Marc Faber: Inflation Is Here to Stay

During a recent interview at the 2023 Precious Metals Summit Zurich event, Doom, Boom & Gloom Report publisher Marc Faber says now is the time to buy gold, silver and platinum because inflation is here to stay.

We are in an uptrend in inflation and uptrend in interest rates that will be interrupted from time to time by countertrend moves, such as we had in the 1970s, but the long-term trend in the next 20 to 30 years is for inflation to accelerate and for interest rates to move up.”

Faber said it’s important to understand that we have long-term cycles. He said we hit an interest rate peak, along with a peak in commodity prices in the early 1980s.

Thereafter we had a declining structure of both inflation and interest rates, partly artificially steered by central banks. But we made a major low in say May-August of 2000 where the 10-year Treasury yielded less than 0.6%.”

Financial analyst Jim Grant has made a similar observation about long-term trends, particularly for interest rates.

So what characterizes interest rate movements is their generation length phasing, not necessarily cycles, but there are phases. Interest rates fell for the last quarter of the 19th century, rose for the first 20 years of the 20th, fell from 1920, ‘46 rose in ‘46 to ‘81, fell from ‘81 to, call it, 2021. So at each juncture there was some mark of excess, some mark of speculative excess blow-off. Certainly in 1981, you know, a 20%+ funds rate seemed excessive. A 14% yield in 1984 in long bond when the CPI was printing at four or five, that seemed excessive. 10 percentage points of real yield — that seemed a lot.

“So I speculate that we are embarked on a long cycle of rising rates. And I say that first of all, for reasons of pattern recognition, there’s no theory behind it.”

Faber said in the short-term, perhaps the next six months, he expects interest rates to fall.

So, we have to distinguish between the short-term trend and the long-term trend.”

Faber pointed out that while interest rates have gone up significantly over the last year, financial conditions aren’t actually tight. In fact, the Fed and central banks globally are still running somewhat inflationary monetary policy.

You can have an increase in interest rates in the US and the money doesn’t become tight. If money was tight, the spread between junk bonds and Treasuries would be much wider. It hasn’t widened much. The VIX index volatility would shoot up. It hasn’t shot up. So, I think the monetary policies are still inflationary at the present time.”

The Chicago Fed’s Financial Conditions Index confirms this. As of the end of Nov. 24, the index stood at -0.5. Any negative number indicates loose financial conditions.

Faber said he has about 25% of his portfolio in gold and other precious metals. He pointed out that gold was $35 an ounce in the 1970s.

So, gold has actually been a good store of value for what it is. … I think in consideration of central banks whose function in the long-run is to print money – we never forget that a central bank exists to print money – in view of that, I think gold and other precious metals are still a good investment from a long-term perspective and also from a safety aspect.”

Faber does not buy into the “soft landing” narrative, and he thinks the dollar will weaken.

I think the conditions in America are not as rosy as government statistics suggest. I think the economy is going into recession, or is in a recession already. For most people, the economic recession is a reality already because their wages have gone up less than the cost of living increases.”

From a broad investment standpoint, Faber said people should “get out of the dollar.”