The boss of a ‘Black Swan’ fund warns the Fed’s rate hikes could cripple markets and the economy – and cause a bigger problem than inflation

via businessinsider:

  • Mark Spitznagel warned the Fed’s rate hikes risk causing huge damage to markets and the US economy.
  • The Universa Investments boss cautioned higher interest rates could turn inflation into deflation.
  • Spitznagel questioned whether the Fed will be able to stop a widescale crash if it causes one.

The Federal Reserve’s efforts to crush inflation risk sparking a collapse in asset prices, and plunging the US economy into a severe recession with painful deflation, Mark Spitznagel has warned.

“If the Fed’s going to try to normalize rates, they’re going to bring inflation down very, very quickly, but it’s also going to cause devastation,” he told Bloomberg on Wednesday.

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Spitznagel is the cofounder of Universa Investments, a so-called “Black Swan” fund that specializes in hedging portfolios against extreme and unpredictable events.

He accused the Fed of inflating asset prices for 25 years with near-zero interest rates and a loose money supply, and argued a return to its historical policies is now impossible.

“I don’t think that the Fed can ever normalize rates again,” he said.



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