Financial repression is coming to Europe and the people that can’t see that don’t have a strong understanding of financial history and the lengths that politicians will go to get re-elected. That’s the view of financial historian and strategist Russell Napier, who thinks that the failure of central banks to reflate the global financial system will lead to stronger and more significant government action.
For much of the past decade, Crispin Odey has been waiting for inflation to rear its ugly head. The fund manager has been positioned to take advantage of rising prices in his flagship hedge fund, the Odey European Fund, and has been trying to warn his investors about the risks of inflation through his annual Read More
Napier is the co-founder of online research platform ERIC and the author of Anatomy of the Bear: Lessons from Wall Street’s Four Great Bottoms. In an interview with Real Vision TV, he envisions a sharp change in momentum from governments, starting with Europe, which is in a clear state of policy paralysis. Items on the policy menu include capital controls, dividend controls and the forced purchase of government debt.
Russell Napier: Fiscal Stimulus Comes With Dangerous Baggage – Financial Repression
Manipulated by the System with a Deluge of Monetary Policy
While professional investors have learned how to play the game against central bankers, who are not too dissimilar to investors themselves – being forward looking and focused on inflation – Napier said they have been “royally gamed by the financial system” on a diet of monetary policy more monetary policy and more monetary policy.
“But if it switches to government, then I think it’s a completely different game,” he said. “We’ve seen a little bit of it already in terms of government action, regulation, forcing people to buy that debt. But primarily, that debt’s been bought by central bankers,” he said.
It’s clear now that central banking isn’t working in terms of reflating the economy and its failure to produce nominal GDP growth above the growth in debt, is now leading some to believe that a fiscal solution is coming. But if people are getting excited about that, then Napier thinks they couldn’t be more wrong.
Fiscal Expansion Comes with Dangerous Baggage – The Tools of Financial Repression
“The nine most dangerous words in the English language are: ‘We’re from the government and we’re here to help you,’” he told Real Vision. “So to me it’s bizarre that people who are the stewards of other people’s capital are getting really excited because the government is coming,” adding that a fiscal expansion is likely to come with a lot of dangerous baggage.
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