Daily Briefing – September 9, 2020

Published on
September 9th, 2020
Duration
30 minutes


Daily Briefing – September 9, 2020

Daily Briefing ·
Featuring Peter Cooper, Ash Bennington, and Ed Harrison

Published on: September 9th, 2020 • Duration: 30 minutes

Real Vision senior editor Ash Bennington is joined by managing editor Ed Harrison to discuss the market plumbing that's fueling the wild price action on Wall Street. Ed and Ash first break down the tremendous pressures on banks, which find themselves in a cash-strapped economy lending to businesses with drastically-curtailed incomes. Ed then weighs the notion that central banks are 'cartels' in that they have a monopoly on the money supply. Ed and Ash then analyze the true effect of QE, exploring whether it will actually spur lending growth rather than just inflating asset prices. In the intro, Peter Cooper discusses the JOLTS report and the woes of commercial real estate.

Comments

Transcript

  • BA
    Bruce A.
    11 September 2020 @ 08:26
    Can anyone help with the following: I've found references on the internet to US laws that require Treasury to issue debt to cover any deficit spending but couldn't find the actual legal reference. I know that Fed/Treasury mechanics allow Treasury to spend first and then later issue debt to cover any deficit............but can't find the law specifically requiring Treasury to cover the deficit with debt issuance. Can someone help me track that down?
  • BK
    Brian K.
    10 September 2020 @ 22:44
    An excellent episode on money and the banking system.
  • dp
    david p.
    10 September 2020 @ 20:49
    does anyone know whether a bank run could actually be possible nowadays due to online banking/paypal/amazon etc? I guess if everyone tried to empty their bank accounts into other assets at the same time it could cause a similar effect?
  • PU
    Peter U.
    10 September 2020 @ 20:11
    Ed, your view is correct but the analysis is incomplete. The explicit backstop from the UK government and the US government to guarantee the loans made to small and mid size businesses has allowed banks to create more money. Did you get a chance to review the video I posted in the Exchange where Russell Napier debated Gerald Minack on inflation v deflation? The extent of the Cares Act and the other business lending program has allowed both governments (UK gov called it something else) to bypass their central banks and encourage more rapid creation of money via the government backstopped loans. Do this change your calculus expressed in today's DB? Thank you. BTW, I live in your neighborhood.
  • DT
    David T.
    10 September 2020 @ 18:58
    Jeff Snyder has been saying that at least for last 6 months continuously. QE doesn't create inflation.
  • JS
    Jon S.
    10 September 2020 @ 18:48
    Edd is very much Edd! Such a sharp analysis always! Thank you Edd.
  • RA
    Robert A.
    10 September 2020 @ 16:02
    The Jeff Snyder interview with Ed was truly eye opening. Never had such a peek under the Monetary hood.
    • AA
      Andrew A.
      10 September 2020 @ 16:49
      Will give it a watch now..
  • AR
    Alan R.
    10 September 2020 @ 12:33
    This was a great episode. Thank you gentleman
  • SB
    Stewart B.
    10 September 2020 @ 10:55
    Spot on Ed. Your understanding of central banking vs free banking, and credit vs state money, is spot on. You should do a specific lesson on this for Real Vision.
  • DO
    DIOGO O.
    10 September 2020 @ 10:31
    Hey Ash and Ed, great thoughts!!! Cheers Again, Real Vision is LONG DUE two major interviews: RUSSEL NAPIER AND SECOND TIME RICHARD WERNER.... For God's Sake... do not postpone these two anymore...LOL Thanks
  • CA
    Cyrus A.
    10 September 2020 @ 09:10
    Great RVDB and analysis of QE and credit. One point to bear in mind is that Ed's argument assumes that if people receive further direct stimulus cheques then they will spend it. If the economic and pandemic outlook remain uncertain, and the labour market remains weak, one may see hoarding of the stimulus cheques i.e. people won't spend it beyond bare essentials. In this scenario, the deficit is increased even further, demand remains flat and you end up in a deflation spiral.
  • AL
    Aaron L.
    10 September 2020 @ 09:05
    That was awesome Ed! 100% spot on. Richard Werner talks about this all the time. Also while I also do t see inflation could you expand on the drivers of inflation in a future interview? Such as the impact of demographics, currency devaluations, countries with monetary sovereignty vs those without etc. cheers
  • BN
    Birgitte N.
    10 September 2020 @ 06:35
