Financial Times - Rob Arnott: We're Making Worse Mistakes Than the 2008 Financial Crisis

August 28, 2020

Article by Shruti Tripathi Chopra in Financial Times

The world’s biggest economies are at risk of making bigger mistakes than those made during the financial crisis, according to top investor Rob Arnott who is known as the “godfather of smart-beta” investing.

The founder and chairman of the board of Research Affiliates, a global asset manager, told Financial News that the lockdowns forced by the Coronavirus outbreak has fuelled “asset bubbles” that will bring pain further down the line.

“The big issues are the lockdowns, and the resulting trillions in fiscal and monetary stimulus, fueling asset bubbles. The lockdown has inflicted a human toll that dwarfs the damage of the virus,” Arnott said.

Arnott’s comments come ahead of Federal Reserve chairman Jerome Powell’s speech to the Jackson Hole economic symposium - where major policy announcements are made.

When asked whether the global economy is at risk of repeating mistakes of the 2008 financial crisis, Arnott said: “No, it’s much worse than that.”

Arnott warned against heavily relying on the concept of Modern Monetary Theory, the idea that countries that issue their own currencies can never run out of money in the same way a business or person can.

“We’ve already embraced MMT on steroids,” he said. “If we don’t step back and take a fresh look, the consequences of this spending binge and money printing will be devastating.”

The US economy shrank at a 32.9% annual rate between April and June, the deepest decline since its government began keeping records in 1947.

“The bigger risk facing the global economy is ...

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