Investing in the “Age of Fiscal Dominance”

Published on
April 22nd, 2020
Duration
33 minutes

Sowing the Seeds of Inflation and Intergenerational Conflict


Investing in the “Age of Fiscal Dominance”

The Expert View ·
Featuring Dr. Peter Warburton

Published on: April 22nd, 2020 • Duration: 33 minutes

Dr. Peter Warburton, director of Economic Perspectives, joins Real Vision to explain his thesis that the world is entering a new era of fiscal dominance. He argues that the policy response to the coronavirus crisis has been closer to war-time measures rather than simple counter-cyclical policy. He explains the potential that the global shutdowns could trigger an inflationary backlash by the end of this year. Finally, Dr. Warburton suggests several investments and sectors that could prove resistant to that inflationary backlash and even help investors both protect and grow their portfolios through the chaos. Filmed on April 20, 2020.

Comments

Transcript

  • CD
    C D.
    21 May 2020 @ 05:18
    From an SFO perspective, insightful economic coverage. Thank you, Doc.
  • BM
    Brook M.
    23 April 2020 @ 03:54
    I love reading the comments sections after the programs on RV. I find them quite valuable and learn as much from them as I do from the interview.
    • AH
      Attila H.
      23 April 2020 @ 10:05
      True, me too
    • AF
      Andre F.
      1 May 2020 @ 16:15
      That used to be the case Brook. But the quality of the comments has severely declined of late.
  • IP
    IDA P.
    30 April 2020 @ 14:47
    This was really excellent, I listened to it twice. I really don't understand the 86 thumbs down, I'd give him 10 thumbs up...
  • LB
    Louis B.
    28 April 2020 @ 08:29
    A warm welcome to Dr Warburton to Real Vision. Great minds like his are and should be welcomed by all here. He may not speak American but that should take nothing away from his words of wisdom. Read his book "Debt and Delusion" if you have not already done so. "To some extent we are investing in a world of interference and therefore the idea that you do fundamental analysis and get to the right answer I think is a bit fanciful"... Well said.
  • tr
    tom r.
    24 April 2020 @ 22:01
    Peter may be good at writing reports but, certainly isn't great speaker. Lots of stammering and ummms. It's is hard for me to listen to guys like this who are not articulate about their thesis. A good speaker could easily say all the same things in half the time. You can't get wasted time back.
  • SS
    Shanthi S.
    24 April 2020 @ 06:51
    This was great. I feel like Peter wasn’t invited to elaborate as much as he could have on certain topics. A normal back and forth conversation that allowed for deeper follow on questions would have been easier to listen to.
  • SM
    Shantanu M.
    23 April 2020 @ 21:27
    His answer on "Where will inflation appear first?" seemed like a 30k ft from the sky view. I wish he had discussed the finer details or at least a framework.
  • CT
    Crispim T.
    22 April 2020 @ 18:38
    I think people remain "undecided" and even "not enthusiastic supporters" about "Crypto" because they are still confused by the media - and RV isn't helping there - by propagating the notion that "Crypto" has value. Crypty means nothing. There is one (1) single candidate to replace Gold as a store of value (making it go the same way of copper and silver - becoming a mere industrial metal) - that is Bitcoin (BTC). No other current "crypto" equals Bitcoin. This is not an opinion, it's thermodynamics and math. Look into BTC and you will understand why it is totally different from the rest. All this "Crypto" noise over your signal is just making you waste time. Don't be like Dr. Warburton, learn the difference between BTC and (everything else) and you'll profit immensely, as many have for the past 11 years since BTC was created.
    • MT
      Mark T.
      22 April 2020 @ 21:38
      Give me a powerful magnet and BTC goes away permanently. Gold is forever.
    • TM
      The-First-James M.
      23 April 2020 @ 00:45
      That powerful magnet is going to need to be so powerful that it can reach servers on multiple continents, plus at least one Blockstream satellite that I can think of off the top of my head...
    • GC
      Gift C.
      23 April 2020 @ 00:50
      Where does your thesis that BTC is better than anything else come from? Simply that it was 'first'?
    • PD
      Paul D.
      23 April 2020 @ 00:58
      Yes, Bitcoin is king but thinking that smart contracts and a whole new world of digitised asset platforms etc. are not valuable is just arrogance to me. The market clearly disagrees in any case.
    • DB
      Daniel B.
      23 April 2020 @ 12:48
      Imagine thinking that smart contract platforms will not have a future as stand alone crypto currencies... Ethereum most assuredly will do a minimum 10X in the next 5-10 years conservatively and if not ETH a stand in replacement will. The progress that the EEA is making is something to pay close attention to, John Wolpert would be a great interview on Real Vision tbh. Could you imagine not buying ETH under 200$ pre halving... it'll more than likely 10X within 5 years. BTC has tons of pragmatic issues. It's unbearably slow, its politics are torturous and its miners are overwhelmingly China-centric. Not only that but as a result of this central planning FED and Gov inflation nightmare decentralization and inflation resistance will rise again in the public consciousness. This is the same sort of rubble and chicanery that gave birth to BTC. Bitcoin simply is not practical outside or wealth storage in any other capacity to service the growing demands of an increasingly online led life. Kids today will be spending more time in VR in 5 years than outdoors BTC will not be their currency of choice in virtual reality. They aren't going to wait an hour to buy in game items