The credit crunch is far from over and is likely to hit sectors other than housing, Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report”, told "Squawk Box Europe."
Consumers will cut spending because of the high oil and energy prices, and all that the recent rally in stocks has shown is that investors think shares offer a better cushion against inflation than bonds, Faber added.
"I personally think we are just starting the credit crunch and it is going to be worse," he said. "I think the economy really stinks and the next sector to be hit, in America and elsewhere, is retail."
The strength of oil and energy stocks has offset some of the current market weakness, and many people believe we are moving into an environment like the one in the 1970s, with high inflation, Faber added.
But the oil price "is not going to go up another 10 times," unless the Federal Reserve prints money and causes hyperinflation; "but then we should worry about other things, we should worry about civil unrest," he said.
China and India, which for a long time have kept world prices down because of their cheap workforce, are on their way for a change.
"Because they cannot survive unless they push up manufacturing prices, they are an inflationary force on the global economy," Faber said.
However, global monetary conditions are likely to tighten as the shrinking U.S. current account deficit deprives the world of liquidity, he added.