Opinion

Felix Salmon

Hyperbole watch, Bloomberg edition

By Felix Salmon
May 27, 2009

Ryan Chittum quite rightly brings the hammer down on a ridiculous “story” from Bloomberg today, which runs under the headline “U.S. Inflation to Approach Zimbabwe Level, Faber Says“, and which starts like this:

May 27 (Bloomberg) — The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said.

This is basically Bloomberg taking a silly journalistic staple — the let’s-quote-someone-just-because-he’s-rich story — and elevating it to the level of utter farce. Yes, there are people who are genuinely worried that US monetary policy will mean high inflation down the road. But hyperinflation on the order of 230 million percent? (And that actually vastly understates the real rate of inflation, which, last time I looked, was actually closer to 89.7 sextillion percent, or about 38 trillion times 230 million.)

Marc Faber is not a policymaker, and if news agencies get into the habit of quoting people whenever they say something outrageous and just because they say something outrageous, that only encourages a culture of unhelpful, nonsensical, hyperbolic, and fundamentally ridiculous sound-bites. (Or CNBC, as it’s also known.)

As for Faber being “100% sure” about what’s going to happen in the future, that’s a classic signal to ignore what he’s saying, since it’s proof in and of itself that he’s bullshitting and posturing rather than saying anything substantive. Shame on Bloomberg for encouraging him in this manner.

Comments
18 comments so far | RSS Comments RSS

Oh, right, maybe they should just stick with the notable pundits like Jim Cramer and the rest of that crowd. Back off Faber, he’s one of the few analysts who has accurately called for much of what’s been transpiring. And you’re right, Faber is not a policy maker, thank god. A lot of good they’ve done us, especially those in California where I’m from.

Let’s see how it plays out, shall we? And let’s not forget that the central banks have pumped more liquidity than ever before into the markets. I’ll stick to hard assets and the rest of the pundits can advise the herd over the cliff.

Posted by John | Report as abusive
 

Felix, you look like you just graduated high school. At 24 Mark Faber obtained a Ph.D. in Economics magna cum laude. How about you? He has studied every boom bust cycle in history and has a better understanding of their causes (mostly gov’t intervention) and outcomes than anyone I’ve ever encountered. Read his book Tomorrow’s Gold: Asia’s Age of Discovery… Then again don’t bother, you probably never got past Economics 101…

Posted by michael | Report as abusive
 

Felix, Ben Bernanke voted for George W. Bush. Okay, one more time, Felix. Ben Bernanke voted for George W. Bush. Are we done yet? Ben Bernanke voted for George W. Bush.

Posted by Fenner | Report as abusive
 

Felix oviously does not even know who Faber is and how accurate he is on the economy. Faber is also someone who readily admits he is not always right and cannot know the future. However, compared to the consensus economists, who COMPLETELY missed what has happened over the past two decades, Faber looks like he has a crystal ball. He is one of the FEW people who do not tell lies about the economy and I really appreciate the few news stories that report on what Marc Faber thinks. Who are you Felix! What have you ever done? I looked and I think it is clear that you have done NOTHING in your life worth anyone else commenting.

 

Marc Faber is MORE HONEST and MORE ACCURATE than the criminal bankers (FED/TREASURY included) who have taken control of this country.

I would rather listen to Marc Faber than any other group of economists in this country.

Marc, please keep up your good work. Many people around the world need you …

US will definitely get hyperinflation (may or may not be as much as Zimbabwe).

Worse yet, US will soon get hyperstagflation – steep fall in asset prices of things which all are nice to have LIKE cars T.V etc) ) and steep rise in all commodities (including food and energy and other important – things that people really NEED TO HAVE).

So get ready folks… we are in for a wild ride…..

 

Oh boy, you are getting a bum rap over this, Felix. You are spot on thought. Faber may or may not be a bright guy (having a PhD at 24 is neither here nor there) but he does quite often come off as a complete lunatic.

The point is not that the US will not face inflationary pressures – of course, it will – the point is these pressure will be moderate, the policymakers are aware of the problem and will respond accordingly and responsibly, the economics on this is not as black-and-white as Faber would have you believe and so on. A sober assessment would be along this lines but of course that would not get you any attention.

