DEBATE | Marc Faber vs Brent Johnson: What Comes Next After The Iran War?

**Adam Taggart** (0:00)
Welcome to a new Zero Hedge Debate. I'm Adam Taggart, founder and host of Thoughtful Money, and I'll be the moderator for today's discussion. As the U.S.-Israeli war versus Iran continues to unfold, what will its legacy be for the US dollar specifically and American hegemony in general? Is this the beginning of a reset toward stability, another leg up in the markets and lower inflation, or are the early stages of a broader economic unraveling tied to supply shocks, currency stress, and geopolitical fragmentation ahead? Simply put, what comes next? To unpack for us, we've got the good fortune to be joined by Dr. Doom himself, Dr. Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, as well as Brent Johnson, CEO and portfolio manager at Santiago Capital, best known for developing his Dollar Milkshake Theory. Gentlemen, thank you so much for joining us today.

**Brent Johnson** (0:53)
Great to be here.

**Adam Taggart** (0:53)
And Marc, you're joining us as well, correct, my friend?

**Marc Faber** (0:56)
Yes, of course, I'm joining you, but I didn't get any question.

**Brent Johnson** (1:02)
All right.

**Adam Taggart** (1:02)
Well, don't worry. We've got plenty of questions. I prepared a number in advance of this discussion, and I made the mistake of asking X if they had any questions for you guys, and I got about several hundred thousand. So we'll try to get through as many of them as we can in the short time that we have here.

**Brent Johnson** (1:20)
All right.

**Adam Taggart** (1:20)
So to kick us off here, Marc, let's start with you. If you can, just kind of ground our listeners in, what was your assessment of America's prospects, both economically and geostrategically prior to the Iran War breaking out, and how, if at all, is the war changing that outlook?

**Marc Faber** (1:41)
Well, I'm sort of of the view that the US economy is much weaker than the statistics that are published by the government liars, I would suggest. In other words, the government paints a rosy picture of everything. But the reality is simply the following. If you increase the quantity of debts in a society, in other words, the borrowings go up. You can generate some sort of prosperity. I mean, you send everybody in America, the 340 million people, you send each person a $10,000 check. I guarantee you that retail sales will go up. But then the borrowings will one day come due.
And the problem occurs right away in the sense that if you do that, the bond buyers will demand a higher interest rate. In other words, the bond market will be sensitive to that economic travesty of sending a check to each citizen of ten thousand US dollar and it will go down. And in my view, the Western societies and not just the US., but all the Western societies have lived beyond their means. In other words, the interest payments on the debts are becoming burdensome. And in the US., as you know, the interest payments on the debts are now the largest expenditure of the government and over a trillion dollars. The latest statistic is 88 billion dollars a month.
And that is a large amount, you know, that has to be repaid. And the consequence of that is that although the Fed began to cut interest rates in September 2024, I mean, in other words, almost two years ago, the bond market didn't rally, bonds went down, the US interest rates and long-term securities went up. And that is a problem for an economic, ignorant people, that ignorant person like Mr. Trump, because he thinks he can call up the Fed and say, oh, you have to cut short-term rates, because, yes, he would like to pay lower interest rates, and maybe on his commercial properties, in theory, lower interest rates would be advisable, because commercial properties are going down in value. But for the economic system as a whole, the lower interest rates may not be advisable, because there are still inflationary pressures in the system. You know, especially after the war, but already before the war, I don't believe that anywhere in the world, the rate of inflation was like around 2%. This is complete nonsense. Open the invoices of your insurance company. Everywhere in the world, insurance premiums are going up by something like 10%. Then you travel around. Everywhere the prices are up. And so my view is that the governments are understating the rate of cost of living increase is everywhere.
And as a result of it, most people are actually struggling. Around 70% of Americans and in other countries is not better. Around 70% of people, they live paycheck to paycheck. They need to paycheck so they can pay the bills that accrued during the months. And I think this is sort of like a modern slavery. I don't think that people are particularly happy to sit there anxiously waiting for the salaries to pay their debts. And therefore, my outlook for the economy was already before the war in Iran, was not favorable. But it doesn't mean that because it's unfavorable, the bond market would rally a lot. I own bonds and that will explain later on why. But I find there is a diverging performance between the financial markets that have gone into the sky and the real economy of people that is flat on its back.