In this episode of the Creating Wealth Show, host Jason Hartman interviews Marc Faber, editor and publisher of the Gloom, Boom & Doom Report. The conversation centers on the macroeconomic shift from an economy driven by real activity to one driven by asset prices, a phenomenon they term "asset inflation." They discuss how post‑2008 quantitative easing (QE) and massive fiscal stimulus have inflated equities, real estate, and other assets, creating a feedback loop where rising asset prices are needed to sustain economic growth. This dynamic has amplified wealth inequality globally, sparking social and political tensions. The guests examine the challenges faced by Millennials and Gen Z, including student‑loan debt, unaffordable housing, and exposure to volatile assets like Nvidia, Tesla, and cryptocurrencies. They explore the potential for a large inter‑generational wealth transfer as baby‑boomers die, but note that inheritance may be limited by high property taxes and debt burdens. Faber warns of powerful deflationary forces (e‑commerce, ride‑sharing) that keep consumer price inflation low, while bond markets suggest a possible global asset deflation scenario where only safe‑haven assets like Treasury bonds retain value. They critique central banks’ reliance on money creation—both through QE asset purchases and modern monetary theory‑style direct transfers to individuals—as unsustainable, potentially leading to currency devaluation and inflation. The discussion also touches on crony capitalism, political populism, and the difficulty of reforming unfunded pension liabilities and government debt without resorting to inflation. The episode concludes with Faber’s outlook that a severe asset deflation could be the only event to halt the current inflationary path, and he promotes his website gloomboomdoom.com.
Chapters
Well, it was never our goal to be full time owners of shopping centers. It's just an opportunity that was too good to say no to that we decided to take on really what we want to do is just have a nice life and not work too hard. And these particular shopping centers took a lot of effort to run. Part of the reason for that is they were in parts of town where it's hard to hire professionals to come and do the management for us. And so we had to do our own property management. And so part of the reason that we're selling the shopping centers and exchanging them for single family homes is that we'll be able to get property management with these portfolios of homes so that we don't have to do so much work ourselves.
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Welcome to episode 1213 1213. Thank you for joining me today. It's my pleasure to welcome Mark Faber. He is editor and publisher of the Gloom Boom and Doom Report. Mark, welcome. How are you?
Well, thank you very much for having me on your program and thank you for asking. I'm fine.
I have been following your work for many years and really find it to be very interesting and insightful what is going on in the economy? I think we are on the brink of some real changes, maybe inflationary changes. Just give us the broad view if you would, Marc.
Well, I mean the economy, as you know, we had a very serious recession in 2007, 2009, which was followed globally by massive fiscal interventions and quantitative easing policies in most countries in the world. And as a result of that, we had very powerful asset inflation. As you know, the S and P went from a low of 666 in 2009, March 2009 to now close to 3,000 and home prices recovered. And in some areas like Newport Beach, Denver, San Francisco, Los Angeles, Boston, New York, they made New highs. So we have had this asset inflation. What has really changed over the last 200 years, we're so in kind of economic activity is that the economy nowadays is driven by asset prices and it's no longer the economy that drives asset prices. And this is a very dangerous situation because in order to keep the economy going, you need to boost asset prices higher and higher. And as we know, markets go up and markets go down, though I think the outcome is not going to be very desirable. But the outcome or the end of this bubble, if you like to say, we don't know when it will be, it could be tomorrow, it may have started and it could be in five years time. So here we are. But that it's created a very loop sided economy is clear. We have this huge wealth inequality and not only in the us this is a phenomenon everywhere that then leads to a lot of social tensions and to people that argue for things like a wealth tax or for all kinds of benefits for people that were kind of left behind, then it becomes a political issue. And so you get social tensions and political tensions which in my view will not be very good for asset markets.
Couldn't agree more. And it's interesting to sort of dissect the inflationary picture, if you will, into consumer. Consumer inflation versus asset inflation. Certainly arguable that consumer inflation is a lot higher than the official numbers tell us. I would certainly agree with that. And it's a mixed bag because technology is so deflationary, but monetary policy is so inflationary. But when it comes to the asset side of the inflation equation, it is incredibly significant. I mean, it's just making the rich richer, the poor and the middle class are left out. They're not in the game, are they?
Yes. There was an article I think yesterday on Bloomberg or the day before that says that children of wealthy parents in primary school did better in life later on than primary school. Children of poor people. Yeah, naturally, because they're wealthy when you're in primary school, they already have assets that the others have no assets. So in an asset inflationary period, some people even without work, become very wealthy. I mean, I went to school in the 50s and I finished high school before going to University in 64. And one of my friends, his family owned some buildings in Zurich and one of the largest collection of impressionist paintings in the world, he had Van Gogh's in the toilet. Of course, these paintings appreciated dramatically and because of the tax laws, it never really paid for him to work. He just became even richer without working.
