Political Risk & The Next Systemic Crisis

Published on
June 20th, 2018
30 minutes

Political Risk & The Next Systemic Crisis

The Expert View ·
Featuring David Levine

Published on: June 20th, 2018 • Duration: 30 minutes

David Levine of Odin River joins Real Vision to discuss the emergence of political risk and how it will contribute to the next systemic crisis. Specifically, he provides his thoughts regarding Italy and how its crisis will unfold. Even though David is a short-term bear, he explains why he's optimistic in the long run, and why themes such as transparency will continue to gain traction. Filmed on May 29, 2018 in Greenwich, Connecticut.


  • DR
    David R.
    5 October 2018 @ 21:14
    Totally agree that Europe is most likely to be ground zero for the coming banking & economic mega-crisis. It's going to be horrendously bad there, like the worst in history.
  • ST
    Simon T.
    1 September 2018 @ 07:13
    He seems like knowing everything, kind of arrogant Would say definitely a New York banker looking down to Europe - At least there is a sense of democracy in Europe, a common sense among most of the people, a social democratic environment providing healthcare for all, decent infrastructure and education Over the past decade or so the US has tripled its debt financing wars but cut down on education, big mistake ....
    • AF
      Andre F.
      6 September 2018 @ 05:58
      When was the last time you were physically in Europe to see it and it's social fabric with your own eyes?
    • DR
      David R.
      5 October 2018 @ 21:10
      Europe is horribly socialist and failing. Economically contracting for over 30 years. No future there, well there is, but it's a really really bad future. I agree with the interviewee that the End for europe will come swiftly, absolutely and throughout. Assuming it's not first overrun and enslaved by an adversary, which is possible as Europe is militarily feeble & defenseless except for its security blanket courtesy of America - who is unlikely to provide Europe free cover for much longer. Best long-term outlook for Europe is it becomes like a giant petting zoo for Chinese amusement, with no more than a 70-80% collapse in its standard of living.
    • DR
      David R.
      5 October 2018 @ 21:13
      Read up on the amazing work of "The Forecaster" Martin Armstrong to understand just how hopeless, bleak and impoverished the European future is.
  • AA
    Aaron A.
    12 July 2018 @ 23:27
    Refreshing enthusiasm, and I tend to agree with the long-term bullish sentiment. However I think the rosy picture he painted at the very end of the interview of a future with only mission-driven companies existing and higher transparency ignores the reality of historical human nature. All in all, good stuff RV. I would have preferred a longer segment and someone like Grant to help the interviewee expound on some topics.
  • GR
    George R.
    7 July 2018 @ 22:59
    "Like" almost too brainy for his own good, but although lacking an erudite delivery, there's definitely some useful content and food for thought......
  • CD
    Charles D.
    30 June 2018 @ 15:37
    Absolutely brilliant dissertation...agree DB is the canary.
  • PD
    Pat D.
    30 June 2018 @ 00:58
    IMHO this guy is way past the Mensa Club. Would love to see if one of the great interviewers (Jim Grant, Michael Green, Grant Williams) can slow him down in a Deep Dive.
    • BK
      Brian K.
      30 June 2018 @ 14:54
      Yes Mike Green for sure
  • BK
    Brian K.
    20 June 2018 @ 15:07
    "BOJ, there's not really much limit to their power because they have a unified this is why really, really smart people who have been really, really wrong about Japan are wrong because it's really, really hard to fight the BOJ because the BOJ has, in a way, unlimited power because of the unified nature of their politics. " - So he is basically saying ECB will have problems purely because each country does not have their own central bank. Cross country turmoil will be the issue.
    • SS
      Sam S.
      20 June 2018 @ 17:56
      EU was setup as trade union, has become a political mess and I'm not sure, but I don't think they can print money. Plus the debt of the EU nations was never converted to Euro's when created. EU in deep shit.
    • BK
      Brian K.
      20 June 2018 @ 18:16
      They cant print money? Who is rapid fire - purchasing corporate bonds then ?