    I Think it’s time to reread Benjamin Roth/Diary of Great Depression. Bank runs are well described and maybe good to have fresh in mind. Thanks for the inspiration.
  • DT
    Devin T.
    9 September 2020 @ 23:52
    "We won't see inflation until more people have more money"....."The FED can do whatever they want and they won't create inflation unless they directly credit peoples accounts" (26 minute mark)..... My question is; isn't the government directly crediting peoples accounts with Fiscal policy and "stimulus checks"? Won't continued stimulus checks create inflation?
    • AT
      ALAN T.
      10 September 2020 @ 00:09
      My understanding is that the stimulus checks unemployment benefits etc. are filling the hole from the shutdown. There isn't much of a net increase (so far).
    • mw
      michael w.
      10 September 2020 @ 03:24
      We would need monthly stimulus checks to see any significant change. Most people are broke, up to their eyeballs in debt, and wages are stagnant. With the majority of wealth being funneled to a select few. I'm starting to realize Andrew Yang was really on to something with his UBI idea.
  • BA
    Bruce A.
    10 September 2020 @ 02:51
    Great information and analysis on bank operations and QE guys. I think this subject is not complete though unless you also talk about how the FED and Treasury can and are working together to create money and spend it into the economy. My understanding is that the govt doesn't always issue bonds into the market in amounts equal to the deficit spending that is happening.........this results in an increase in money supply. Although we aren't yet near the level of deficit spending (relative to GDP) that happened from 1940-45, we might be starting down that path. The money creation through deficit spending in the war years did eventually lead to price inflation. I think the gov't is also guaranteeing private bank loans to companies (under conditions). Perhaps you can talk to some of these points too.
    • BA
      Bruce A.
      10 September 2020 @ 02:58
      "when treasury spends, its central bank credits reserve accounts of private banks, which credit deposit accounts of recipients of the government spending. In spite of the greater complexity involved, we lose nothing of significance by saying that government spends currency into existence and taxpayers use that currency to pay their obligations to the state" http://neweconomicperspectives.org/2014/06/modern-money-theory-basics.html So, if Treasury doesn't then issue bonds/bills equal to the deficit spending, they are taking less money out of the economy than they are putting in! Money supply increases as bank deposits rise. Do prices eventually start to rise? Do banks start to lend more (private money creation)? Where does this go? Someone should be watching the difference between bond issuance and deficit spending I think! Maybe it becomes significant to the markets' views on inflation.
  • AB
    Andrew B.
    10 September 2020 @ 02:53
    CRE and retail property is f*cked! The online venture I was leading for a large Real Estate company has been shuttered, they are in full cost control. I agree we will see big insolvencies and repricing of CRE late this year/early next year.
  • DN
    D N.
    10 September 2020 @ 01:07
    Richard koos balance sheet recession
  • JG
    John G.
    10 September 2020 @ 00:54
    QE doesn't cause Monetary Inflation. So, what is causing the recently accelerating Asset Inflation? Where is that money coming from?
  • MH
    Muddshir H.
    10 September 2020 @ 00:41
    GReat work ed and ash
  • BE
    Brandon E.
    10 September 2020 @ 00:09
    Haven't we "desensitized" the markets and individuals to bankruptcy such that both individuals and businesses will go right back to borrowing if the banks will lend? So then does that make the banks lenders the gate to how long this debt induced recovery can last, and could it last longer than we currently think?
  • MD
    Matt D.
    9 September 2020 @ 23:50
    Great DB Ash and Ed. I think its one of the clearest explanations yet. The implications are serious... We can power through this - nice silver lining.
  • MA
    Mike A.
    9 September 2020 @ 23:23
    Exactly ED! Money supply cannot expand without the banks lending (Into the economy) No inflation without expanding supply. Q.E Pulls liquidity out of the system.. Great way to spell it all out ED/Ash Another great RVDB Episode guy's..Keep it up!!
  • ER
    Ernesto R.
    9 September 2020 @ 23:10
    thanks guys like always really good
  • OA
    Oliver A.
    9 September 2020 @ 23:09
    Ed, as always the voice of reason.
  • HR
    Humberto R.
    9 September 2020 @ 22:33
    Great insight Ed!