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BookmarkOn the heels of continued problems at Deutsche Bank, a legend who oversees more than $180 billion warned King World News that the world financial system “is headed for a train wreck.”
Legend Rob Arnott, whose firm helps to oversee $180 billion globally, warned the
world financial system “is headed for a train wreck.”
Eric King: “Rob, the central banks have been insane for some time now but that insanity is escalating. Can you talk about that?”
Rob Arnott: “Of course the Fed did not hike in September. They have set the stage for what is characterized as a likely hike in December, but who knows? It’s not at all unlikely that they will flinch again. At the end of last year they were signaling four rate hikes for 2016 and it looks like we might very well finish with zero. So they talk a little hawkish but do not have the spine to do anything.
Now, the problem with zero interest rates or near zero interest rates or negative interest rates when you get to Japan or Europe, is that it demolishes the saver, the investor, the thrifty, the prudent. It demolishes the pension industry. It puts intense pressure on banks, especially if you go negative.
The War On Cash Is Not About Organized Crime
It actually creates pressure for some of the talk that we are seeing now about the notion of getting rid of currency. Because if people are given a choice of getting minus 1 percent at their bank or just buying a safe and stashing it with currency, a lot of folks are going to do the latter. And it (the elimination of paper currency) is not to fight organized crime, it’s to get control of your money. You earned it, you saved it, we (the government) want it.
So we have central banks harboring the illusion that their models are reality, and seeing relentless evidence that their policies aren’t working, and playing this game of saying, ‘Well, if we didn’t do this it would have been worse.’ An unproven counterfactual, which is about as lame an argument as you can make.”
Eric King: “The Bank of Japan, really and truly, what’s happening over there is insanity. Obviously all of the Western central banks are moving in that direction. Where is this train headed?”
Rob Arnott: “This train is headed for a train wreck. The only question is, when? The short answer to that question is, nobody knows when.
Eric King: “Rob, you and I as professionals have to navigate this situation the central banks now have the world in, but these are uncharted waters. So when people look at the two of us and say, ‘Great, we want the two of you to go navigate this,’ we just look at each other and say, ‘These are uncharted waters, there is no navigation for this.’ So I wanted you to talk about the endgame and what you envision going forward, because when you say, politely, ‘Going forward this is going to be a train wreck,’ that’s a hairy situation you are talking about.”
Rob Arnott: “It is a hairy situation. Bill Gross and others have noted that negative interest rates have never happened in a 5,000 year history of interest rates. OK, so we now have central bankers playing games that have never been tried in 5,000 years. And they take us deep into uncharted territory, and they think that their charts of charted territory — their models — are going to work. They’re not going to work.
SCARY: War On Cash A Ploy To Steal Your Money
Negative interest rates are crushing to entrepreneurialism, they are crushing to confidence in the future and a willingness to bear risk. And what do they stimulate? They stimulate hoarding. That’s why there is talk of eliminating currency. Again, it’s not about organized crime. It’s about you earned it, you saved it, we want it. Or at least we want to control it and know where it is, and know how and where to grab it if we need it. Well, that’s appalling, but that seems to be the mindset of the central bankers these days and it’s very scary.
King World News
9/30/2016