    • CB
      C B.
      20 June 2018 @ 18:28
      BOJ has a greater level of control and thereby they may be able to maintain the illusion for a longer period.
    • ww
      will w.
      22 June 2018 @ 02:35
      I THINK (but of course must't put words in David's mouth) that David is thinking of Japan's (vastly) greater societal homogeneity and social cohesiveness - a characteristic i know from personal experience to be the case. This is in stark contrast to the situation in Europe, where the "ordinary" people's desire to maintain their cultural/ national distinctions is at great odds with the elites' also-strong desire for unity (by which the elites hope to avoid any more dreadful internecine wars).
    • BK
      Brian K.
      30 June 2018 @ 14:39
      I AGREE that is his point as well. My point is that it is self inflicted. I think the ECB could ease way more like Japan if needed but the political strife my hinder it.
  • JW
    James W.
    29 June 2018 @ 02:26
    What a rambling freakin' mess. It's interesting for RV to have some of these folks on here where we can get a closer look at what they're about.
  • WG
    Wade G.
    28 June 2018 @ 00:25
    Thanks David, really interesting thesis. I think u may be off on your quick tally of total CB QE... I thought ball park $12T, not $20T. So much of your main thesis was intuitive to me, fitting easily in my view of our recent history. What I really appreciate is your emphasis that this has been a credit cycle and your point that the markets can give way before the economy turns. Also agree w/ your long term optimism, but apparently more than you, I'm concerned about a looooong downturn... sort of like the dark ages (that eventually were overcome). Thanks again for sharing.
  • AE
    Alex E.
    27 June 2018 @ 00:07
    For what it's worth, a good interview. The ECB can throw all the fake money it wants to at the coming recession, it "ain't" gonna do whooey...The Fed learned that more QE did exactly nothing to revive the U.S Economy. Why would ECB efforts prove any different? As for the coming crisis coming out of Europe, it's plausible, but I would think the Fed tightening will cause a recession first if The Orange Swan doesn't break the global economy! Something tells me that Transparency will eventually morph into a World Government type of scenario which neither good nor healthy for freedom-loving individuals... The long delayed Financial System enema is about to be administered...hope you have a rain slicker and some rubber boots :)
  • DS
    David S.
    21 June 2018 @ 23:13
    Few really believe that the central bankers are infallible. The central bankers only come to bat when Wall Street/Congress/President/lobbyist have put the country at risk of financial collapse. Central bankers are not the genesis of the wreck just the last inning before the market correction. DLS
    • CB
      C B.
      23 June 2018 @ 01:31
      Hey David, neat thought. You might like Ben Hunt and his description of “the missionary “ concept from game theory. He identifies a character Who has the large enough podium and microphone that they facilitate the change of consciousness.
    • BC
      Burton C.
      23 June 2018 @ 13:37
      Disagree, I think the average person out there does believe CB's posses a magic wand and have the ability to keep the ball rolling. Consider the faith in the housing market which is based on credit. Vast majority cannot conceive of credit contracting and therefore dive headlong into a high risk market.
    • DS
      David S.
      26 June 2018 @ 21:15
      Burton C. - I thing you are correct about the average person if they think about the central banks at all. Thanks, DLS
  • JB
    Jason B.
    22 June 2018 @ 06:40
    A question to all viewers... I heard today that on Feb 14, 2018 that legislation was passed in Australia to allow banks to use savings accounts to bail them out should the need arise... Is this correct ? How many other nations has this legislation been passed ?? Thanks
    • VV
      Vanessa V.
      22 June 2018 @ 22:30
      Hi Jason. Yes, that is correct, the Financial Sector Legislation Agreement Bill is now law giving APRA power to use bail ins to deal with a banking collapse. Many Australians believe that the Depositor Guarantee Scheme (Currently up to $250k) will protect (some) savings but it is inactive until such a time as the Government activates it when an institution fails. Basically this means that during a crisis APRA may have access to all savings to bail out banks before the Depositor Guarantee Scheme is implemented by the Australian Government. You can find out more on the APRA Financial Claims Scheme website, www.fcs.gov.au. Hope this helps.
