Blackstone’s Byron Wien is up with a new blog post, wherein he relays a conversation he had with someone he only refers to as The Smartest Man In Europe.
Wien doesn’t say who The Smartest Man In Europe is, but describes him as basically an incredibly brilliant, wordly, rich businessman.
Many of you remember The Smartest Man from earlier essays; I have been writing about him annually for more than a decade. He has been a friend for thirty years, and during that period he has shown an almost uncanny ability to see major events affecting the financial markets before other observers. Among these were the fall of Japan as an economic power in the 1980s, the economic changes in China and their significance the early 1990s, and the serious consequences of excessive borrowing in the developed world in the last decade.
His DNA endowed him with a certain amount of business acumen. His ancestors operated canteens along the Silk Road, selling food, weather protection and supplies to travelers to India and China. He apprenticed in finance in New York, but returned to Europe to take advantage of opportunities created during the post-war recovery there. Along the way he has acquired the ABC’s of European wealth – an airplane, a Bentley and a house on a Cap in the French Riviera. The depth and breadth of his art collection is impressive, but material things are not what gives him a high. He gets his thrills from identifying a problem, thinking it through and being right in determining how it gets resolved. In his ninth decade, he is an inspiration to me.
So what does TSMIE see now?
Basically that massive amounts of debt will bring the decline of Western Civilization, but that in the meantime, before that happens, policy makers would pull every trick they could in order to stave off a catastrophic event.
He started out by saying he had done some preparation for our visit. “I think the title of your essay should be ‘Dancing around the Fire of Hell.’ For years I’ve been telling you that the accumulation of debt was going to be the ending of the developed world and for years you have been telling me my views are too extreme. The problem is you are an optimist and I am a realist. You go around with a smile on your face thinking that there are serious problems facing us, but that everything will turn out favorably because the policy makers will do what they have to do to avoid disaster, and so far you have been right. The developed economies and their stock markets have plodded along and investors haven’t made or lost much money in spite of the challenges. At a certain point, however, the temporary measures that the policy makers put in place to avoid financial catastrophe prove insufficient and that’s where we are now. I’m not saying that it will happen tomorrow but events are falling into place that will take the smile off your face.
After getting to the point where fiscal stimulus no long works, the world’s central banks will go into overdrive (as is already happening)
Full article: Byron Wien: I Spoke To The Smartest Man In Europe, And What He Had To Say Was Terrifying (Business Insider)