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Rob Arnott - Defaults & Disorderly Contagion Around the World
With continued volatility in all the markets, King World News interviewed five time Graham & Dodd Award Winner, Rob Arnott, who oversees more than $80 billion as the Founder & Chairman of Research Affiliates. Rob sub advises the Pimco All Asset Fund and mutual funds and ETFs for Schwab, Powershares and Nomura. When asked about the latest crisis in Europe, Arnott stated, “It’s very simple, countries had an obligation to be fiscally solvent and to take responsibility for their own financial obligations. And all they’ve done is thrown all of the Maastricht (Treaty) agreements out the window, which tacitly means that they are probably throwing the euro out the window.”
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
November 11, 2011
Rob Arnott continues:
“It’s astonishing to me that people didn’t notice Italy early on in this because Italy is not a big country. It’s not a huge economy and yet it’s got the third largest debt burden on the planet. Only the US and Japan are larger. But what we are going to see is defaults. The question is not whether there will be defaults, but whether the defaults will be orderly or disorderly and will they have contagion effects around the world or not?
If you lend without any expectation of getting repaid, that’s just lunacy and that’s what’s been going on. So you have governments borrowing. You have governments encouraging their banks to buy the government debt that has no prospect of repayment, and then there is a worry about a banking crisis. Wow, what a surprise.
What you are looking at is a scenario where countries will likely leave the euro. This is one thing that has the euro banks panicked. If they (Greece) leave the euro, they owe the money back in drachmas, which means they can define how much its worth....
Continue reading the Rob Arnott interview below...
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“So the consequences here are very, very interesting because it could play out in the form an unraveling of the euro itself. That would have enormous consequences, enormous ripple effects, but ultimately might be the right answer.
The Fed’s hands are paralyzed, barring financial contagion effects that demand that they play with fire, demand that they embrace inflation as a way to deal with crisis. Once we’ve gone through the economic pain of a likely renewed recession in the coming year, running the printing presses to get us out of that, either way I think we’re looking at renewed inflation. That (inflation) could be fairly serious as early as next year and not later than the following year. Investors are really poorly positioned for that.”
Rob is one of the brilliant original thinkers in the financial world and he is warning investors to expect tremendous inflation going forward. The outstanding KWN interview with Rob Arnott is available now and you can listen to it by CLICKING HERE.
© 2011 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
Eric King
