Famed Investor Jim Grant Warns Higher Rates Could Fuel Defaults, Stagflation After Era of Fed-Fueled “Everything Bubble”
• Jim Grant predicted the 2007 housing bubble and now warns higher interest rates are here to stay after a decade of "free money" policies by the Fed. He fears defaults in the credit markets.
• Grant argues the Fed's quantitative easing and near-zero rates after the 2008 crisis fueled an "everything bubble" that has only partially deflated so far.
• Hundreds of "zombie companies" stayed alive using cheap debt and may now default as rates rise and the economy slows. Bankruptcies are already increasing.
• Unlike many on Wall Street, Grant believes rates could trend higher for decades, with some volatility, based on historical cycles. He warns of potential stagflation.
• While innovation can be deflationary, Grant says history shows technology and falling prices do not always align. He concludes forecasters should be humble as the past is not always prologue.