That's Certainly true. And when you look at, I mean, that's a more extreme example because that's know already starting out as a wealthy person. But when you look at the typical, say, millennial in the United States, they're saddled by student loan debt and assets have become so expensive that they're just not acting the same way they did when I was in my 20s, I was a Gen Xer, the tail end of Gen X. You know, people were buying homes, they were buying their first home when they were 25, 26, and that home has become so expensive, you know.
Yeah, I agree with you. But on this point point, I'd like to make an additional commentary. A lot of young people nowadays, particularly the millennial generation and the Generation Z that comes after the millennials, and I have experience with that because my daughter is a typical millennial. Now the thing is these people, they grew up with a different mentality and different attitude than when I grew up. A lot of my generation, when we went to college and when we went to school and after school at university, we took part time jobs to earn some money and we didn't borrow any money. I mean, in Europe people don't borrow money to study because it's free of charge usually.
Right.
But even in the US the debt explosion of Millennials and of student loans that have occurred precisely in the last 10, 15 years is amazing. And it's partly because people just think, well, I go to university, I study, even if they don't study very much. But after, they think they will earn a lot of money and repay that. But it doesn't happen that way frequently. Later on when they finish studies, depending on what they studied, they can't be employed.
Yeah, well, you know, there aren't a lot of people hiring for liberal arts credentialed jobs. There just aren't that many positions for that.
And number two, I'd like to say this. A lot of millennials, they really got hit very hard by the housing bubble. They bought homes on speculation with large borrowings because as you say, they don't have much money or they didn't have much money then. And then the property market went down and so they lost a ton of money. And number two, go on the website Robinhood and look a little bit at what kind of stocks the millennials own. One of their favorites was Nvidia. Nvidia is down almost 3,50% from the I. Almost 50%.
That's the chip maker you're talking about, right? Nvidia.
Yeah, yeah.
Okay.
And Tesla is also down almost 50%. These are the type of stocks the millennials bought. They bought also cryptos, but at the wrong time, right?
Yeah. Yeah. Well, Nvidia is behind the crypto revolution and Tesla is potentially on the brink of failure. It's amazing what's going on with Tesla. That's a soap opera in and of itself. But this generation, when you take this out 10 years from now, and these kids are 40 years old, for example, they won't have the start that the baby boomers and the Gen Xers had because they don't own assets because of the asset price inflation. Right?
Yes. But there are many studies about this that the millennials, at 35 years of age, they earn less and they have less assets than the boomers. This is the fact. I can verify that. And I have really a lot of friends in America. Some are very rich and some are not so rich, but they're say, upper middle class. And when we have discussions and so forth, I always ask them, what are your children growing? And so forth. And they say, well, one is and one works there and so forth. And then I say jokingly, what about are you still supporting them? I say, 80% of my generation is still supporting their children.
That is amazing. You know, the one wildcard in this that might save the Millennials is the inheritance that will eventually come. And I don't really, I don't really know of any stats on that. I mean, you read all these things about how many Americans, for example, are living paycheck to paycheck, couldn't come with $400 if they had an emergency, etc. Etc. But you know, there certainly are some wealthy baby boomers. No question about it.
No doubt.
Any thoughts on the inheritance side of the equation?
The problem is that the people that don't have $400 to spend on emergencies, and they live from paycheck to paycheck, they usually do not come from wealthy families. That is the problem. And I know about this inheritance. In Switzerland, we have made studies on the subject how much wealth is going to be transferred between now, my generation of baby boomers is now coming or is approaching the day of final departure, and the young people, our children. This is a huge wealth transfer, but it's particularly large in countries that have large savings, where people owned their homes and so forth, and where people owned their homes not on credit, because I have friends, you know, they will inherit large homes, but they won't afford to live in these homes. Because in Switzerland, like in the U.S. in most states, we have property taxes so property tax can be quite expensive.
Yeah, that's true, that's true. What is your outlook for the future in terms of inflation especially, you know, say you're looking the next 10, 15 years ahead. What will that look like?
I mean, you said correctly that there are very powerful deflationary forces in the system. Say Amazon is a hugely deflationary force or also Uber or Lyft and so forth, sharing economy that reduce the cost of doing business and of your living costs. And now airborne, these kind of companies, they contribute to say relatively low consumer price inflation. Although as you pointed out, the consumer price inflation varies a lot. For instance, if I'm smoking and drinking, well, alcohol taxes went up and prices of cigarettes went up a lot. So depends also what kind of a life you have. If you have four children, you have to pay their education.
That's ridiculous.
If your wife is sick and you have to pay health expenditures for her, then the cost is very high. So there are many, many different aspects to this inflationary issue. But in general, if you look at the bond market, you know, at the beginning of the year everybody was very bearish about bonds. They expected interest rates to go up. The bond market has been very strong and yields have come down from 3% to now slightly below 2.4% on the 10 years US treasury in half a year. So I think that the deflationary issues are still in place. And I keep on emphasizing what can happen is that you will get a global asset deflation. Properties go down, commodities go down, stocks go down. And in that scenario the only asset that will appreciate are treasury bonds for a while. But the dollar may become weak. You understand you now have to also think about currencies. There is no point to make 5% on a U.S. treasury through price appreciation and annual interest of 2.5% or so, but lose it on the exchange rate. So this is an additional thing. You know, when you measure inflation, I can tell you in most emerging economies and in Asia we had had cost of living increases that are rather substantial.
