Here at Classiarius we are concerned about an economic slowdown in the US, China and Japan in 2019 for the first two, while Japan sees protection as the 2020 Olympics pumps money into the system.
This past week we have seen an increasing number of analysts and economists talk about the US economy, linking it to a possible slowdown by the end of 2019 or even the potential for a more severe downturn – one saying that there were “gigantic holes in the system.” In a piece on CNBC, former federal Reserve Chair Janet Yellen told a group in New York that she fears there could be another financial crisis because banking regulators have seen reductions in their authority to address panics as there is a recent push to deregulate. Ms Yellen also said that excessive corporate debt could prolong the downturn.
We at Classiarius have always had a different viewpoint. That is to have a limited number of strong and enforceable regulations in place, while addressing all concerns early and at the source (In 2004, there was too much unregulated and free money. In 2014, there were mountains of regulations).
Ms Yellen was quoted as saying, “I think things have improved, but then I think there are gigantic holes in the system.” In a discussion moderated by Paul Krugman of CUNY. Mr Krugman is the Nobel Prize laureate who predicted that global equity markets would collapse if Donald Trump were elected and sat in the White House. Mr Krugman is not known for his ability to divorce himself from left wing politics while giving economic analysis.
Now it is important to note that while speaking in London in 2017, right after leaving her post, Yellen did say that she did not believe there would be another financial crisis in our lifetimes because of the financial reforms that were enacted when she was in office. She is now warning that efforts to deregulate were underway and this, as it seems, is not a path that we should be taking. In short, the idea of massive deregulation is a concern for the future. As she continued to discuss the current world, Ms Yellen did say that she believed interest rates would stay low for a longer time, especially relative to past decades.
We tend to agree with this view and feel that strong but limited regulation is preferred, with of course some freedom for thinkers and investors to engage in business formation.