Will the U.S. Leave the Value of the Dollar to “Market Forces”? — Live with Luke Gromen

Published on
February 3rd, 2021
Duration
78 minutes

Sizing Up the “New Kids on the Block” and the Efficient Market Lie — Live with Matt Rowe


Will the U.S. Leave the Value of the Dollar to “Market Forces”? — Live with Luke Gromen

Live ·
Featuring Luke Gromen and Ed Harrison

Published on: February 3rd, 2021 • Duration: 78 minutes

Luke Gromen, founder and president of FFTT, joins Real Vision managing editor Ed Harrison to discuss why he believes the strength or weakness of the dollar cannot be left to market forces. Gromen argues that, if left to market forces, the sheer size of the U.S. Government deficit would crowd out global dollar markets, sending the dollar skyrocketing with devastating consequences for global markets. Paired with recent rhetoric from Janet Yellen about not seeking a weak dollar has shaken Gromen’s conviction in near-term dollar weakness and the subsequent knock-on effects. Gromen and Harrison will also discuss Gromen’s views on the Treasury market and why he thinks rates will be allowed to rise until something cracks.

Comments

Transcript

  • DW
    Dennis W.
    23 February 2021 @ 01:59
    Luke is amazing! New ideas, big picture, concise speaker, interesting, and a great explainer. Have him back again, please!
  • ar
    andrew r.
    11 February 2021 @ 16:37
    Wow. It's been a while since I've watched a video twice. Superb.
  • DB
    Donna B.
    10 February 2021 @ 02:36
    This is a classic RV, excellent macro interview. Thank you both.
  • AT
    Aleem T.
    9 February 2021 @ 07:58
    fantastic. wonder what Luke thinks about the Lacy Hunt's argument that as debt levels are so high the marginal revenue product of debt is so low, which means that any gov't spending financed by issuing treasuries monetized by the Fed has a very small effect ( and decreasing at the margin) on growth and inflation?
  • TE
    Tom E.
    7 February 2021 @ 16:56
    That was a quality interview. Great moderating @Edward. Would be great as a follow-on if RV (Ed? Roger?) could tie together Luke’s views vs Raoul’s vs Julian’s. There is a whole solid hour in that.
    • WS
      William S.
      9 February 2021 @ 00:34
      Great - idea - bring em on all together for a bit of a debate
  • MT
    Mark T.
    7 February 2021 @ 11:49
    Listening to Luke Gromen’s interview on January 14th on MACROVoices was helpful in my understanding the intellectual ground upon which his world view rests. I wonder if it is excessively US centric resulting in his somewhat ironically missing “the forest for the trees”. It seems to me the driving force explaining much of the past quarter centuries history of the global financial markets is China’s integration into the global financial system. It might be helpful to view the US’s deficits as the outcome of its being forced to import various countries current account surpluses with its resulting effects upon levels of US leverage. The discussion though of the US dollar losing its position as the world’s reserve currency does leave one somewhat hopeful that the global system remains sufficiently elastic to apply that too long delayed palliative. Finally, it seems like there is a missing piece in the narrative of a looming US solvency crisis. It seems like the dog that should be barking should be rising US interest rates. Possibly if one is looking for a looming solvency crisis one might look to China with its pack of baying hounds.
  • jG
    james G.
    5 February 2021 @ 01:35
    Happy now .... I was getting stressed out with my positions. I was happy with my Bitcoin but I have owned gold for almost a year and it has been dead money. Then today was another gut punch and I was totally confused about what was going on. --- thank you it cleared up lots of things
    • JS
      John S.
      7 February 2021 @ 11:05
      Hold the line!
  • AB
    Alastair B.
    7 February 2021 @ 04:32
    It never ceases to amaze me that Realvision is only slightly more expensive than a UK TV license. Superb value. Thanks Luke, Ed. Outstanding interview - one to watch twice.
  • SM
    S M.
    6 February 2021 @ 23:18
    Great conversation, very informative.
  • MT
    Mark T.
    6 February 2021 @ 10:37
    Luke Gromen whose thoughts I was not previously familiar growth has that rare ability to juggle multiple variables in the air simultaneously and run an intellectual thread through them knitting them together into a plausible framework. Very impressive. Early in the interview he references foreign central banks as having sat out the opportunity to add to their US Treasury holdings this past seven years which appears ominous. I wonder though to what extent the large shrinkage of China’s current account surplus (though I acknowledge not so much with the US) and the dramatic growth in the global carry trade with the leveraged share resting on US Treasury’s as its preferred form of collateral enters into this mix.
    • CG
      Christine G.
      6 February 2021 @ 22:30
      I think he answers that question about 40 minutes into the talk.
  • EL
    Eric L.
    6 February 2021 @ 05:23
    I've been a fan of Luke for the past 18-month and there are a couple of things that impress me are - (1) Luke has been generous in laying out his framework and share his views in a straight forward manner. (2) You'll be surprise that how much of the materials that Luke cited are "public information" but he manages to connect the dots to extract the insights and formulate a more 3D view. (3) Luke has been consistent in his thesis and he continues to use ongoing events and data-points to validate his thesis and refine it. Keep up the good work.
  • AW
    Angela W.
    6 February 2021 @ 02:42
    Ed and Luke, the best RV interview ever. Thank you so much!! Please have Luke back regularly, as his grasp across the whole macro spectrum is breathtaking and original.
  • AW
    Andrew W.
    5 February 2021 @ 22:07
    Luke's weekly service is fantastic analysis if you don't have time to read everything that comes your way and if you agree with Luke's analysis and view of things.
