The U.S. and Western European governments will default on their debt, says Marc Faber, editor of the Gloom Boom & Doom Report.
Asked on CNBC whether he would buy Greek government debt, the investment guru responded, “I’m not interested in sovereign debt, because I think all governments will eventually default, including the U.S.”
He later amended that statement, saying emerging market countries with small debt burdens and large currency reserves are exempt.
“The problem is that emerging market economies today are much sounder in terms of debt-to-GDP ratios than the developed world, including the U.S. and Western Europe,” Faber said.
“The problems will really be in the developed world. They have huge debt-to-GDP ratios and unfunded liabilities. These unfunded liabilities are so huge that eventually these governments will have to print money before they default.”
As for stocks, Faber says the downward move isn’t over.
“We are in a correction phase, and I would expect to see this correction phase run further.”
The market could stage a “relief rally” in the next 10 days, Faber says. But he doesn’t expect the Standard & Poor’s 500 Index to breach 1,100.
Others are worried about Europe’s debt burden as well.
“The risk of contagion is a real one,” Scott Thiel, head of European fixed income at BlackRock, told The New York Times.
“Investor sentiment is now focused on countries like Spain and Portugal, where fundamentals are weakest.”
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