Tags: Faber | recession | Germany | 100%

Faber: World Still Headed For a Recession, Will Take Germany With It

Friday, 24 Aug 2012 09:32 AM

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The global economy is headed toward a recession and will likely pull Europe’s once healthy economic motor into a downturn with it, said Marc Faber, author of the Gloom Boom & Doom report.

Faber reiterated his calls that the chance of a global recession stands at 100 percent.

Europe is in a recession and the United States and China are cooling down, which will dampen growth or recess many emerging market nations.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

“If you look at the world, we have essentially Europe, we have the U.S., we have China and emerging economies that depend heavily on China,” Faber told CNBC.

“Europe is already in a recession and the German economy is still growing very, very slightly but will likely to go into recession soon. The other economies are in recession,” he added. “The U.S has decelerated, and I don’t see much growth in the U.S. in the next six to nine or 12 months. If you would measure the cost of living increase, real [gross domestic product] would be negative.”

The Federal Reserve said in the minutes of its latest monetary policy meeting that stimulus measures might be needed to steer the U.S. economy away from a downturn.

Such tools, such as purchases of bonds held by banks that flood the economy with liquidity to encourage investing and hiring, send stocks rising.

The Fed has rolled out two such liquidity injections — officially known as quantitative easing — since the country entered recession, but the tool carries diminishing returns and won’t help United States much this time around, said Faber.

In fact, easing measures might hurt the country by swelling the Fed’s balance sheet while not bringing about the recovery they were designed to produce.

“Well I think that if you look at the injections of liquidity and the intervention by the Fed — and also by the Treasury with fiscal measures — it has actually already impoverished the U.S. economy,” Faber said.

“They can print money and maybe the [Standard & Poor’s 500 Index] goes up somewhat more, but my sense is that the market has pretty much discounted further easing already.”

Earlier in August, Destatis, Germany’s national statistics office, reported that the country’s GDP product expanded by 0.3 percent in the second quarter, while the eurozone economy as a whole contracted by 0.2 percent, according to the AFP newswire.

Experts have expressed worry over Europe’s bright spot, including Timo Klein of IHS Global Insight, who told the AFP that the “negative impact of unsettling debt crisis developments in the eurozone has finally become more burdensome” for Germany.

“Future developments in the eurozone debt crisis will remain critical for Germany’s economic outlook, as any disorderly Greek sovereign default and/or euro exit could create serious contagion effects on other eurozone countries in trouble, notably Spain,” Klein said.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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