Billionaire Carl Icahn Sees Over-Regulation as Fueling US Economic Crisis (Video)

Billionaire and founder of Icahn Enterprises, Carl Icahn, recently appeared on Bloomberg to discuss his support for Donald Trump and a future move to start his own super PAC. During the discussion he had with Erik Schatzker, the wealthy activist made a case for the coming demise of the US economy and collapse of the dollar due to over-regulation of the markets and lack of capital spending.

Produce Nothing, Profit Nothing

One thing Icahn is adamant about is the US economy’s move from manufacturing to the service industry being a wrong turn.

In a society like ours, manufacturing is important. Sooner or later, you can’t just keep tweeting to one another. We say we’re a service economy. Oh, that’s great…What does that mean? That we text more to each other? Sooner or later, everybody is going to just sit there and text to one another. Isn’t that wonderful? So why should anybody work? We can just sit there and text to each other and watch TV. This is happening as we speak…Eventually our currency is going to go to hell and we’re going to lose our hegemony.”

The Zero Interest Rate Bubbles

The long-time hedge fund manager strongly believes the Fed’s low interest monetary policies are creating asset bubbles. From a corporate standpoint, low rates are making loans easier, but not enough companies are investing in capital. Rather they’re choosing to leverage buy backs of stocks to increase profits.

A lot of these companies that are over-leveraged today are not really making true earnings. They’re borrowing money and buying back stock. This is making a false market. But, worse than that, it causes them to have worn out tools for their workers. It’s costing them the ability to go into new things. Therefore, they should not be buying back stocks.”

He provides an apt analogy:

So think of it as a rich family that decides ‘we’re just going have a lot of fun. We’re going to sit around the pool and we’ll keep printing up IOU’s’. You keep doing it until you go broke. This is what’s happening in our economy.”

As for his own investments, Icahn is taking a much more conservative approach. “I’m more hedged than I’ve ever been,” he admits. “There are certainly good companies, but some are way over valued at 20 times the S&P… A lot of it is the result of zero interest rates.”

Icahn is also seeing many with savings who can no longer live off interest and are themselves moving into stocks to make up the difference. The rush to assets is creating an over-valuation of some stocks. He describes a common scenario:

Many of my friends call me and say:

 “‘Hey what should I do with my money? I have to buy stocks’.” 

“I say, ‘Why are you buying stocks?’”

“They say, ‘I can’t live on zero percent interest.’”

“I say, ‘What’s better zero percent or losing 30 percent. In one day you can lose it.’”

Regulation Run Amuck

What’s driving all of these issues Icahn believes is over-regulation in the economy, both financial and manufacturing. Having heavy interests in petroleum, the billionaire knows first-hand how regulatory bodies like the EPA can hamstring exploration and innovation.

Thousands of CEO’s understand the problem: One day a regulatory agency like the EPA waves its wand and we’re bankrupt or almost bankrupt or losing a fortune.  Why the hell should I invest in more capital? Why should I invest in more machinery? We can’t compete, and therefore the middle class doesn’t have manufacturing jobs…We’re a reserve currency, but I don’t know how long you can depend on that. Sooner or later there’s going to be a massive problem.”

What are the consequences? They’re not positive for capitalism. Icahn warns not only of a financial crisis, but of a rise in socialism and communism as a result of lack of investment.

The last two years, capital spending is down 4 percent in the last quarter, which is unheard of when you don’t have a recession. Productivity has not grown. In fact, it’s at the lowest point it’s ever been, as far as growth goes. These are very important things in a capitalistic system. You’re going to go the way of Venezuela or Argentina. You’re going to be in a major problem if you keep doing that.”

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