Noteworthy for predicting the 1987 stock market crash, billionaire hedge fund manager Paul Tudor Jones warned investors at a Goldman Sachs “Talks” event that “we don’t have any stabilizers” to help stave off a deep recession at this time. “We’ll have monetary policy, which will exhaust really quickly, but we don’t have any fiscal stabilizers,” said Jones according to MarketWatch, which covered Goldman Sachs CEO Lloyd Blankfein’s interview of Jones on June 18, 2018.
Former Fed Chair Ben Bernanke also warns that the US economy is likely to nosedive once the massive dose of fiscal stimulus delivered by federal tax cuts and spending hikes wears off.
In particular, Tudor Jones noted that quantitative easing put in motion by the Fed in response to the 2008 financial crisis has produced real interest rates that not only are far below long-term historic norms, but also actually negative.
Tudor Jones elaborated: “You look at prices of stocks, real estate, anything. We’re going to have to mean revert to a normal real rate of interest with a normal term premium that’s existed for 250 years. We’re going to have to get back to that. We’re going to have to get back to a sustainable fiscal policy and that probably means the price of assets goes down in the very long run.”
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Sources: https://www.marketwatch.com/story/hedge-fund-boss-who-predicted-87-crash-says-next-recession-will-be-really-frightening-2018-06-19; https://finance.yahoo.com/news/paul-tudor-jones-warns-next-recession-will-really-frigtening-203418073.html