Legend Warns The World Is Now Facing Enormous Dangers

"Today a legendary value investor warned King World News that the world is now facing enormous dangers.  Below is what the legendary investor, Jean-Marie Eveillard, who oversees more than $85 billion, had to say about the tremendous danger the world faces in his powerful interview.

Eveillard:  “Things had been very quiet and bullish in the global markets for quite some time.  Then all of the sudden the markets recently tanked hard and fast.  But there are all sorts of problems beyond the geopolitical ussues in the Ukraine and the Middle East.  We now have this Ebola crisis to contend with....

“But the main problem is there is just too much debt.  The developed world is choking on debt.  When Western central planners intervened and took absolutely unprecedented steps in 2008 - 2009 in order to save the day, it did not allow for a cleansing of the financial system.  In other words, there are zombie companies that exist today because interest rates are almost nothing.

So they stabilized matters in the very short-term, but the world will eventually pay one hell of a price for that intervention.  We have just seen early warning signs or the beginning stages of what can happen when things reverse to the downside.  What I am saying is that they have compromised the long-term stability of the entire global financial system.  This is why you see the VIX suddenly spike and you see panic set in very quickly.

Also, there was a piece that was produced by a number of economists that said, ‘Deleveraging, what deleveraging?’  There has not been any deleveraging.  The private sector has delevered a little bit, but meanwhile the public sector is even more leveraged than it used to be.  So, yes, there will be one hell to pay for their actions.

And the West is not alone.  There has been an even bigger credit boom in China.  So there is too much debt everywhere.  When I was recently traveling to France, somebody told me that since 1974 the federal budget in France has been in deficit every single year -- even during the good economic years.  This is madness.

And complicating matters even further for the markets is the fact that hedge funds are borrowing money at near zero and leveraging this money into global markets and creating all sorts of distortions.  Then there is the margin call.  This is when the  liquidation starts.  They have to sell in order to meet the margin call.

All of this creates an atmosphere of crony capitalism.  Milton Friedman used to say that ‘The free enterprise system is a system of gains and losses.  And for the system to function properly, the losses are as important as the gains.’  Today if a large bank or some other major entity makes a big bet and wins, they pocket the winnings.  But if they lose, that’s too bad.  Today anybody who loses runs to the government and says, ‘Bail me out.’”

at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/10/17_Legend_Warns_The_World_Is_Now_Facing_Enormous_Dangers.html