    • GP
      Gordon P.
      23 June 2018 @ 20:42
      Jason, Canada has the same legislation as Australia -- only CDN government is very quiet about it
    • JB
      Jason B.
      25 June 2018 @ 01:58
      Thanks Vanessa and Gordon
  • JY
    James Y.
    24 June 2018 @ 09:31
    I’m not sure why the ratio of thumbs down in this video is a high as it is? This was a refreshing interview from someone who looked to have a lot of energy and delivered a thought provoking thesis. I agree with someone’s comment below in that there should be the option to ‘agree or disagree’ with the thesis, and then like or dislike the delivery etc. I love real vision but feel like when people don’t deliver a world is going to end tomorrow investment thesis people dislike/dismiss what could add value to their own world view.
  • GL
    G L.
    23 June 2018 @ 18:57
    "...[the ECB] buy high yield debt in Europe" No they certainly do not.
  • DM
    Davis M.
    21 June 2018 @ 23:57
    Enjoy the interview and really like David's enthusiasm. This is the second time I have heard the market is based on a credit cycle not a business cycle anymore. Basically, it doesn't matter how the real economy is doing (bad for most folks), it is all about the credit. This is changing fast and it is due to the fallibility of the CBs. I hope transparency becomes the norm of the day in the future but think it is the #1 enemy of government and they will not allow it (look at Assange). Where there are free markets (internet/technology) transparency will be gaining ground but do not see it in control or crony capitalistic markets or government (ie Obama's "people business" transparent government).
    • BC
      Burton C.
      23 June 2018 @ 13:33
      Yes, Richard Duncan makes the point that the cycle is based on credit growth primarily. When credit growth drops below 3% the economy goes into a recession
  • SC
    Scott C.
    20 June 2018 @ 21:33
    And so like, and they're like, you know like.
    • VV
      Vanessa V.
      22 June 2018 @ 23:30
      The challenge with the internet is that sometimes we default to quick, knee jerk reactions versus considered responses that take into account our shared human experience. We are all a work in progress, after all. Whilst your insight may be valid (and I am sure David is tough enough to handle it), feedback given constructively is generally more effective. Out of respect for RV participants please could we all consider the manner in which we offer our insights.
  • WM
    Will M.
    22 June 2018 @ 22:33
    This was a higher level discussion including lots of "insane" stuff that has been going on "blah blah blah". Not the greatest delivery, rambled on across topics a bit, but I followed his arguments and agree with his thesis. I thought the points made by David, though not by any means totally new (e.g the terrible risks in european sovereign bonds, the rising political risks in Europe), were overall, very cogent. Some excellent reminders about the lunacy of Italian yields vs USA 10 year yields. This confirms the way debt risk has been manipulated and when Draghi loses control, yes, watch your screens for the global reaction. Martin Armstrong has suggested Europe (or perhaps China) will probably be the catalyst for the next crisis driving capital to the USA. Good job David, if you return, some interviewer focused questions / answer could make his input great! If I was in New York I would certainly take up any offer to buy him lunch!
  • DR
    Daniel R.
    22 June 2018 @ 19:28
    I wish this had been David’s 9 th annual interview. Very understandable and helpful. Could have used this to an advantage years ago. Will use now to inform my decisions.
  • DW
    Doug W.
    22 June 2018 @ 12:08
    Great interview! Please have him return.
  • PL
    Paul L.
    22 June 2018 @ 06:42
    First, I’ll say I liked the point of view David presented. I believe his comments re the stresses in euro are seriously worth thinking about. Deutshe Bank’s stock price points to something that isn’t good and the Italian debt / politico situation cannot be comforting. And how these are resolved, if they can be, have profound implications for the global financial system. A one year timeline ought to scare all of us. Second, many people older than David may object to his youthful presentation style but hopefully do not ignore the thoughtfulness of his POV.
