With stocks at record highs, seemingly proving that everything must be awesome in the world, Chris Watling, chief executive of Longview Economics, shocked CNBC on Friday by reminding them that “this is undoubtedly the lowest quality economic recovery we have seen globally… full stop.”
The reason is simple, Watling continued,
“the economic model is deeply flawed and the system in the west is deeply flawed, particularly in the English speaking part of the world and it needs to change.”
The Longview Economics CEO explained that a debt-laden global economy could be vulnerable to looming interest rate hikes because,
“This is a world that is more indebted than it was before the global financial crisis in 2007, there’s no productivity growth, asset prices are very elevated, a lot of debt that corporates have built up has gone to share buy backs (and) the number of ‘zombie companies’ has doubled since 2007.”
Watling’s warnings confirm bond-king Bill Gross’ recent warning that the course of global central banks toward tightening policy could be detrimental for the economic recovery. He argued that raising interest rates would increase the cost of short-term debt that corporations and individuals currently hold.
When asked whether an imperfect system constituted a clear and present danger for the financial markets, Watling replied:
“Whatever you want to call it doesn’t really matter but these sorts of things always unwind when you tighten money. The problem is judging what is tight? And that is sort of the million dollar question.”
Will that pain begin in October?