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A sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen, Marc Faber, the author of "The Gloom, Boom & Doom Report," told CNBC Friday.
The central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries, Faber said.
The years 2006 and 2007 were "the peak of prosperity" and the world economy is not likely to return soon to that level, he added.
"I think the final low in markets will occur when the system is cleaned out," Faber said.
Unless the system is cleaned out of losses, "the way communism collapsed, capitalism will collapse," according to Faber. "The best way to deal with any economic problem is to let the market work it through."
US Will Go Bust
The Federal Reserve's policy of printing money is destabilizing the markets and creating "enormous volatility" said Faber, who in his latest "Gloom, Boom & Doom Report" wrote that it was money printing that had pushed stock prices up.
"The US government for sure will go bust. That I guarantee you. Not tomorrow, but it will go bust," he added.
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AP / AP Fall of the Berlin Wall |
US government bond yields bottomed out in December 2008, he said.
"I think this is the beginning of a long-term bear market. And I think the government will have to keep interest rates artificially low because deficits will be too high," Faber said.
As for the recent rally in the stock market, most investors missed it because they focused on the economy rather than look at the technicalities.
"People said fundamentals are bad and markets are going up for no reason. But money printing is a reason," he said, explaining why quantitative easing will continue.
"The worse the statistics will be, the more money will be printed. Believe me, globally all the central banks will print money like there's no tomorrow."
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