  • RR
    Rex R.
    20 June 2018 @ 12:30
    The Best Presentation I have seen on RealVision. Awesome.
    • BT
      B T.
      22 June 2018 @ 02:35
      Seriously? Many others have like than this but I did think it was ok. I appreciate his perspective and agree that the homogeneous society of Japan is way different for the ECB but, beyond that message it was many words, less depth and rationale. He is smart, yet I think drafting a script beforehand would have helped vs. freewheeling.
  • ss
    sid s.
    22 June 2018 @ 00:54
    is this the guy you call to hear geopolitics for regards??
  • EL
    Eric L.
    21 June 2018 @ 23:52
    Thanks David that was a great interview. Novice millennial investor here. Learned tremendously. Your views on Europe being the epicenter of the next systemic crisis, resonates with many smart investors out there. How will this impact the dollar versus other currencies?
  • PW
    Phil W.
    21 June 2018 @ 21:39
    David what is your time horizon for your bearish view? eg: 6 months 1 to 2 years. Enjoyed your interview...……………. Thanks
    • DL
      David L. | Contributor
      21 June 2018 @ 21:46
      My view is the crisis likely unfolds in the next 12 months and most likely before year end 2018. Europeans have kicked the can as far as they can. Perhaps they can delay slightly longer but I believe we saw a glimpse that the time is arriving in Italy in the last month.
  • Jc
    Justin c.
    20 June 2018 @ 16:51
    I don't normally do this, but I am at the 18:00 at it so bad. He has basically said nothing and thinks his audience is stupid.
    • Jc
      Justin c.
      20 June 2018 @ 17:12
      I made it to the end, although it was very difficult. He was unable to coherently communicate a potential counterpoint to any of his beliefs. Equity markets are going down 40-50% because governments have intervened. THAT'S THE STORY. THANK YOU. I think there is a little more nuance to form any valid investment philosophy around this theme.
    • CB
      C B.
      20 June 2018 @ 18:26
      I'm not sure that your interpretation is capturing the ideas in the video. In fact, if you read between the lines a bit perhaps you will observe a classical Austrian story line here. The central banks have created currency and allocated that capital using a non economic decision making matrix. There is a probability that this capital will be destroyed because it is unproductive.
    • DL
      David L. | Contributor
      20 June 2018 @ 18:58
      Hi Justin. Sorry you didn’t like the talk. I promise you I don’t think the Real Vision audience is “stupid”. Quite the contrary. Clearly my talk didn’t resonate with you or convey the thoughts in a way you could appreciate. If you are in NYC I’m glad to meet and/or chat if you care to learn more. Otherwise perhaps we can email. I’m reachable very easily on Twitter @davealevine or @paranoidbull. Good luck.
    • DB
      Douglas B.
      21 June 2018 @ 20:11
      David L. You’re a classy guy. Loves your thoughtful presentation and insights.
  • bm
    brian m.
    21 June 2018 @ 18:51
    He sums up the best RV interviews over the last few years
  • MB
    Mark B.
    21 June 2018 @ 18:33
    Raoul in his update video asked for suggestions on how to improve Real Vision. So here goes: - Instead of one 'thumb' rating, provide two. One for how well the premise was presented, the other for if we agree or disagree. I don't know how to rate something like this presentation. I may feel that David Levine's premise is well stated and makes sense, but I may disagree with it. Is that a thumb's up or thumb's down? (Just using this as an example, I actually think he may be right, but that's beside the point). I'd find this useful to help me decide where to spend my time. I might actually be *more* interested in listening to someone who presents their premise well but has a large number of people who *disagree* with it. Helps me to avoid confirmation bias.
  • DW
    21 June 2018 @ 16:45
    Maybe I've just had bad 'click-luck' lately, but after watching a string of very disappointing content on RV, good lord this was refreshing. Discussions like this are why I subscribe. Interesting views and I love his approach. Hope to see more of David in the future. Thank you.
  • mc
    michael c.
