Governments stopped the world from falling into double-dip recession and authorities around the world did not make the same mistake as where made in the 20s and 30s, Mark Mobius, the executive chairman of Templeton Asset Management said Thursday.
“Governments have reacted very quickly to pump money into the system to ensure there is enough liquidity, so we see a very good market going ahead in Europe and in the US," Mobius told CNBC.
But Mobius said he does not believe all the money thrown at the financial crisis by governments has been well spent and expects mistakes to hit the job market for some time to come.
"If you look the at unemployment situation in the US, that will probably continue for a while now, because a lot of the stimulus package in the US has been going into unproductive government spending," he said.
Mobius is confident President Barack Obama and his team will learn from what he considers their mistakes.
"Going forward, the administration and the government will wake up to the reality that this is not the way to stimulate the economy and they will have to reduce the burden on small enterprises," he said.
US vs. Europe?
With investors asking if austerity measures in Europe could cause a double-dip recession and others fretting over Obama’s decision to keep the government spending flowing, Mobius says both stimulus and some austerity are in order.
“You need both," he said. "They are not really opposing and what I mean by that is first the liquidity in the system must be there. In other words, governments are correct in supplying the liquidity to the banks”
Mobius said the problem is that the banks are not getting this money into the economy.
“The problem is the banks and not making loans, and that has to be encouraged, so that there is enough finance for growth”
Mobius warned that money must not be pumped into more government spending.
“There has to be a cut yes, in spending but not by the private sector but by the public sector," he said. "Because the public sector is the sector that creates bottlenecks and restrictions on growth For example, in the labor market, the more restrictions you put on whether you are able to fire labor or hire labor, it creates all kinds of problems."
China Will Lead the Way
"In the rest of the world, for example in China, you going to continue to see much higher growth, two or three times faster growth than in developed countries" Mobius said.
Focusing on emerging markets, Mobius dismissed fears over the state of the Chinese property market.
“In certain cities, there has been an increase in property prices that has been too high, but it's not a bubble," he said. "Simply because the holding power is so high in China, because of the high savings rate and consumers are not as heavily leveraged as they are in Europe and in the US, particularly in the US”
"Yes, prices have gone up, you have seen a sort of bubble expand, but the bubble is not going to burst because people have the holding power to keep those properties," he added.