J. Gundlach: Import tariffs led to a Great Depression

Jeffrey Gundlach warns we may be repeating the mistakes that led to the Great Depression.

The bond investor was asked for his view on the rising trade tensions between the U.S. and China.

“It’s not a positive. I mean it is really interesting when I was in elementary school and high school we talked about the Great Depression … [What] my teachers told me was that the Great Depression was caused by the Federal Reserve raising interest rates prematurely in a not so strong economy and also the Smoot–Hawley Tariff Act,” he said.

Gundlach compared what happened in the 1930s to the current state of the economy cycle. He also noted how central banks are in the process of withdrawing monetary stimulus.

“So here we are. We are raising interest rates late in the cycle,” he said. “Laid on top of that quantitative tightening … on top of that we’re now talking about tariffs, so one can put together a scenario that we’re stumbling our way into a policy mistake.”

The Great Depression is considered to be the biggest economic collapse of the XX – century. During the crisis, international trade fell by more than 50% and unemployment in the US reached more than 25%. But the United States is far from being the most affected country. In some countries in Europe and Asia, unemployment ranges from 35% to 40%. The consequences of the crisis are the most severe in the highly industrialized urban centers.

Gundlach is founder and CEO of DoubleLine. He is known for his investment acumen in the fixed income markets. Barron’s dubbed Gundlach the “The New Bond King” in 2011. DoubleLine has assets under management of more than $118 billion, according to its website.

Source: CNBC