Wednesday, May 20, 2009

Marc Faber: Capitalism might fail

Marc Faber told a CNBC Europe "Squawk Box" panel that capitalism may fail like communism did if corporate enterprises and the financial system are not purged of the excesses and losses of the recent past.

Some excerpted (see above article link) comments from Marc:

"A sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen, Marc Faber, the author of "The Gloom, Boom & Doom Report," told CNBC Friday.

The central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries, Faber said...

..."I think the final low in markets will occur when the system is cleaned out," Faber said.

Unless the system is cleaned out of losses, "the way communism collapsed, capitalism will collapse," according to Faber. "The best way to deal with any economic problem is to let the market work it through.""

Now, we should point out that Marc is not discussing the popular fallacy of "market failure" as an impetus for the economic crisis; he is actually speaking (from a free-market viewpoint) about the risk of total failure of the capitalist system due to the suppression of financial losses and business failure.

As Marc and Jim Rogers have pointed out many times before, you cannot have a viable capitalist economy without the up-front risk of failure and economic loss which serves as the flipside to business growth and economic gain.

If the risk of failure is removed, and businesses can keep their profits while losses from the financial system are socialized (costs of failure are passed on to the people), what you then have is a a corrupt system of "crony capitalism". At that point, anything resembling true free-market capitalism will have faded from view.

Related articles and posts:

1. Synchronized Boom, Synchronized Bust - Wall Street Journal.

2. Jim Rogers & Marc Faber speak out on bailouts - Finance Trends.

3. Has Capitalism Failed? - Ron Paul via

4. The Bailout Reader -