Governments are 'unequipped' for the next Black Swan;  Investing in the Index has “run its course” - Former Bank of Canada President Stephen Poloz

Governments are ‘unequipped’ for the next Black Swan; Investing in the Index has “run its course” – Former Bank of Canada President Stephen Poloz

(Kitco News) — Stephen Poloz, who led the Bank of Canada from 2013 to 2020, says the world is on the cusp of becoming more uncertain and policymakers ill-equipped to manage it.

Poloz explained that there are five risk factors affecting the future of the world: an aging population, technological progress, growing inequality, rising debt, and climate change. These factors acting simultaneously create a more dangerous environment. The economic models that policy makers usually use will not be effective in dealing with this. Hence, Poloz said, individuals and companies will need to deal with the uncertainty themselves. Poloz, who is currently a special counsel for Osler and Hoskin & Harcourt LLP, spoke with Michelle McCurry, editor-in-chief and principal broadcaster at Kitco News.

“Central banks will have almost no room to maneuver in a low interest rate environment, once this current inflation cycle is bypassed,” Poloz said. “Governments are burdened with debt and fiscal deficits caused by an aging population will only make it worse in the future.”

Uncertainty and investment

In his book, The Next Age of Uncertainty: How the world can adapt to a more dangerous futurePoloz claims that due to increasing uncertainty, people should use individual risk management rather than relying on governments. “People will try to get rid of the dangers in their surroundings,” he said. “…they will carry more savings, and they will be willing to lose their jobs more often…so this is a completely different development in a precarious environment.”

With a new era of uncertainty upon us, Poloz has not expressed optimism about index funds. “It is possible that the investment in the index is over,” he said. “I think it will be a stock picker type environment, one in which you should know… more about how [the company manages] Risks, how resilient they are.”

Green energy and fossil fuels

Poloz noted that the world should be careful in how it transitions to greener energies. “There are still 3 billion people who burn little bits of wood or animal dung to cook dinner… It’s just too egotistical of us to say, OK, we’re going to start electrifying somehow and I don’t know what’s going to happen to these people.” “…so the only way to get to 2050 the way we hope is to combine that with robust carbon capture and storage solutions.”

Carbon credit markets are expected to play a role in the green energy transition. These markets include permits that allow owners to emit a certain level of carbon dioxide. Poloz commented on these markets, “I think in terms of their prevalence and legitimacy, yes, [carbon credit markets] It will explode and we will need the cooperation of our accounting firms.”

For Poloz’s thoughts on how bitcoin and central bank digital currencies (CBDCs) fit into this uncertain future, watch the video above.

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Disclaimer: The opinions expressed in this article are those of the author and may not reflect the opinions of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to conduct any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will be liable for losses and/or damages arising from the use of this publication.

2022-06-02 13:50:00

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