Absolutely no question about it.
And let's say on the 15 years outlook, when I look at the unfunded pension fund liabilities in the U.S. i look at the government debt, globally, I look at the asset dependency of the economy. I think there is only one option for central banks and that will be to print money. It doesn't work. They'll print more. It doesn't work, they'll print even more. Do you understand? So eventually, I suppose that paper money will become worth much less. That would be Kind of my view over the long term.
Mm. Yeah. It seems to be the only tool the governments and central banks really have is just money creation. They've just got to create more. Whenever I see a G20 meeting, you know, Davos, whatever it is, right. It's always, let's just get together and talk about how we can stimulate, stimulate, stimulate. It's more qe. I mean, what else is there? Do they have any other tools? It seems to be the only thing they've got.
Yes, correct. But there are two ways they can print money. They can print money by buying assets, which they've done through qe. In other words, they go into the market and buy treasury bonds, mortgage backed securities, and in the case of Japan, they will support stocks. Okay, that is one way that money flows mostly to the financial system and to rich people. The other way is what they propose now they think it's a modern monetary theory. It's not modern and it's not a new theory. But it's basically to hand out money to individuals and to finance it by the central bank buying bonds, essentially expanding its balance sheet. In other words, the central bank prints money, but the money doesn't flow into the financial system, it flows to individuals. And that creates then a society that depends on the government, like a socialist society. But maybe this is what people want. I don't want it, but this is a lot of young people, they want socialism, but they want more government intervention. I want less.
Yes. And I, and I hope AOC and Bernie and the rest of them don't get their way because that has never worked at any time in history or any place on earth. But they keep trying it, they keep trying it.
You know, but maybe the capitalistic system, the way we have it and the way it morphed into crony capitalism where you have this huge wealth inequalities and where you have, I mean, rampant corruption between the government and the leading businessmen. We have to see this. Yeah, maybe this system doesn't work either.
Right. So what system does work? I agree, the cronyism is just disgusting. And the anti capitalists want to say, well it's capitalism run amok, it doesn't always work. Right, But I don't know what's better, a bunch of central planners making the decisions. There's lots of corruption in those systems too.
No, no, but you know, if you look at sports gain, whether it's American football or soccer in Europe or cricket or anything, they are rules and the capitalistic system needs that. Someone enforces the rules, but it's morphed into a system where people with money, they can bend the rules through lobbies and all kinds of questionable characters. I mean, the Mueller investigation in the US and the Barr investigations don't interest me a lot, but it's fascinating to see how they all lie, all of them. Right?
Yeah, absolutely. Of course they do. Of course they do. Of course they do. In terms of these unfunded mandates, I mean, we've got maybe anywhere between 60 trillion and 220 trillion. If you look at Lawrence Kotlikoff's work on the subject in these unfunded mandates over the next 15 years, I mean, it just seems like they're going to create inflation. There is no way to avoid it. They have to print to pay for that. Right?
Well, in theory they could cut the benefits, but try to cut the benefits of the police, the retired policeman or firemen. They'll rebel.
Oh, of course they will. But even just regular austerity like we saw in Greece or in, you know, any number of places, I mean, it's, don't let me retire at 49, don't pay for my college, et cetera, et cetera, you know, the people take to the streets and it's, it's violent and. Yeah, yeah, sure, that's not going to work. The way to do it is through inflation. As ugly as it is, it's really a pretty good business plan for governments and central, central banks. It's the only sort of way that people don't instantaneously notice. You know, you boil the frog slowly, as it were. Right.
Well, in time they will notice it. I mean, every. Inflation has eventually ended relatively badly, but it forced reforms and some of the reforms were successful and some were not. But the inflationary path or road, they can postpone the problem for a long time.
Mm, they sure can. They can keep kicking the can down the road. They sure can. Mark, give out your website and tell people where they can find your newsletter and such.
Well, the last thing I just wanted to say, I mean, the only thing that can really hurt or maybe make this inflationary path unworkable is really a severe asset deflation. I mean, if homes really collapse, if the stock market really collapses, and if we have massive defaults in the corporate debt market, that will be difficult to fight with additional liquidity. That is that the problem is we have grossly inflated asset markets. Grossly. And we have lots of companies, they will go bust. I mean, you raised the issue of Tesla, an example, that of a company that probably should have gone bust a long time ago.
I agree the emperor has no clothes.
Anyway, the website that I have is gloom boom doom.com all in one word. I repeat gloom boom doom.com excellent.
Mark Faber thank you for joining us.
Well my pleasure. Take care of.
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