Submitted by Taps Coogan on the 9th of May 2018 to The Sounding Line.
Legendary investor and forecaster Martin Armstrong recently gave an wide ranging interview to ‘This Week in Money’ in which he discusses the global economy, the looming pension fund crisis, interest rates, and much more.
Enjoy the interview here:
Mr. Armstrong notes the following about the looming pension fund crisis:
“When we have had crashes before, they tend to be because the private sector is the one that’s in trouble. This time it’s the opposite. It’s the government… The low interest rates have basically created the next crisis and I have been writing about this for the last few years… Most pension funds are insolvent. The ones that have done well are far and few between and they are the ones that have abandoned government bonds… You buy corporate debt, and even if the company goes bust, you end up with a bankruptcy sale and you get some money back. The government (defaults), you get zero back. You can’t go to the National Gallery and start lifting Picassos. So the crisis we have is this pension crisis and it’s monumental… It’s very simple. You’ve got ten year bonds and let’s say they’re paying 3%. You need 8% to pay out pension funds going forward. They can’t even afford to buy 10-year bonds. They do and they lock in a guaranteed loss. This is what Janet Yellen kept talking about and people were not understanding what she was really saying: “We have to normalize interest rates.” They don’t go out there to the press and say ‘Gee if we don’t do this all the pension funds are going to go belly up in five years…’ They just (say) very quietly ‘we’ve got to normalize…’ They’ve got to get (interest rates) back up to where pension funds can be solvent. That’s the real crisis we have.”
As always, political views expressed by Mr. Armstrong are not necessarily ours.
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