    21 June 2018 @ 00:40
    We need an editor. 1% of what he said I agree with. But it’s consensus. 99% of that was a waste of time. Thanks for Wifi.
    • RK
      Robert K.
      21 June 2018 @ 15:56
      not getting this. you say 1% of what he said you agree with and is the consensus?
  • VP
    Vincent P.
    21 June 2018 @ 13:22
    Very nice job David and please come back for a follow up!! Enjoyed the energy in your presentation. Was once a ZH follower and almost got caught in it's bearish journey down the rabbit hole but still think TD brings an occasional good article. Just have to "careful", LOL.
  • GF
    Gordon F.
    20 June 2018 @ 18:41
    There is a greater division between strong likes and strong dislikes on this interview than on any others in recent memory. Personally, I find David's thesis fascinating, but remain unconvinced. If he is right, and the central banks lose control, starting with the ECB or wherever, I agree that it will be catastrophic. However, I have been surprised at how long they have kept this dance going, and it may well be that something else will break the system before they lose control. Actually, I would consider that a bad outcome, because the central banks are desperate to lay the blame elsewhere, and thus retain their power and influence. Thus, I find David's thesis appealing, as I am firmly convinced that no one can print wealth, and the central banks should get the blame. But just because I would find it satisfying doesn't mean it will happen.
    • VP
      Vincent P.
      21 June 2018 @ 13:18
      Pavlov is dug-in by Central Bank influence, so yes, it is likely the Black Swan remains unknown.
  • GM
    Greg M.
    21 June 2018 @ 11:45
    I enjoyed the interview. David some constructive criticism. Work on cutting the word "like" from your speech. It is just a filler word. Overall you did a good job. Lots of passion and good energy. I fully agree with your analysis of being optimistic over the long term. The way things have changed over the past 10 - 20 years has been remarkable. How everything unfolds in the future is going to be interesting.
    • DL
      David L. | Contributor
      21 June 2018 @ 12:48
      Thanks for that feedback. Still new at these TV interviews!
  • SH
    Steve H.
    21 June 2018 @ 11:58
    Great interview. The global financial system is clearly broken, and the primary responsibility for this lies with the central banks. There will have to be some type of 'reset' within the next few years, but what form that will take is anybody's guess at the moment. One of the few justifications for owning (certain) stocks is that cash-rich brand-name corporates with meaningful 'moats' around them might be amongst the few safe-havens when that reset occurs - especially given that government debt, except perhaps in the initial stages of a panic, is no longer fit-for-purpose. Mr. Levine's analysis of Europe is perceptive, but I wonder if yesterday's new ECB initiative paving the way for perma-QE if/when needed might warrant a reassessment of the thesis that Draghi has limited power to control yields and credit spreads. I'm not convinced there's much limit at all on how much more damage the man can do in his final year at the helm.
    • DL
      David L. | Contributor
      21 June 2018 @ 12:48
      Thanks Steve. See your point about the “perma QE” potentially giving Draghi more wiggle room. My sense is this is primarily focused on maturities and only rumored to expand the Capital key. The primary constraint on any policy changes remains German Constitutional Court review (they are already suing over current QE policies). Thus, it seems Draghi will remain constrained in any scenario. My primarily concern is that a momentary fight overwhelms his buying power in the very short run causing immediate and extreme Credit Market Volatility. What we saw a few weeks back was a very small glimpse of what might happen. Some very smart people agree with you so perhaps Draghi has more power than it appears. Time will tell.
  • VV
    Vanessa V.
    21 June 2018 @ 07:59
    During a recent speech in Sweden Chairman Powell spoke about the "intense scrutiny and declining trust in public institutions" around the world due to the "extraordinary actions taken by central banks in response to the GFC". Clearly the rise of populism and political risk is a concern. Some great insights. Thank you, David.
  • VR
    Vince R.
