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Transcript
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KJYeah, well, Gundlach is actually way behind the times. ;-) He went out on a limb and predicted a year or two ago that rates had bottomed on a secular basis and were trending up on the long term. My bets leaned toward Lacy Hunt's view that they were still headed down toward Japanification (a ZIRP liquidity trap) in the US, and the recent rise the Fed tried since 2015 is a blip that will disappear back towards zero interest rates again and not reappear for years. Now, Gundlach's finally starting to acknowledge that Japanification may happen 'if the Fed makes the mistake of emulating the ECB and JGB'. Does it sound like the Fed or any central bank to prioritize 'not making a financial mistake' over doing whatever it takes to keep its economy from cratering by whatever means necessary when the threat of a collapse is imminent, as it was in 2008 or the EU more recently? He also calls MMT 'a crackpot idea'. Hasn't thinking we can solve a debt problem with more debt always been 'a crackpot idea' a child could have recognized that they've nonetheless milked for decades? I think Ray Dalio is much more likely on the money than Gundlach with his prediction that QE is going to fail to stimulate the economy enough going forward and there will be no way to avoid a fatal tanking in economies bad enough to generate social unrest without MMT, (monetization of government debt to fund public spending). Dalio thinks governments and central banks absolutely will be forced to undertake it - IMO, whether it turns out ultimately to be just another crackpot idea or not. Dalio's recent article: https://www.linkedin.com/pulse/its-time-look-more-carefully-monetary-policy-3-mp3-modern-ray-dalio/
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CMIn my view we are already doing a form of MMT. Congress spends up to the debt ceiling and then raises the ceiling forcing the Fed to issue more bonds. The old restriction was that the bond vigilantes would reduce buying forcing rates up which would put pressure on the gov to keep the budget deficit within certain parameters. Now if that happens the Fed will come in and force rates back down. So where is the restraint on spending? So in effect we have MMT for the financial markets. Why are people surprised when the rest of the country wants to get in on the game.
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OCI enjoyed original interview. I don't understand why Real Vision keeps republishing excerpts of old videos, which comes across as content fillers due to lack of sufficient new content.
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ETI think your point is spot on Christopher. I agree that it is impossible to borrow your way to prosperity for anyone in the long run. So where was the hue and cry when a $61 billion dollar increase in the Defense Budget was passed last year to the point that the defense budget is now 40% GREATER than it was at the height of the Iraq war? It wasn't even discussed. But somehow when the little people try and figure out a way to get some share of this largess, pundits fall all over themselves about how stupid it is. It is inconsistent.
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MHLove Love Love it! Please sign Mr. Gundlach up to a multi year mega contract. He could give a master class in Thinking
JEFF GUNDLACH: The reason people worry, I think, is that they are not acknowledging some certain dangers and they feel it subconsciously. I know that there's dangers, but I'm aware of them, and I look right at them.
Nothing really keeps me up at night. I don't really worry about stuff anymore. I accept things the way they are, and I think the reason people worry, I think, is that they are not acknowledging some certain dangers and they feel it subconsciously. I know that there's dangers, but I'm aware of them, and I look right at them. And I think that's why I'm pretty good at managing money. I think it's about looking for risks, finding them, and accepting that they're there and trying to make them nonfatal.
I'm really most worried about just the basic divide everywhere in the world, just the whole have, have-not thing, which is ushering in fractured politics everywhere. And it's not going to end until it fully ends. We're not going to get the genie back in the bottle. We're not going back to Bush versus Clinton, right? It's going to end up with awareness of the nonsustainability of debt, particularly now in the United States, particularly if our dollar drops, particularly if the challenge of the dollar's reserve currency becomes increasingly real because our interest rates would be a lot higher if we were not the world's global reserve currency.
GRANT WILLIAMS: Well, but that's something that is definitely a topic that is moving closer to front and center.
JEFF GUNDLACH: China's definitely moving in that direction.
GRANT WILLIAMS: Yeah, but people kind of just dismiss it still. They say it's no chance.
JEFF GUNDLACH: It's just like the deficit. It's one of these things where it's just a given. If you say the dollar will not forever be the global reserve currency, people don't understand because it's been their entire life.
I remember in '08 before Lehman went bankrupt I wrote a white paper begging people to get out of commercial-paper money-market funds, and I gave a speech saying whatever you do, don't own a commercial-paper money-market fund because it's got all kinds of financial debt. It might be 30 days, but it doesn't matter. It could all default. And people couldn't hear me. They would come up to me after speech and say, did I hear you right? You said money-market funds can be risky? And I said, which one of those words did you not understand?
GRANT WILLIAMS: This is not a complicated theory.
JEFF GUNDLACH: Right. I was absolutely crystal clear in my statement. It wasn't oblique. And yet it's so foreign that they can't quite accept it. And so people need to listen with their mind as well as their ears and not just repeat what they're told.
Which-- I've said this several times publicly-- my biggest revelation in life was that people want to be told what to think because I don't. And I do the same thing every human being does. You assume everybody is like you when you're young. You just know your own little world, and you don't know that there's many different ways of operating. And then you start to realize, gee, by assuming that everybody wants to figure things out for themselves, I'm not getting anywhere. Am I not explaining it right? I'll try harder. And then a few more years go by. I'm still not getting anywhere. Then a light bulb goes on. No, they want to be told what to think.
So it's very convenient to be told that deficits don't matter, and you've been pretty much pounded into submission on that idea. But the math is the math, and it's not complicated. It's just arithmetic. And you get to the compounding curve where-- I mean, if we pass legislation, like, next year, maybe we could somehow reverse course, but we're not going to. We're going to go the other way.
GRANT WILLIAMS: Well, because that kind of legislation is not going to get you any votes. Let's face it.
JEFF GUNDLACH: Only gets you votes when the problem is out in plain sight and is hurting people right now. And we're still in mega denial mode because we actually think that we can get richer by borrowing more. That's the message from the democratic socialists.
Don't ask me how I'm going to pay for it. That's not even important. You're missing the real question. How are we going to divvy up the massive prosperity? We're going to borrow our way to prosperity, which of course is nonsensical.
Just think about that in your personal life.
GRANT WILLIAMS: But that's the problem.
JEFF GUNDLACH: The more credit cards you get, the more wealthy you are. Sure.
GRANT WILLIAMS: But MMT, Modern Monetary Theory, is gaining all kinds of traction. Wherever you look, it's suddenly become an incredibly hot topic, which we know it doesn't work. It can't work. You can't just spend your way into prosperity.
JEFF GUNDLACH: Sure. You can't drink yourself sober.
GRANT WILLIAMS: Right. But at a certain time in the cycle, which we seem to be at, it sounds great to a lot of people, and they want to be told what to think.
JEFF GUNDLACH: Extraordinary Popular Delusions and the Madness of Crowds.
GRANT WILLIAMS: Of crowds, exactly right.
JEFF GUNDLACH: And it's amazing how it happens, and Bitcoin was an example of that, I think. Maybe if we go all digital and all this down the line, something like this will work, but Bitcoin was not going to a million. It was just ridiculous mania. And I think spending your way to prosperity is so blatantly idiotic. Yet when you get groupthink going and everybody starts to repeat what they're told, this is what happens.