  • JO
    J O.
    5 February 2021 @ 22:02
    As always, listening to Luke makes you realize how clear a grasp he has on the dollar situation. Ed is one of the best interviewers on Real Vision. This is a great video.
  • PG
    Philippe G.
    5 February 2021 @ 18:04
    Was looking forward to seeing Luke Gromen back after finishing both Mr. X Interviews books over the prior Christmas break!
  • SB
    Stephen B.
    5 February 2021 @ 17:14
    Luke has to be one of the clearest thinkers, anywhere. I listen to a lot of advice, from a lot of different thinkers but Luke is top of the list for me.
  • PC
    Petros C.
    5 February 2021 @ 16:28
    Ed/Luke, it would be interesting to expand on the topic briefly mentioned: 'Plan To Stabilize The Global Monetary System' & Gold $50K! https://creditwritedowns.com/2010/08/stabilizing-the-global-monetary-system.html
  • ML
    Max L.
    5 February 2021 @ 10:45
    This is so good! Would love to have Luke and Mike G chat about Mike's Bitcoin thesis.
  • HG
    H. G.
    5 February 2021 @ 09:02
    This has been a collegecourse in Marcro. Great interview. Would love to see Luke vs Richard Duncan..Would be a excellent discussion.
  • PC
    Petros C.
    5 February 2021 @ 08:05
    Transcript please?
  • AL
    Aaron L.
    5 February 2021 @ 02:25
    So for Ed, there is a bifurcation in the dichotomy, and that is where the rubber meets the road :D
    • AL
      Aaron L.
      5 February 2021 @ 05:54
      But jokes aside, that's was an incredible interview, thanks Luke and Ed
  • JL
    J L.
    5 February 2021 @ 01:46
    Thank you! Between 35:00 and 30:00 he lays it out. Unprecedented fiscal spending will be the dominant driver of inflation creation, not rear view assumptions about private sector bank lending. An era of fiscal dominance -- which is exactly what the pandemic introduced in March 2020 -- functions very differently than the four-decade disinflationary era of relatively restrained fiscal policy we are leaving behind. Agree with him too that real rates will eventually plummet, which will be great for gold as well as BTC -- but between here and there yields could rise faster than inflation for a while, until fiscal-driven inflation really gets moving. That is why gold is getting hit hard right now in my view. Gold is vulnerable to a 2021 economic recovery perception, and a rising yield outlook temporarily stronger than the inflation outlook, until some point -- not yet arrived and months or quarters away -- when the Fed is forced into yield curve control and real rates start to fall again as the inflation gap widens. TL;DR gold will be a great buy somewhere significantly lower than it is now, once real yields stop rising and start to fall again...
    • JL
      J L.
      5 February 2021 @ 02:03
      Also, the most logical reason I've heard for why Japan can't generate inflation is because all of their stimulus policies are basically corporatist. If you look at various measures of Japanese household spending, consumer confidence, personal savings etcetera over decades, they are all relatively flat or moribund. This bolsters the Michael Pettis argument that domestic consumption in the Japanese economy is suppressed by persistently low wage growth and a lack of aggregate consumer spending power. The liquidity and profits are accruing in Japanese corporate accounts and high-end investment accounts. This capital is then reinvested abroad or recycled into corporate profits that pool unused like stagnant bank reserves. In both cases local inflation is avoided because you aren't seeing domestic consumption rise (which would also create a trend of rising imports). Japan's policy makers also seem to be corporatist in that they are prone to raising consumption taxes whenever inflation seems to be showing itself -- which completely defeats the whole point. By favoring stimulative policies that add inert capital to corporate reserves, sort of like stagnant bank reserves, or running policies that favor capital export abroad while suppressing domestic consumption through low wage growth -- and a hike in consumption taxes whenever inflation shows sign of appearing -- Japan actively shoots itself in the foot. But it also seems to do this on purpose, because the cycle is beneficial for corporations. It's a head scratcher but maybe not an accident. The U.S. is very different, though, in that the government is sending free money to domestic consumers, and the current administration will favor policies that increase spending and personal income in the labor half of the economy. That's the kind of fiscal, when measured in the tune of trillions, that can really work.
    • MO
      Master O.
      5 February 2021 @ 05:37
      @J L. can you please post some of your comments on the exchange. I think some of your view points would be valuable to members who are posting on the exchange.
  • MD
    Matt D.
    5 February 2021 @ 03:44
    Great interview Ed and Luke. Thanks. Very interesting is the word. Be good to have the same BTC chat with Mike Green - both intelligent and genuine. Luke is always great - lots to ponder. Cheers.
  • BA
    Bob A.
    5 February 2021 @ 01:34
    Thanks Ed and Luke for a great interview. Luke is brilliant and he has repeatedly nailed macro over the last few years.
  • KP
    Kaushal P.
    5 February 2021 @ 01:23
    One of the best and very clear macro view I’ve seen on RV in 2021. Great job Ed and Luke. Loved it.
  • RS
    Riki S.
    5 February 2021 @ 00:58
    Luke is a straight shooting oracle of wisdom! Love his style, breadth of knowledge and general synthesis of his underlying market thesis. Great interview Ed. Excellent contribution in terms of questions, input and providing Luke sufficient scope and width to articulate himself.
  • GA
    Gerald A.
    5 February 2021 @ 00:46
    The conversation was pure gold...(er....pure bitcoin).
  • HH
    HODL H.
    4 February 2021 @ 04:38
    Could not tell if the picture was mike novo grate or Luke gromen lol