As we kick off another trading week, John Mauldin spoke with King World News about what he says will be the next great shock to the world. Mauldin warned it will be far greater than the banking disaster that ignited the 2008 global collapse.
John Mauldin: “I really believe that the Fed is going to raise rates later this year. They should have been raising rates 3 years ago. They have distorted the economy and created all sorts of problems. Normally in this cycle with the growth that we have, interest rates would have been in the 4 percent range. They have really, really messed up here….
Continue reading the John Mauldin interview below…
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“They’ve created all sorts of malinvestments. We had 6 years of zero interest rates. To think that doesn’t distort economics and businesses and how people function? People used to save their money and put it into bank CDs and live off of it. They can’t do that now.
Disastrous Future For Pension Funds
We’ve got pension funds and insurance companies that are literally incapable — it’s mathematically impossible — for them to make their numbers with the mandates they are regulated to have in terms of how much bonds they are supposed to have and equities and whatever.
Going forward they are going to be lucky to make 3 or 4 percent compounded, but their targets are 8 percent. And what people don’t understand about pensions is that the bulk of the money they (are projected to) have in 30 years, when they say they are fully funded today, that means that they are expecting a compound return of 7 – 8 percent.
And if they don’t get that (return) of 7 – 8 percent, that means they are not just somewhat underfunded, (say) 10 or 20 percent. They are radically underfunded 70 or 80 percent. Well, where are you going to make up what’s literally one trillion dollars, when you just go through just the public pension funds? Where are you going to cut that from?
The Next Great Shock To The World
This is going to be a crisis that’s going to show up next decade … and where are they going to get the money? What’s going to shock people is insurance companies and the big annuity companies that are guaranteeing so much of those funds. It’s going to be a true crisis.
And what most people don’t realize is that the insurance industry is a multiple the size of the banks. It’s far bigger, far vaster and far more important. So this is what the Fed has done is they’ve made it impossible for these guys to make their numbers. We are going to have to have pension and insurance and all sorts of reforms — that’s the next crisis.” John Mauldin's remarkable audio interview and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO RELEASED: More Disturbing Developments, War On Cash And The Endgame CLICK HERE.
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The audio interviews with John Mauldin, Michael Pento, Gerald Celente, Egon von Greyerz, Dr. Paul Craig Roberts, Andrew Maguire, James Turk, Rick Rule, Bill Fleckenstein, Dr. Philippa Malmgren, Eric Sprott, Robert Arnott, Michael Pento, David Stockman, Marc Faber, Felix Zulauf and Rick Santelli are available now. Other recent KWN interviews include Jim Grant — to listen CLICK HERE.
