields were 6% and they went to 15% and so forth. So during that period of time wealth was accumulating very rapidly plus we had a huge boom in real estate and in equities and bonds between 1980 and 2007.”
“That is not going to happen again.”
Agricultural commodities including palm oil and Asian companies processing agricultural produce is where Dr. Faber currently sees value. Some of these companies in Malaysia and India, for example, pay dividends between 2% and 4%.
The young people who invest in these types of company will see their wealth steadily rise as opposed to their western counterparts who rely on the casino of rising paper asset prices.
Faber also likes the stock market in India and thinks it could see gains of 15% next year. The new government is free market and enterprise friendly and Faber believes the central bank in India is the “world’s best central bank.”
Dr. Faber is a long time proponent of owning physical gold. He has consistently urged people to act as their own central bank in acquiring bullion coins and bars as financial security and he believes that storing gold in Singapore is the safest way to own gold today.
- Source, Gold Seek