by Mike “Mish” Shedlock

Recently by Mike “Mish” Shedlock: It’s Melting, It’s Melting

In his gloomiest prediction yet, Marc Faber sees big financial bust leading to war:

Marc Faber, the Swiss fund manager and Gloom Boom & Doom editor, said eventually there will be a big bust and then the whole credit expansion will come to an end. Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to continued stimulus.

Speaking at a conference in Singapore on Wednesday, Faber said: “The crisis has not solved anything. On the contrary there is less transparency today than there was before. The government’s balance sheet is expanding, and the abuses that have led to the one cause of the crisis have continued”.

“I think eventually there will be a big bust and then the whole credit expansion will come to an end,” Faber added.

“Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to stimulus”.

In one of his Gloomiest predictions, Faber, referred to as Dr. Doom, said “the average family will be hurt by that, and then in order to distract the attention of the people, the governments will go to war”.

“People ask me against whom? Well, they will invent an enemy,” Faber said.

“At some stage, somewhere in future, we will have a war – that you have to be prepared for. And during war times, commodities go up strongly,” said Faber.

“If you want to hedge against war, you don’t want to own derivatives in UBS (UBS) and AIG (AIG), but you have to own them physically, like farmland and agricultural commodities. That is something to consider for you as a personal safety and hedge. You have to own some commodities,” he added.

Discussion of Ideas From the Article

Faber: There will be another war and it will be against an imaginary enemy.

Mish: I certainly agree the next war will be against an imaginary enemy. Nearly every war is against an imaginary enemy and/or of no vital interest of the US.

World War I, Korea, Vietnam, and Gulf War II were all needless. World War II was a direct result of World War I. The War on Terror is preposterous. Terror is a method. Waging a war on a method against an enemy that has no real country is bound to fail and waste a lot of money in failure.

As for where next, given President Barack Obama’s saber rattling against Pakistan, that’s one place to keep an eye on. Iran is another.

Faber: The S&P 500 and the Dow Jones will go down relative to gold.

Read the full article.

The following Dutch documentary from 2005 poses a mindblowing “worst case” scenario where speculation on the currency exchange market and a substantial sell-off of dollars from a hedge fund causes a chain reaction in the markets around the world, leading to a complete collapse of the banking system, and effectively resulting in a political escalation of blame around the globe. Features Peter Schiff, Stephen Roach amongst others.