I would speculate that land is getting scarce. Especially workable farmland. Saudi Arabia is buying up US farmland. At the rate we are going Americans are well on track to being serfs in their own country. Warren Buffet warned of this share cropper society in his 2005 shareholder letter. He was, sadly, very right when you look at a chart of US liabilities vs US net international investment. Americans have sold their birthright for widgets.

Additionally it’s an inflation hedge you get paid to own.

Agree with other comments; would just add that Rosie is referring to a V turn in inflation. Once we see rapid (perhaps even runaway) inflation, the gig is up and many asset classes, especially those that benefitted from ultra low interest rates, will suffer. Stocks, bonds, real estate could all see significant markdowns reflecting the new cost of money. Productive, income-producing assets such as farmland should see their value keep pace with inflation.

Good points, thank you for the answers.

Gold with a dividend. Correlated to inflation.

I agree. I'm a fan of David Rosenberg, but Ed isn't a great interviewer, in my opinion. Ed's interview style is predictable: stumbling all the way without a cogent question, really. Just mumbling. David is smart but letting him ramble on keeps this interview less coherent.

I think the most likely outcome would be a sovereign jubilee, not a private asset one. The G7 countries all agree on some % of cancellation of government owned bonds and poof it's gone. While I agree with you 100% on the student loan point, I think that would be the result of a certain party trying to buy the election, not a coordinated international effort. Really good interview. Especially getting you to not only think about a jubilee, but what happens after. We all tend to think Germany and Zimbabwe, his thoughts are totally different.

On the fairness point. Sure it would be unfair, but the fed is infamous for bailing out Wall Street in ‘08 and is currently bailing out hedge funds with repo. We collectively agree to bail out poor people and old people. So to me the student bailout is just another extension of that, not some brand new treatment for a specific class.

A debt jubilee doesn't work. The currency unit of the jubilee nation will become worthless against the currency unit of a non-jubilee nation. To protect one's purchasing power against such crony capitalism, one needs to own gold in lieu of promissory notes issued by the central bank of the jubilee nation or bonds issued by the Government of the jubilee nation. In my opinion, a negative risk free interest rate is a mild form of debt jubilee.

Interestingly the Friday morning early show pdf pack showed US going into quad 1. Maybe it was a narrow adjustment that tilted the model.

yep!

Yes indeed! This is a great example of why I subscribe.

There is no need or reason for any ratio between them. In history there was some fixed ratio by governments but this time is long gone.

Here's a free MacroVoices podcast with Grant published just last week: https://www.podbean.com/ew/pb-qhj5b-cfdbfc

I hope Grant is still part of RV?

The ticker for the largest ETF to represent the long bond trade is TLT, which has an average duration of over 20 years for the treasury bonds held by the ETF.

ZROZ

Go back & restudy gold

You could possibly be the one to not understand. From around June/July 2019 to Sep/Oct 2019 the dollar went up. Gold did not fall. It went up also.

All currencies weaken vis-a-vis gold in an environment of raid (hyper) inflation. The return of inflation is what he's expecting over the next 5 years.

A debt jubilee for student debt sends the wrong message, as it will be expected to happen over and over again. If a student uses college to be more marketable in the job market, then the cost of her/his loans should be looked at as a working life investment. Yet, as a society, we do need to fund educations at many levels. It is a very complex issue, but the incentives need to be to encourage training at the college level and trade school level. In the new economy having an electrical or plumbing licence may have a higher net present value than many college degrees. DLS

Anytime the government gets involved n the free market they distort it. If there is a debt jubilee for student debt... then they need to exit all student financing and student loan guarantees. In the old days students worked to pay for education and or their parents paid as you went. It worked out for most people and for the economy. Question is how many "hours" after that law went into effect before universities would slash their tuitions? And instead of the students living the high life during their summers ...they would start being productive to society.

I find it laughable that we readers, many of whom presumably, like me, have meaningfully enlarged our nominal wealth since 2009 - that great sign of our 'genius' in the modern world - by dumbly hitching our wagon to the most horribly gov't distorted, intentionally inflated stock and bond markets in world history, are suddenly worried that students might get the wrong message by benefitting from the same distortion, but in a simpler, more direct form. Wall St and the phony US financial system and economy were cut slack to the tune of $20 trillion or more according various accountings using the info forced out of the Fed by the Freedom of Information Act after the 2009 credit-fraud debacle. IMO, the Fed probably acted illegally in some of its purchases/underwriting. There is no undistorted free market, if there ever was, and there certainly won't be one now without a global depression first. Better to start distorting in favor of younger people and their future instead of we old dogs who have become so superior winning a rigged game while half asleep, or the future will turn out to be worth a lot less than our absurd brokerage statements now imply. We might even have to all go back to school to actually learn a productive trade instead of living off the hot air and hot money of central bankers. The notion that it makes any sense that the US economy slowed markedly last year, faces growing international factionalism but the US S&P popped 30% - now THAT's what I call distortion. http://www.levyinstitute.org/publications/29000000000000-a-detailed-look-at-the-feds-bailout-by-funding-facility-and-recipient

Two words. Moral hazard.

