Dr. Doom: Bailout Won't Help Markets Much
The $700 billion US financial rescue plan might give the market a temporary boost, but eventually stocks will fall again, Marc Faber, the analyst know as "Dr. Doom," told CNBC.
Faber, editor & publisher of “The Gloom, Boom & Doom Report”, said he doesn’t believe that the recent efforts to ease the global credit crisis will help.
“It will work temporarily in the sense that some confidence is coming back into the market,” Faber said about the bailout plan. “First we’ll get the bounce from an oversold level and I suppose afterwards it will drift because the global economy is decelerating at an unprecedented pace, and the governments in the Western world they try to reignite credit growth, and I think it will fail.”
He sees the same slowdown in Asia.
“The U.S. produces very little," he said. "Asia is the producer for the United States and it is also the region that has very large capital spending. So when there is a slowdown in the U.S., it’s not good for the U.S., but it’s basically a disaster for Asia. Because of reduced demand in Asia it’s an even greater disaster for the resource producers of the world: the Middle East, Russia, Brazil. The whole world goes into a vicious down cycle economically, and the U.S. is relatively better off.”
Watch the entire interview above.
He didn’t have anything positive to say about the coordinated moves by foreign countries to inject liquidity in their banks.
“In general, I believe market led solutions are better than government interventions and there is no evidence that government interventions bring an improvement,” he said.
Faber points to the Japanese government as an example of this: Since 1989, he said, the Japanese government has intervened and flushed the system with liquidity and created deficits much larger that what the United States will create. “What is the result? The stock market is at 9,000 compared to 39,000 in 1989,” Faber said.
Faber also tore down the notion that stocks over a 20-year period always go up: “That is only correct maybe in U.S. dollars because the U.S. dollar goes down, but I can give you X examples where stocks peaked out and never again made a new high.”
He believes that 2007 will go down in history as a major economic milestone in the world, on par with the Great Depression.
“2007 is like 1929 or World War II, a very important year,” he said. “It’s the year when the credit bubble burst, and when the credit bubble burst the economic implications are very negative.