http://moneynews.newsmax.com/streettalk/Marc_Faber_Dubai/2009/12/02/293180.h tml
Faber: Dubai Debacle Just Tip of Iceberg
Wednesday, December 2, 2009 10:11 AM
By: Julie Crawshaw
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Uber bear investor and Gloom, Boom and Doom Report editor Marc Faber says
Dubai World's debt problems are just the tip of the iceberg, and suggests
investors will be better off not buying U.S. government bonds.
"In the context of all the default that will happen in the world, it (Dubai)
is not a big thing," Faber told Bloomberg. "But it's a reminder that
governments can default."
The 3.3 percent investors currently earn on U.S. bonds will likely be lost
to dollar depreciation over time, Faber notes. Moreover, if deflation
occurs, "much more money will be printed" and stimulus packages will cause
government debt to rise.
"Eventually, I suppose a lot of governments will be bust, including the
U.S.," Faber says. "Nothing has been resolved, it's just being postponed.The
ultimate crisis will not just bankrupt the banking system and financial as
happened in 2008, it will bankrupt governments."
"I think the upside potential for U.S. bonds is extremely limited."
New York Investing Meetup founder and market trader Daryl Montgomery calls
the Dubai default "merely the latest episode in the unwinding of a global
real estate glut."
While the drop in real estate values Dubai might not get as Japan's - where
residential real estate prices dropped by 90 percent and commercial real
estate prices by 99 percent for class A office buildings in Tokoyo - the
price drops in Dubai could be considerable.
"Local authorities denied there was any problem right up to the end,"
Montgomery writes at Seeking Alpha.
"Until the excesses are wrung out of the system, sustainable economic
recovery is not possible - and even then it's not guaranteed."
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