"This Gonna Spark The GLOBAL Recession..." - Marc Faber

Added: 2026-05-28

[00:00:00]In my view, we've been in more than a stagflation for a long time. We have dual economy. We have the economy of ordinary people in the world, and these people that get the salary or they have a small business, and in real terms, inflation-adjusted, what has happened is that the cost of living is going up more rapidly than their earnings or their wages. And so, in real terms, they're less well-off than they were, say, 20 years ago, or they enjoy a standard of living that is inferior to the standard of living their parents used to enjoy. You know, the GDP figures are misleading. They always show some growth because they're published by the government, and the government will, of course, never admit that they mess up saying so, that their interventions are misguided. But, in reality, we've been actually recession for most people.

[00:01:03]But, there's an exception. People who have assets, say you own a house, and I have my portfolios and my financial assets, and also real estate, and so forth, and so on. So, the money printing has lifted the value of all these assets, and when I look back at the '70s, we had one or two billionaires in the world. In 1980, we had about six billionaires in the world. And now, in every country, we have thousands of people that have a billion dollars because money has become of lesser value. The purchasing power of money has gone down. So, we've created kind of the illusion of wealth, and the illusion of wealth is true for the 1% of the population, the asset holders. But, most people who not asset holders, say 60% of the population, they are less well-off than their parents were. So, the money printing by the Federal Reserve and the debt explosion by the government has lifted the wealth of a very narrow group of people and their economies are doing okay. But the economy of the typical American or the typical European is not doing particularly well. They live paycheck by paycheck. I think that even without further disruption, the oil price will stay at an elevated level because the damage has occurred and even if a straight of Hormuz were to open tomorrow, which won't happen anyway, but say there will be an easing of traffic for sure. But the price increases that are underway at the present time, they're here to stay and so I think what you'll see is that there was an increase in prices already and this will accelerate on the upside in the next few months. So, in my view, the economy will not do well, but the stock market may do well as long as they keep on printing money. My view is that the Trump administration, notably Mr. Trump, he was kind of dragged into this war. Maybe Netanyahu had something on him and kind of encouraged him to participate. And then Trump administration tried to justify the war by saying, "Well, we had to do it because the Iranians were building nuclear weapons and so forth."

[00:03:36]So, they had to sort of justify it. And now they suddenly realized that although the US is actually not needing any Middle Eastern oil to speak of and is at in a better position than other countries, their prices for oil products are also going up and the midterm elections are coming up. So, Trump, he wants to have a good showing in the midterm elections and one major concern among voters are the women who go to buy groceries. And if they see the grocery prices go up and so forth, they are bitching. So, I think that Trump administration is now backing off the war in order to kind of sort of not disrupt the economy too much. People in America, ordinary people, they wouldn't even know where Iran is, but they have a clue about the prices they pay at the grocery store and at McDonald's. And when they go and put petrol in the tanks of the car and when they pay the electricity bills and so forth and so on. So, the Trump administration now is backing off because they want to deal to end the conflict and to bring down or at least contain the pricing creases. So, in my view, they're in a horrible mess and the problem, of course, is that the Israelis, Netanyahu, has to be mad at it because he wanted to really have a regime change in Iran and that is not going to happen. He continues his war in Lebanon and that gives the Iranians some bargaining power. My sense is they will find a near-term solution, okay? But the near-term solution, when you look at it, doesn't solve anything and does not improve anything compared to prior to the war. This conflict is the most senseless conflict you can imagine. Like Ukraine, doesn't make any sense, but it seems that some people benefit from war effort and a lot of money flows to the arm dealers and the weapon manufacturers. And a war can sort of boost economic activity for a while and the Americans will argue well we suffered the least in this war conflict but that is not entirely true because as a result of this war interest rates on the government debt are rising or they're not going down as much as they would otherwise be doing and then the interest payments on the debt become burdensome. They're already the largest expenditure in the US budget and if they go up then more money printing has to get underway to finance the deficits and that then has an impact on the rate of inflation. Inflation goes up and bond prices tank. I think some people told Trump that this war may cost a lot of money and actually prevent interest rates from coming down. That would be my view. The market is not taking into account that possibly interest rates cannot go down much here because of cost pressures that things will become more expensive. Secondly, at the moment the money printing has actually been very favorable for corporate profits but I lived through the 70s I can tell you one of the major concerns in the 70s for corporations that costs were going up more than their selling prices and so the margins then started to go down the profit margins and earnings were then relatively subdued because of the rise in interest rates the price earning ratios of stocks came down and I have to say given the inflation rate now and let's define here the inflation rate as the increase in the cost of goods and services. If these costs go up more than real wages, then real wages decline. And in my view, already today, the interest rates are probably too low. They should be higher. But for many sectors in the economy, interest rates are high. Say if you own a commercial property in Baltimore and Chicago and wherever, and the prices are going down on your commercial properties, then the current interest rates are already very high.

[00:08:11]You see, in my asset allocation, and most of your viewers would disagree with me, but I own fixed interest securities.

[00:08:19]And I'll tell you why. I think that we're moving into period where maybe you lose less money on bonds than by being in stocks that will go down 90%. I mean, you just look at the last few years. The Generation Z, they bought into cannabis stocks a few years ago. And then these cannabis stocks like ACB and so forth, they went ballistic and then they collapsed. And then they bought into GameStop and into AMC, and these stocks went through the roof and then collapsed and so forth. And then they bought the meme stocks in 2021, and most of these meme stocks are down 80%, 90%. And now they're all dabbling in cryptocurrencies and in semiconductor stocks and so forth. And my view is that maybe it's good to be in bonds because you will lose less money if a disaster strikes, you understand? But I don't think that the 10-year Treasury yields now particularly attractive yield. I would be more enthusiastic in buying the 10-year Treasury now if the yield was 6%, but the central bank does not control long-term rates. It controls short-term rates, and with the short-term rates, they can manipulate the long-term rates to some extent. Say, if the Fed cuts the Fed fund rate, and I can get on deposits or short-term money only 1%, then the incentive for me to buy a treasury at 4% is very high. So, they can manipulate to some extent the investors' appetite for long-term treasuries. But, my view would be that the market, because of its size, we're talking nowadays of $39 trillion of treasury debts, and it's growing by a few trillion every year because of the deficits. And the deficits, as I explained, they cannot go down much as long as interest rates don't go down, and they can't go down much as long as the war increases the spending by the government. This war is expensive. You know, everybody has to decide for himself. But, I just like to observe, the public is buying like there is no tomorrow. Like, they must buy today because the stock will go up tonight, and they'll make a profit in options or stocks or whatever it is. And here you have Buffett essentially with the largest cash position ever. Isn't that interesting? Maybe he's wrong, but I'd rather be wrong on the side of Buffett than be wrong with all the investors, the individual investors, who are traditionally buying high and selling low.