Sep 26, 2008

Marc Faber on the magnitude of the credit crisis

It's not the problem that home prices have gone down. The problem is excessive leverage. And somewhere, somehow the U.S. has to try to bring down the excess leverage that exists in the system, that incidentally was built over the last 7 to 15 years under Fed chairman Mr. Greenspan and then also under Mr. Bernanke. So now they try to solve the problem by having this credit bubble actually extended. And I think the $700 billion dollars will be like a drop in the bucket because the total credit market in the U.S. is something close to $60 trillion dollars. Then you have the CDS market - credit default swap - of around $62 trillion dollars. And then you have the whole derivatives worldwide, worth about notional $1,300 trillion dollars. So the $700 billion is really nothing and the Treasury's giving out this figure when actually the end figure may be $5 trillion dollars.

~ Marc Faber, Bloomberg TV, September 26, 2008

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