US Default Inevitable: Fund Manager

From CNBC

A U.S. default isn't a matter of "if" but "when," David Murrin, chief investment officer at Emergent Asset Management, told CNBC.

"It's inevitable that the U.S. will default—it's essentially an empire which is overextended and in decline—and that its financial system will go with it," he said.

The question is: Does the U.S. default when it is forced to by the outside world, probably the Chinese, or does it take the option to default on its own terms in such a way that it may have a strategic advantage, Murrin said.

Marc Faber has a slightly different view:

“I don’t think the US will default in terms of not paying the interest on its debt. They will though default via a falling dollar as Bernanke begins printing more money,” Faber said.

“They will get an agreement or fiddle around with the debt ceiling,” Faber said.
“I disagree with the bond bulls that are basing their case on a deflationary environment. In such an outcome tax revenues would collapse and stocks would fall heavily.”

Faber predicts that 1,370 points was the high for the S&P 500 index in 2011 and told CNBC that if stocks fall another 10 or 20 percent from here, another round of quantitative easing is inevitable.

“The risk is not to hold gold. Whilst there is the potential for 10 percent downside in the short term over the next 5 to 10 years the gains will be big. Or put another way, the purchasing power of paper money will fall," Faber said.

“Cash is very risky asset except in times of major market corrections,” he added.