Jim Bianco is ill at ease with the state of global financial markets.
In an interview with Swiss business publication Finanz und Wirtschaft, Bianco said negative interest rates have brought us into a world that simply makes no sense.
Bianco — who runs Bianco Research out of Chicago — said, “We’re still all trying to feel around in the dark as to what [negative rates] mean. And that means the chance of an accident is very high.”
As Bianco outlines, right now no one is issuing negative rate mortgages or negative coupon bonds where the creditor would literally pay the borrower to take their money.
And so in effect, negative interest rates don’t exist outside a small corner of the financial world, and it’s not clear what good they’re doing there, either.
Negative rates are also part of a new world for markets in which the size and complexity of Wall Street’s biggest banks make the system impossible to fully understand.
“At our offices, we laugh about a running joke: Every time somebody talks about large financial institutions there are only two answers to any question,” Bianco, one of Wall Street’s most widely-followed contrarian strategists, said.
“Either you respond, ‘I don’t understand because it’s too complicated,’ or you’re lying.”
Bianco added, “When people start picking through JP Morgan’s balance sheet nobody understands it. The complexity of these institutions is beyond the comprehension of the human mind. So am I concerned about the financial system? Yes.”