I am getting tired of these ‘professipnal pessimists’ a la Faber. Conversely, Nouriel Roubini is an economist good enough to recognise problems when there are problems and hopeful developments when there are hopeful developments. He’s toned down his rhetoric lately and kudos to him. Faber is just raving.

 

People who listen to pundits, whether Marc Faber or anyonme else think Reality is merely the name of a small ton in Saskatchewan and are addicted to TMZ. The number of studies of pundits trck records is legion and they’re always wrong. As Graham Champman said in Life of Brian: Think for yourself.

Posted by Ken Bernsohn | Report as abusive
 

You do not have to be a policy maker or an incompentent governmental offical to realize that the US financial institutions are still leverged to the sum of 300 trillion dollars in CDS and hedges.. and God only knows what else. Marc Faber examines the economy through contraian principles where the dollar had respect when it was backed by gold which prevented the money creating madness we have now. The politicans around the world want expanded government for control so they keep printing money and all this money printing will be levered up again and we will see price increased in commodities like food, oil , energy where there is limited supplies.. I have traveled around the world and I am so amazed at the thought police that exist in the media All the money printing has consequences and no body seems to have a definitive answer as to what the future will hold borrowing never before record summs of money from the fed..

Posted by Josh | Report as abusive
 

When I read that piece on Bloomberg I couldn’t help but laugh. The problem isn’t just that it’s the he-says/she-says game but that they always try to make it sound credible and as a factual statement. Granted, Faber did make such a comment, but there’s no reason for a journalist to completely act unbiased and not show a little more direction in an article that is clearly a load of crap.

If that is in fact the direction of the US to come, then it would fall apart before it got to that step. Our people are not cowards, nor is the rest of the world. The US Dollar wouldn’t even get to such a point. Where’s our Mugabe scaring citizens?

Posted by Onion | Report as abusive
 

Marc Faber has pretty a good record, and it is hard to argue with his record.

There is perhaps some sensationalism on Bloomberg’s part. Marc however was half joking when he said inflation close to that of Zimbabwe’s and he certainly did not imply that this would happen anytime soon.

I’d refrain from passing judgement on Marc based on an article.

Judge for yourself, the video of the FULL interview is here:

http://www.bloomberg.com/avp/avp.htm?N=v ideo&T=Faber%20Sees%20U.S.%20Inflation%2 0Approaching%20Zimbabwe%20Levels%20&clip SRC=mms://media2.bloomberg.com/cache/vNb fJ.kepSzo.asf

Posted by Derek Au | Report as abusive
 

Hi Felix,

The person who said that the policymakers will recognize a problem and act accordingly is really smoking something special.

Faber is on TV a lot (often on Bloomberg) and I’m thinking he might have been trying to shock the viewer because the problem is serious. Since inflation is defined as an increase in the money supply, we already have inflation. When the price levels begin increasing strongly is when the global economy recovers and the panic move to USD fully reverses.

We got a little taste last year with oil rising as helicopter Ben dropped rates and forced our seniors with bank balances to earn 0.30% on their savings accounts to bail out loser homeowners. But that’s besides the point. Price increases will result from developing countries buying up the natural resources – fuels, metals, and food – and remember, even if Ben had the guts to raise rates to combat inflation (which he won’t – he needs to be reappointed), raising US lending rates won’t curtail Chinese, Malaysian, or Indian demand for fuels, metals, and food.

If you really want to check him out, Faber shared his picks with the last 2 or 3 Barrons roundtables in January (easily found online). he is not a dogmatic pessimist – he recommended buying Asian shares and is a long term bull on Asia and commodities. he has helped me make money for myself and my clients and avoid calamity – he knows how the world connects – he is such a student of the world beyond his classroom work.

Faber is trying to wake up the average person because the politicians won’t stop what’s coming. Too bad the average person’s understanding of economics won’t allow that.

