On whether China’s central bank made a timing mistake in allowing the yuan to strengthen:
“[China’s central bank] probably is [making the wrong move]. They run a stop-go economic policy. The last time they tried to slow things down was 2007. The timing couldn’t have been worse as it came right on the eve of the ’08 global recession. ”
“Now they’re trying to slow things down and letting the yuan go up against the dollar is part of that tightening move. They’re worrying about inflation, but they’re really trying to tighten down after all their massive stimulus last year. The timing is probably going to be terrible because we’re getting the eurozone crisis spreading globally and that may give us the sequel to what sub-prime mortgages did in 08.”
On conditions in the Eurozone:
“I don’t think it’s the end of the world but it’s mainly financial. It isn’t so much in trade although obviously if Europe is in weak conditions, they’re not going to be able to buy much of anything including our exports, but the point is that US banks have 48% of their global exposure -1 ½ trillion dollars in the Euro zone plus the UK – so there’s a lot of involvement there. I think we’re probably going to end up restructuring, meaning lower value on the debts, sovereign and private debts, in Greece and probably Spain and a few other of the picks.”
“There’s a difference between technical default and actual default…but I think it’s coming.”
On the European Central Bank owning Greek and Spanish debt:
“The suggestion is that the ECB should sell that that, in effect, to this big fund, this back up fund that they’ve set up. The Greeks have actually proposed that. That’s what going on globally: it’s the socialization of debt. It’s taking it over by some, by a government or by a super government agency.”
Watch he full video here:
Source: Bloomberg TV
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.