– Former Fed Chairman warns of bond bubble, stagflation
– “Moving into a … stagflation not seen since the 1970s”
– This will not be “good for asset prices”
– 10 Yr Gov bond yields fell from 15.8% in 1981 to 2.3%
– Interest rates will not stay low, will rise ‘reasonably fast’
– “Normal” interest rates in 4%-5% range
– Inflation will not stay at historically low levels
– Gold “protects savings” and is “store of value”
– Gold is the “ultimate insurance policy” says Greenspan
Editor: Mark O’Byrne
Greenspan warns of Bond Bubble
‘We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.’
There are a lot of warnings on Bloomberg, CNBC and other financial media these days about a bubble in the stock market, particularly in FANG stocks and the tech sector.
But former Fed Chair Alan Greenspan is not in agreement. He is continuing his message of the last two years, that there is a bond bubble and which is more dangerous than what is going on in the stock market.
He is not the only one, in recent months there has been a growing number of those who are concerned that real bond yields in the U.S., UK, EU and elsewhere are well below where growth and inflation rates seem to suggest they should be.
They correctly warn that it is only a matter of time before the inflationary pressures (that we are feeling) hit the bond market.
Stagflation on the horizon
Greenspan’s warning this week comes a little over a year after he last warned us that we were currently in the worst period he has seen since he began public service, including the financial crisis.
Things are so bad, he said that he wished he could “find something positive to say.”
At the time he pointed towards the problem of ‘entitlements’ (welfare / warfare spending of the ‘welfare warfare state’). Something, he argued, is uneconomic and unsustainable. The main reason for its lack of sustainability is the low growth rates developed countries around the world are experiencing (around 2%).