Submitted by Taps Coogan on the 16th of September 2019 to The Sounding Line.
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Mark Mobius, Mobius Capital Partners founder and emerging markets pioneer, recently spoke with CNBC about the unnecessary nature of today’s rate cuts and why he feels that efforts to weaken the USD will be unsuccessful.
Some excerpts from Mark Mobius:
“If you look at it from a strict financial-economic point of view, (the Fed) probably should not be cutting and that’s true for the other central banks around the world. We’re all headed down to crazy low levels, at negative interest rates and that sort of thing… But I think that the pressure will be too great and they’ll probably want to reduce (rates).”
“They’re looking at the trade war. They’re looking at the impact it’s having. There is no question, they’ll be some economic impact in the US in the short term at least. And therefore, they are probably going to react to those numbers and say ‘Well maybe we’d better move and get ahead of the curve.’ But don’t forget, there’s a whole other aspect to that. With all the other central banks around the world… lowering interest rates, the US can’t be left standing because you have the problem of the US dollar getting too strong against the other currencies…”
“It would be very difficult for the US to (engage currency markets to devalue to dollar) because the US dollar, unlike all the other currencies, is a global currency. So it’d be very difficult for them to do that unless they really brought down interest rates to very very low levels… Right now people are saying ‘Look I’m getting negative interest rates in Euro, Swiss Francs forget about it…, let me go into US dollars.'”
“I think the whole theory of lowering interest rates is insane and it really doesn’t achieve the purpose that they are trying to achieve. You know, they are talking about getting 2% inflation. Well that itself is a crazy theory, in my view. They should be reacting to what is happening in the economy and let the economy decide what prevailing interest rates should be. That’s the problem with central banks. They’re not listening to the markets and allowing the markets to determine the interest rate and what the value of money is.”
There is a bit more to the interview, so enjoy it above.
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