We are witnessing the greatest experiment in history
The investment banker Lord Rothschild is not sure how the biggest experiment of the history of monetary policy will end. So far his company has earned big money. Rothschild sees the greatest risks in the West.
A luminary in the financial sector, Jacob Rothschild – head of investment company RIT Capital Partners – warns against the negative consequences of the expansive monetary policy of central banks. Low interest rates, negative returns on some government bonds and bond-buying programs by some central banks are part of the largest monetary experiment in world history. The long-term consequences of these policies, as Rothschild, are completely unpredictable.
In the semi-annual report of RIT Rothschild looks at the current situation: “In the past six months, the central bankers have continued the biggest experiment of monetary policy in the world’s history. We are in unfamiliar territory and it is therefore impossible to estimate the unconsidered consequences of very low interest rates, the fact that around one third of all government debt has a negative return, as well as the massive bond-buying programs.
Concerning risks writes Rothschild: “Meanwhile remains weak growth, with weak demand and deflation in many parts of the developed world. Many of the risks to which I referred last year, remain: In fact, the geopolitical situation has continued to deteriorate. The United Kingdom has withdrawn from the EU, the presidential elections in the US in November will be unusually tense, whereas the situation in China remains unclear and the growth of the world economy is slowing. remain the Middle East conflicts exist and are unlikely to be resolved in the coming years. Their consequences we have felt already during the terrorist attacks in France, Germany and the USA.
RIT has given this risk adjusted its portfolio with gold again play a greater role: “In times like these the preservation of the assets remains the fundamental objective. In equities, we have lowered our commitment of 55 percent to 44 percent. Our commitment to Sterling has been shut down in the past six months, at 34 percent, with currency accounting for about 25 percent of the total portfolio. We have increased gold and precious metals to the end of June to 8 percent. ”
Since inception of RIT in 1988 Rothschild was able to achieve a total return of about 2,000 percent.