Kelly J. - I am all for figuring out how to help the next several generations. It needs to be done to make them better and our society better. I want the money to go into fixing roads and bridges. re-inventing the internet. Most of the debt forgiveness is pandering by politicians for votes.Then they will not deliver it. Maybe we should vote to paying the interest on student loans. If they go into teaching forgive 20% per year. I would oppose just forgiving all the loans. DLS

Agree that in true free market we would not be talking about a student debt jubilee. However, the problem was created by Federal underwriting of bad loans which are now effectively in default. So the Fed needs to take the pain. If they stop underwriting loans you will see tuition costs plummet in a hurry. Additionally, we are already bailing out hedge funds and financial institutions AGAIN with QE4 and so let's shut down ALL bailouts if you want to talk about moral hazard.

We could possibly get inflation in the near term & not have to worry about deflation or the Jubilee

Well the premise is that IF we restore velocity, then inflation will come. In Japan they have not restored Velocity. I agree with you that there is a risk that we fail to restore Velocity. In any case I think the dollar is under threat as global reserve currency (10 year timeframe). That doesn't change the fact that we may go down that route.

so by extension What alternative do these investment banks have to the equity market with all this extra liquidity they have been given? And at what point will they decide to switch? Are they all going to jump into bonds?

Well the difference is that Zimbabwe had core price inflation, so the money printing was driving prices and therefore bottom lines. In our scenario, because the Velocity has collapsed, the new money is not driving core inflation. It's only driving the valuation multiples of financial assets, but not the underlying fundamentals. I suppose that theoretically this could go on forever, but history tells us that valuations will top out somewhere around where we are right now.

what is suger?

I am with you Bruce. I am not looking for 6% on my retirement savings, not even 4%, but I do need something to live on while I wait for the coming carnage.

You own the bonda into the crisis that is needed to force a debt jubilee and you switch to real assets before or during that downturn.

A debt jubilee is undefined at the moment. In the 500 BCE Athens all debts were forgiven. I do not thing we are thinking about that. DLS

The fed is all that drives the market these days.

I think the markets are more driven by politics. The Fed and other CBs are adding liquidity to cover the vast deficits. Politicians want you to focus on the Fed. The Fed is important, but it is the tail of the dog. DLS

I noticed that, too, Kenneth. For one things, my guess is it's a bit tough to be a well-publicized economist and jerry-rig your own numbers for inflation and CPI and then have to defend those, rather than use the official numbers as a springboard that you then can qualify to create your own narrative. Rosenberg makes it clear he knows CPI doesn't reflect people's actual, higher inflationary experience here: "I still very much favor the Treasury market because everything that we've seen happen is telling us that inflation-- and I speak to so many people that essentially, they say, well, my inflation rate's a lot higher. Look at education, look at health, look at a lot of the things that you can't substitute away from. Well, that's right. Seeing people that say to me, well, look at my tax bill, that's inflationary, no, your tax bill-- if your taxes are going up, it's actually disinflationary because it's leaving less money for you to spend on discretionary items. That's the heart here of what we're talking about." In other words, here (and elsewhere) he's saying that the bind that higher prices in key areas put on consumers actually hasn't and won't have an inflationary impact on bond interest rates and company earnings unless wages, consumer demand, and the velocity of money in the economy rise accordingly. Otherwise, personally experienced higher than official CPI inflation actually has a self-corrective, counter-intuitive effect on the economy. It creates a drag on discretionary spending that gets increasingly intense, squeezing down demand in the 70% consumption portion of the economy in a deflationary effect both on rates and demand for companies' goods. To overcome that drag, the economy & households continue to build debt in order to keep moving, keep growing, thereby, paradoxically adding to the drag. At the household levels, for many years now, consumer debt has been ramping, and is now well above 2008 levels. The net result of using debt to generate growth is deflationary for both rates and economic demand, as we've seen for decades in Japan, for years in the ECB and now in the US as well.

I agree. I've read and listened to David for many years, his views are always valuable, but never once have I heard him acknowledge that the CPI is pure hogwash. It always was hogwash to some extent, but even the directional signal is now worthless thanks to the hedonic adjustments. BLS can basically cook any number they want by pretending that new stuff is much better than old stuff (inverted reality because new stuff malfunctions and wears out so frequently coupled with being deliberately unrepairable) that there is no inflation despite higher prices. My question back to these BLS charlatans is where exactly do I go to buy a 1969 television set for $2 dollars? Moreover, where is the anti-hedonic adjustment for designed in obsolescence, diminished service life, and being unrepairable? Was the 737-MAX really better than the original 737? That's resounding no but BLS would tell you it's fabulous with all of its novel bells/whistles (that drove it straight into the ground with the people in it but let's not worry about that little detail).

That’s why he said he is watching V very closely