from another autonomous individual in the same landscape, they'll need instant settlement. There are endless examples of this. The ideas and potential inside the realm of crypto currency are revolutionary and no one knows what they'll bring. From peer to peer economics to digital cash settlements to transferring ownership of goods, titles, deeds. Its only enemy is Government tyranny, which is an honest threat that an individual needs to assess going forward, but that same enemy is a threat to BTC. The US has very little to gain by allowing digital currency and those that lobby it have all to gain if they write the rulebook for digital currency, which is a distinct possibility (we've seen this battle already with Libra). I'll never understand BTC Maximalism and more importantly... neither will the smartest and most driven people fleeing traditional enterprise in favor of the crypto space. To think that the only thing that comes from that is Bitcoin with all its hang-ups... I've never been sold on that idea.
    • DM
      Dominic M.
      23 April 2020 @ 16:58
      You realize that the overwhelming majority of crypto projects aren't trying to compete with BTC, right?
    • SM
      S M.
      23 April 2020 @ 19:40
      Crispim T. The last time you went on a rant about Bitcoin was prior to the bear market fall and you had explained to the RV community that gold had fallen and Bitcoin has risen. Essentially you said gold was a thing of the past. Perhaps you should rethink your whole thesis and look at those two charts now since it's been about two months? You are absolutely obsessed with it and it will make you blind and eventually broke betting all in. If BTC has a good run, take your profits, be happy and look at your next trade/investment.
  • EW
    Erik W.
    22 April 2020 @ 11:50
    Is there a link to the BIS article on the Treasury dislocation?
    • ar
      andrew r.
      22 April 2020 @ 15:45
      I think this might be it. https://www.bis.org/publ/bisbull02.htm
    • DN
      D N.
      23 April 2020 @ 09:31
      Would be good to get some simpler explanation. I've read the article when it came out (BIS bulletin #2) and also listened to the Mike Green interview to try and understand what they were saying. Does somebody have a very simple explanation for how it all came together. The aspects discussed but hard to piece together were: Ronan Capital blowing up after getting margin called by the CME, An auction style sell off of their Treasuries (off the run), something about the Fed cutting by 100bps which somehow triggered this, And something about yields jumping as low as 30ish bps and then flipping back. does anyone have a clean explanation of how all these things come together?
    • DN
      D N.
      23 April 2020 @ 09:33
      ^ There was also something about interest rate swaps / receiver options. Then somehow all of this blew up the risk parity trade and forced delevering. Hard to piece it all together - would appreciate if someone has this mapped and the chronology
  • TM
    The-First-James M.
    23 April 2020 @ 00:47
    I really cannot understand why this interview received so many dislikes; unless it was because of the brief Cryptocurrency discussion at the end...
  • OC
    Otto C.
    22 April 2020 @ 20:52
    I usually watch entire videos but I can't watch someone saying "umm" every 30 seconds
    • JW
      Jason W.
      22 April 2020 @ 21:36
      Umm I can’t say I agree with you there.
  • JW
    Jason W.
    22 April 2020 @ 21:35
    Such brilliant questions! RV is invaluable !
  • JA
    John A.
    22 April 2020 @ 13:16
    I don't understand why economists see inflation as a possibility while these policies seem to damage monetary velocity and the money creation is for the most part in the form of loans that suck back out more money than it introduces into the economy.
    • RR
      R R.
      22 April 2020 @ 15:20
      There are also fewer goods being produced so even if the money stays constant they are chasing fewer tangible goods
  • WG
    Wade G.
    22 April 2020 @ 13:00
    This issue of inflation level, where it's going and on what time frame, is pivotal to my own investment choices. Raoul has stated CPI could go negative and so even with yields pinned at zero or below, real rates could rise. This guest supposes the opposite, and on a time frame of within a year. We're back to the classic deflation/inflation debate and the stakes couldn't be higher. I wish a bit more time was spent expanding on the various mechanisms in which inflation could overwhelm the effects of deflation we see at this moment (e.g., in oil, copper, some soft commodities). One perspective I have held related to this is that the US establishment, if not all central banks, are committed to financial repression, and specifically to attempting to engineer negative real rates. Reinhart and a co-author laid out the case for indebted governments using that specific tactic in a BIS paper years ago, and it seems to me many policy decisions over the last 12 years can seen to be supportive of conclusion that the Fed has pursued those tactics. In the present situation, it might suggest that the fiscal and monetary medicine will be applied excessively, hoping to get a kick up in velocity. Maybe with some varied and sustained shortages of necessities (due to economic/supply chain disruption), prices will start to run, velocity will pick up even more, and pretty soon we're looking at undeniable, material inflation. It seems to me it requires plenty of dollars in the hands of lots of people. In candor, and as usual, most of new money appears to be a lot more concentrated than that. Makes me wonder if I've been wrong for 10 years: the establishment just wants us to believe they're trying to engineer negative real rates; they're really just busy supporting asset prices, concentrating wealth in fewer and fewer hands.