Looming
Global Catastrophe
The
biggest bear of all, Dr. Doom (Marc Faber), discusses the future of
the euro and whether a global catastrophe is on the way, with CNBC's
Brian Sullivan and the Money In Motion traders.
CNBC
Forget Greece, China Biggest Risk to Global Economy: Faber
Forget
Greece, which is an "insignificant" economy, it is China
that poses the biggest risk to the global economy, Marc Faber the
editor and publisher of the Gloom, Boom and Doom report told CNBC on
Friday.
The European
Central Bank will
be able to support Greece and European taxpayers would pay for it, he
added. On the other hand, a slowdown in China, the world's
second-largest economy, would have a huge impact on prices of
industrial commodities, Faber said.
"In
turn, this has a huge impact on the economies of countries like
Brazil, the Middle East, Central Asia, Africa, and Australasia, so
these countries could slow down meaningfully," he said.
Faber,
who correctly predicted the 1987 stock market crash and more
recentlyforecast
the stock market correction in August last
year, said China's economy depends largely on capital spending, which
tends to be volatile and has a strong multiplier effect on the
economy.
A
slowdown in China could have a painful impact on global gross
domestic product growth
as the nation is now the single largest contributor to global
economic growth, the International Monetary Fund said earlier this
year. The nation's contribution to global economic growth over
2010-13 is expected to be 31 percent, up from just 8 percent in the
1980s, the IMF said.
Faber,
whose investment portfolio is concentrated in Asia, said late last
year that some sectors in the Chinese economy were already in
a recession .
However, data so far this year have indicated that China's economy is
slowing, but not crashing. China posted its weakest growth in nearly
three years in the first quarter, with GDP
expanding 8.1 percent.
Some
experts point to other data points, however, such as electricity
output and rail freight for signs that China's economic slowdown
is much
more severe than
the GDP numbers.
Faber
said that while global economic concerns were weighing on markets,
stock indices will find it "very difficult" to repeat highs
set in April. But, he added, he expects a short-term rebound of maybe
5 percent.
"I
would cover my shorts in the next 10 days, because I think the market
is very close to approaching an intermediate low from which we will
rebound," he said.
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