Billionaire Warns That Under Yellen a Major Economic Collapse Will Occur

In his latest quarterly letter, Jeremy Grantham, co-founder and chief investment strategist of GMO, a Boston-based money management firm with $117 billion in assets, blasts the money printing ways of Fed chair Janet Yellen.

Yellen is “sticking faithfully” to the “clearly wrong” policies of Alan Greenspan and Ben Bernanke, writes Grantham:

She will not use interest rates to head off or curtail any asset bubbles encouraged by the extremely low rates that might appear. And history is clear: very low rates absolutely will encourage extreme speculation. But Yellen will, as Greenspan and Bernanke before her, attempt to limit only the damage any breaking bubbles might cause.

Grantham criticizes Fed officials for not learning from history

I had thought that central bankers by now, after so much unnecessary pain, might have begun to compromise on this matter, but no such luck, at least in the case of the Fed. The evidence against this policy after two of the handful of the most painful burst bubbles in history is impressive. But not nearly as impressive as the unwillingness of academics to back off from closely held theories in the face of mere evidence.

And he explains how all this will end badly:

This affirmation of moral hazard – we will not move to stop bubbles, dear investors, but will help you out when things go badly wrong – should be of great encouragement to speculators and improve the odds of having a fully-fledged equity bubble before this current episode ends.

-RW