Harries says that the appetite for debt in world markets is dangerously high, and lending practices are dubious, just as in the run-up to the 2008 crash.
This is being caused by global authorities’ policy of reflating the market at all costs, which is bound to fail, the manager says.
"The authorities want the market to do better and think it will encourage economic activity and thereby lead to a recovery, but we question the sense of that and we are starting to see some behaviours that are quite reminiscent of the period prior to the credit crunch: wider credit spreads, issuance in emerging market debt and companies issuing debt to pay dividends," he said.
The manager warns that by pushing investors into equities through quantitative easing, the authorities are destroying the mechanism by which reasonable risk/return relationships are established in the market.
"If you are pushing up asset prices then the prices are wrong," he said.
"If you take away the pricing mechanism, you get poor allocation of capital and you get a situation like in Japan where companies struggle on but production falls."
Harries says that the authorities’ current failure to recognise the dangers of over-expanding credit mirrors their mistakes in the run-up to the crisis.
"The problem is 40 years in the making, and there are lots of reasons for it," he said.
"Everybody decided to borrow more and credit became much easier to get. Globalisation meant more financing and more cross-border trade."
"One reason that is less-well appreciated is the effect of the mainstream economics used by central banks."
"They began to de-emphasise the importance of credit cycles and money, so they took less notice of the extent to which people were borrowing."
"That will be the key mistake when people look back at the period later."
"It wasn’t the credit crunch that created the mess: it was the bad deals made in the years coming up to the crisis."
"For example in China, the poor lending has been done and we are now trying to work out who is going to wear the loss."
Harries’ £3.8bn fund, which has five FE Crowns, is by some way the most popular Global Equity Income fund, according to FE Analytics data.
It has seen inflows of over £570m in the past year, more than twice those of the next most popular fund in the sector.
In addition, it is almost £1.5bn larger than the second-biggest fund, Veritas Global Equity Income.
It was launched in 2005 and had a rough time during the financial crisis thanks to large weightings to the mining and financial sectors, both of which did particularly badly.
However, since then its track record is good, and the fund is a top-quartile performer over three years, with returns of 42.65 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
Harries says that investors should not get carried away by the recent rising markets and forget how serious the crisis has become, being many decades in the making.
"Between 1980 and 2007 markets were pretty good and economies had a good, long run."
"It was a time characterised by rising asset prices and we had a lot of benign business cycles."
"It was a time when debt was building structurally and so in that respect it was benign for reasons that couldn’t be repeated now."
"Deleveraging is a process, not an event, so the future is likely to be low returns, more volatile business cycles and more difficulty making money."
"Not because GDP growth will be lower – there is little correlation between GDP and stock market growth – but because the starting point is worse."
"We think you should construct an investment strategy which recognises this and is flexible and has an absolute return mandate rather than outperforming a benchmark."
Harries' fund is currently yielding 4 per cent, according to data from FE Analytics, and the manager says that gathering income is likely to be a key method of producing superior returns over the medium-term.
The manager is underweight sectors exposed to global growth.
"We have been negative on areas related to China and emerging market growth and it’s interesting to see basic materials are at the bottom, which would be consistent with that view," he said.
He has preferred more defensive, sustainable businesses, but he warns that reflationary policies are pushing up the prices in these companies to levels where he is thinking of selling out.
Harries is preparing for a downturn in the markets, which he says he will use as an opportunity to buy into companies he likes but that are currently too expensive – such as the elevator business Kone – and businesses that are of lower quality but that he thinks are worth investing in at a lower share price.
Although the manager explains that the turnover on his portfolio has remained low, he has taken advantage of recent price weakness in Microsoft to build a position in the company.
"Microsoft is a wonderful business, and the valuation is attractive and the dividend is rising so it’s available for us to buy."
Harries warns investors not to be deceived by the surge in global stock markets.
"In our view the global economy is slowing and the underpinnings of this is the experimental and extreme monetary policy."
"It is pretty easy to forget how experimental and extreme it is. There will be unintended consequences down the line."