Morgan Stanley chief executive officer Ted Pick on Tuesday, October 29, during a speech at a panel of finance CEOs in Riyadh, Saudi Arabia, said that the days of easy money and zero interest rates are firmly in the past.
The head of the mentioned bank, based in New York, stated about the end of financial repression, zero borrowing costs, and inflation at the same level. According to him, the corresponding era is over. Ted Pick expects interest rates to be higher. Also, in his opinion, this cost of borrowing will be challenged around the world.
Moreover, during a speech in Riyadh, Ted Pick talked about the completion of the concept of the so-called end of history. He noted that geopolitics is back and will be part of the challenge for decades to come.
In the mentioned context, Ted Pick hinted at the book The End of History and the Last Man, authored by the American philosopher and political scientist Francis Fukuyama. This book was published in 1992. Francis Fukuyama formulated the concept according to which the process of spreading liberal democracy in the world in the configuration that is characteristic of the corresponding political paradigm in the framework of implementation in Western countries is the endpoint of the socio-cultural evolution of mankind. He also assumed that in this case the final form of government as an institution of public administration is being generated. It is worth noting that in the context of Francis Fukuyama’s interpretation, the end of history does not mean the end of the existence of human civilization or the final stop of the sequence of events that form the global being. In this case, it means the end of the century of ideological confrontations, world revolutions, and wars. Francis Fukuyama also noted that the new configuration of the global order in the socio-political dimension and cultural format means the disappearance of art and philosophy. It is worth noting that he did not identify himself as the author of the theory of the end of history, noting that in this case the ideas contained in the works of the German philosopher Georg Hegel are being developed. At the same time, the current state of affairs in the geopolitical space does not correspond to what can be described as a situation in which Francis Fukuyama’s concept is materializing. Some experts and the media after the terrorist attacks in the United States on September 11 said that the theory of the mentioned philosopher is naive and morally outdated. Also, within the framework of the relevant assertions, statements were made that the historical process continued to move forward, and Francis Fukuyama lagged behind this process.
According to Ted Pick, repressed interest rates and easy monetary policy have been reflected in the rearview mirror since 2022. It is worth mentioning that during the coronavirus pandemic in the United States, the cost of borrowing fell to almost zero. At a later time, the Federal Reserve cranked its benchmark rate by about 500 basis points over the course of 18 months.
Ted Pick stated that the United States had a sugar high of coronavirus and zero rates. According to him, in the conditions of the relevant state of affairs, small companies could become public without having much of a business plan. Then, as he noted, for about 18 months there were hard times when almost nothing happened.
Ted Pick also stated that currently, it seems that the state of affairs has returned to normal. In the relevant context, he separately noted that it is now more difficult to be a public company.
It is worth mentioning that last month the central bank of the United States decided to cut its benchmark rate by 50 basis points. This is the first lowering of the cost of borrowing by the US financial regulator since March 2020. The Fed’s decision indicates a kind of turning point in the management of the economic system of the United States. Also, in this case, the US financial regulator is confident that inflation is on a steady trajectory towards its target of 2%.
Strategists at JPMorgan Chase and Fitch Ratings predict that by the end of the current year, the central bank of the United States will make two more decisions on cutting interest rates by the end of the current year. They also expect the lowering of borrowing costs to continue in 2025.
At the same time, according to media reports, some chief executives from Wall Street are highly likely to admit the possibility of continued inflation. The implementation of the corresponding scenario will become an obstacle to further easing the monetary policy of the central bank of the United States.
According to media reports at an event in Riyadh, chief executive officers of Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered, and State Street were asked to raise their hands if they agree with the assumption that in 2024 the Fed will make two more decisions on lowering the cost of borrowing. No one raised a hand.
It is worth noting that so far there is no final understanding regarding the Fed’s further actions in the context of monetary policy. The economic situation in the United States has recently shown signs of improvement, but it still faces such a circumstance of the current configuration of material reality as uncertainty, which is intensified by the upcoming US presidential elections scheduled for November 5. The Fed has made progress in countering price increases. The corresponding result is evidenced by statistical data. For example, in June 2022, the inflation rate in the United States was fixed at 9.1%. In September 2024, the corresponding figure was 2.4%. As for the above-mentioned uncertainty, the corresponding circumstance is relevant for the entire world economy. Moreover, for positive economic prospects both on a global scale and in the context of likely scenarios for individual countries, the threat is the currently observed increase in tension in the space of geopolitical relations. The situation inside the cooperation system of world capitals is deteriorating. In this context, the most telling example is the signs of degradation in relations between Beijing and Washington. Cooperation between China and the United States is steadily deteriorating, gradually approaching the line beyond which degradation begins as a fundamental and structural process.
As we have reported earlier, Morgan Stanley Lowers Climate Target.
