Friday, December 19, 2014

Andrew Huszar Suggests that 2015 will bring Surprises

In this interview with King World News, the former Fed manager of its first QE program Andrew Huszar talks about what he sees coming in 2015. We have noted here on the blog that 2015 looks like an important year for several reasons. We have the IMF Plan B for dealing with the 2010 reforms that were never approved. We have the IMF quota review to determine if the Yuan will go into the SDR basket. We have had multiple warnings all year long in 2014 from both the IMF and the BIS that markets are at risk from being over inflated. We also have strong hints of deflation around the world except in Russia, where they are dealing with a collapsing currency and surging inflation. Oil has crashed as well. And we still have ongoing geo-political conflict in many places. All of this suggests 2015 will be a very important year with substantial risks to the financial system still in play.

King World News does not allow anyone to copy quotes so I will just do a bullet point summary of this interview below. As always, we encourage readers to click on the link to the full interview above to get full context. 

Before we summarize the interview, here is some background info on Andrew Huszar:

"Until June, 2012, Andrew was Managing Director and U.S. Head of OTC Derivatives Client Clearing for Morgan Stanley.  In this role, Andrew reorganized and managed a business encompassing sales, financial planning and analysis, product development, on-boarding, and client service functions. Previously, Andrew managed for the Federal Reserve Bank of New York ("FRBNY") the $1.25 Trillion Agency MBS Purchase Program (the centerpiece of "QE1").  In this role, Andrew managed the program's portfolio design and trading strategy, as well as the creation of a permanent, in-house Federal Reserve MBS business platform, encompassing front, middle and back office components."

Here is a bullet point summary of his latest interview linked above:

- the Fed announcement on Wednesday was not signifigant news. They appear reluctant to bring easy money to an end

- Problems in Russia are being made worse by the end of QE by the Fed

- The problems left over from the 2008 crisis and still not resolved. We are waiting to see when they will lead to a new systemic crisis

- He expects surprises in 2015 and is concerned at some point they will lead to a new crisis
My added comments: 

Please keep in mind that the comments in this interview are coming from the man who implemented a big part of the first QE program at the Fed. If he is concerned, we should be too. The big problem we all are facing is that almost everyone understands that there is a substantial risk of another huge financial crisis. The numbers are all just bigger now, so a new crisis will be bigger if we have one. These facts and warnings are NOT coming just from critics of the system and outsiders. They are coming from the leading global banking institutions in the world (the IMF and BIS) and from people like Andrew Huszar, Jim Rickards, and Nomi Prins. These are all highly respected and well connected people who have worked inside the system. They still know many people who work in the system now.

Despite all this, so far we have avoided another crisis. But no one feels they can relax. We certainly don't here. There is so much debt overhang around the world combined with massive derivative hedges (both known and unknown) that no one can possibly say with any certainty when another crisis might hit. Andrew Huszar states that clearly in this interview. It could literally happen at any time or be awhile into the future. Stephen Leeb says in this interview the next two years will be the most critical of our lifetime.

This means it is critical to not relax and to stay informed. It is critical to formulate a plan for how you would deal with different possible situations and make what preparations you can before a crisis arrives. If we never get one, that will be great news. But look at all the highly respected people who work in they system or have worked in the system who are trying to make people understand the risk is out there. We simply cannot afford to ignore them. It is now time to not only think about these issues, but try to get others you know to do the same. This blog is here as a free resource in an effort to try and be of help in that process.

added note: 

A question I get here is how can the average person prepare for change given that so many different future scenarios are possible? On January 1st 2015 I will have an in depth article that talks about this. It will give the history for why this blog was started, what it hopes to do, and offer some common sense ideas that anyone should be able to use to prepare for whatever happens. This article will also be provided as a Google document in Word format so that it can be easily printed and given to anyone interested. Of course it will be free to anyone who can use it. Please do hand it out to anyone you think can use it.

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