Submitted by Taps Coogan on the 21st of February 2018 to The Sounding Line.
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Legendary short seller Jim Chanos, the man who predicted the implosion of Enron, recently spoke with Business Insider to deliver this message:
“What Wall Street has benefited from, among many things, is basically a once-in-a-lifetime move in rates from 14% to basically 2% or zero depending on if your looking at short term rates and we’re not going to repeat that… I am pretty safe in saying. So what Wall Street hasn’t seen, with the exception of a few greybeards like Paul and myself, is high interest rates or rising interest rates for any sustainable period of time and the big change will come when that changes. So I don’t know if that’s what’s happening now. We’ll see, but when you see things like Greece borrowing at rates lower than the US for 2-year notes, it’s a little crazy. So things are happening in the credit markets that are making people a little uncomfortable. We’ve moved to almost 3% on the 10-year. But based on nominal growth right now, with or without a rising CPI… the 10-year should be north of 4%. So, we are still in a very accommodative environment.”
“In a highly competitive economy, if interest rates are so low, returns should be dropping. Instead, returns and corporate assets are remaining high and some of that might be technology. Some if that might be just lobbying – simple rent-seeking and I think it’s probably a combination of both. But what it does lead to is stagnating wages, lower capital investment, and a disproportionate portion of the economy going to the corporate sector and shareholders and that’s great for equity holder. It’s not really great for everybody else.”
There is more to the interview so enjoy it below. As to what ‘big change’ might be coming if the rate rise for a sustained period of time, check out ‘Now Is the Time to End Deficit Spending.’
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