Chris

Posted by Chris G | Report as abusive
 

Umm. I think that the US’s debt is in US dollars. This means that hyperinflation will drive the size of US debt to zero (plus everyone’s mortgage, credit card debt etc.). Assuming that the hyperinflation works out smoothly, then prices will rise, salaries will follow, and assets like US denominated shares will rise too since the products of US companies, priced in US dollars, will seem cheap (so long as companies use the financial markets to hedge their commodity exposure). Overall, hyperinflation sounds like a great way for the US to get out of debt. So why is everyone worrying? The reason, because it isn’t going to happen. No one wants to see the money they lent the US disappear so they’ll all prop up the dollar. Hyperinflation in the dollar is a complete load of nonsense, and that’s the problem. The US debt is BIG and it’s going to stay that way for a while.

Posted by Anonymous Coward | Report as abusive
 

The issue is that the creditors of the US may start to default. Particularly the GCC nations that are suffering now with low oil prices and were hemorrhaging, Japan also has sever imbalances that had their day of reckoning delayed due to growing US exports in addition to the high savings rate that allowed for the quantative easing, with deflation instead of inflation. When our creditors sell US debt/dollars not by choice, but by necessity in order to prevent default it will greatly devalue the dollar. The chinese will write-off the US debt, though not by choice. This is not an unrealistic scenario considering that almost all of the mainstream economists did not forsee this crisis, and that this ponzi post bretton-woods economy is slowly coming to an end.

Posted by Derrick | Report as abusive
 

I’m with Felix on this one. I don’t care how smart Mark Faber is. That was clearly a ludicrous statement and if Bloomberg is going to quote him on that they have a duty to point out how spectacularly implausible his statement is. Is he suggesting the Fed would sit back and allow this to happen?

 

There are still so many people that have blind faith in the Fed as if it is a religion. Bernanke’s economic theories have all been proven false, the defintion of insanity is to repeat a process in the same manner and expect the same results, the Fed is reapeating all the mistakes that it has in inflating the real estate bubble to begin with. The Fed will no longer be able to reign supreme. If the Fed raises rates consumption will fall off a cliff and gdp will contract, which will drive our export-based creditor nations closer and quicker to economic ruin, while an inflationary recession with rising nominal prices will be the only option in the end, there is no way the US is capable of paying of its debts. Much of the paper value of assets in the US is overvalued as proven by the recent bubbles.

Posted by Marc | Report as abusive
 

Felix, Yours is an analysis of objectivity in Journalism, so yes you are right that yes Hyperbole have been used by Mr Faber. But it did the job it made you and others sit up and take notice. We (and he) don’t really think we will see those sorts of inflation numbers and who knows what they will be (nor does Faber, that is why he used hyperbole) but he is using hyperbole to indicate they will be with no doubt (or little doubt) be intolerably high.

It is disappointing that your journalistic skill have not acknowledged this and focused on his key points
- the fed is wrong
- Inflation is on the way in a big way

without the sensationalisation and pomp surrounding it would be another page 53 story that nobody would pay attention to (not quite many watch Mr Faber closely). Sensationalisation is what you do to sell papers?

Posted by Ed | Report as abusive
 

Quite so, Felix.

Just ’cause Faber has smart things to say sometimes doesn’t mean it’s not correct to call him out when he goes totally insane, as he does here, for the reasons you point out.

Posted by RN | Report as abusive
 

Felix you have not said why the US should not suffer hyperinflation. Is it because the “US is the best country in the world” or because they are a “Superpower”
or have they perhpas suspended the laws of nature where they can print with no consequences whatsoever? All you have done is through stones at Bloomberg and especially at Marc Faber. Shame on you and Reuters. What if Faber is right! Will you and Reuters executives apologize to people who follow your advise? You seem to be 100% sure of what you say at least Faber admits he might be wrong.

All Faber said was that if the US keeps printing, “than i can guarantee you the US will at some point in the future suffer hyperinflation, maybe not the at the same rate as Zimbabwe but close” This is what he said to bernie during the interview.

As many here have stated Faber is the only investor/economist out there who never speaks his book. He does not manage people’s money he has an exclusive fund of 300 million dollars and that’s it. When you and your kind where putting stories of how good things where Faber was warning people of the coming catastrophe. In the past 20 years Faber’s advise has always been spot on, while you and the Cramer’s of this world where having an orgy with Goldilocks and the bears.

Posted by Dan | Report as abusive
 

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