    21 June 2018 @ 07:09
    Great interview. I agree with the political risk in Eurozone, in particular, the one coming from Italy. The mix of high debt, small growth, and populism will create soon higher asymmetries in the wealth distribution: the 2 main parties with the flat tax and citizenship income are not sustainable in the current framework and soon or later the friction between Italy and Germany will explode.
  • KS
    Karen S.
    21 June 2018 @ 06:29
    This was great.
  • AC
    Allen C.
    21 June 2018 @ 06:01
    I really enjoyed this one, hope to see David back in the future.
  • PN
    Philip N.
    21 June 2018 @ 05:39
    I'm sort of left thinking David had an hour worth of thoughts and he tried to fit them into 30 minutes. I enjoyed the interview none the less and hope he could return in conversation with one of the better interviewers and a little more time.
  • GG
    Gary G.
    21 June 2018 @ 01:53
    Loved it!!!!
  • RK
    Robert K.
    20 June 2018 @ 23:16
    Nice one! Good to see sober thought is not dead yet.
  • SP
    Steve P.
    20 June 2018 @ 23:08
    Hit on some great concepts. VERY interesting conversation. Thanks David.
  • JV
    John V.
    20 June 2018 @ 22:54
    Clear enough! Brought those fears/risks in the back of my mind, to the forefront! Thank you David, hope you are back with more soon. JV
  • DS
    David S.
    20 June 2018 @ 19:56
    Mr. Levine you have worked hard to be one of the smartest, quickest persons in the room. I like your enthusiasm, but I suggest you add an additional goal of being one of the wiser persons in the room also. I am retired and living on a small island in the middle of the Pacific. I give this as gentile advise and wish you all the best. DLS
    • DS
      David S.
      20 June 2018 @ 20:11
      Mr. Levine: I am sorry. I meant gentle advice. As you can see I am no longer the smartest, quickest person in the room. DLS
    • DL
      David L. | Contributor
      20 June 2018 @ 22:02
      Thanks DLS. Wisdom is one of my core values and I appreciate you sharing yours. Enjoy the peace of the waves. -DAL
  • TE
    Tito E.
    20 June 2018 @ 19:36
    The transparency concept is compelling
  • LT
    Lucas T.
    20 June 2018 @ 14:45
    Great Interview...but that guy was high AF
    • SS
      Sam S.
      20 June 2018 @ 17:51
      Triple Expresso!
    • CB
      C B.
      20 June 2018 @ 18:30
      Silicon Valley is now famous for micro dosing LSD. They say it increases their creativity
  • CB
    C B.
    20 June 2018 @ 18:19
    Really excellent. You can see David focusing on the reaction function of market and societal participants. I think examining the behavior and the likely reactions is the right framework for projecting price action. I agree that one day market participants will wake up and say, "the central banks did not create more wealth, they created more claims on existing wealth." It will be a crisis of realization. The transparency theme is also identified very nicely. This one I am less certain about because powerful people and entities naturally attempt to insulate their information advantage. So I see this as a longer term theme, which perhaps is consistent with the long run bull view. Very creative and interesting talk. Thank you.
  • NF
    Nat F.
    20 June 2018 @ 16:57
    Amazing, loved that. More please !
  • ET
    Eduard T.
    20 June 2018 @ 16:53
    Great interview!
  • AA
    Aymman A.
    20 June 2018 @ 16:14
  • FB
    Fernando B.
    20 June 2018 @ 15:55
    David Lavine nailed it! Excellent interview! Thanks guys
  • SS
    Sam S.
    20 June 2018 @ 14:33
    Interest rate increases to protect the Pension System modeled on 6-8 percent growth rate, but had their heads handed to them over the course of the no-to-low interest rate world. Government debt growing in expenditures to pay the higher amounts created by a rise in interest rates, pretty much confirms Mr. Levine's presentation that political/government will be the driver of the next crisis. I'm just saying.
  • PM
    Patrick M.
    20 June 2018 @ 14:04
    Thumbs way up!
  • RM
    Ron M.
    20 June 2018 @ 12:15
    Like totally love this guy! Bring him on for a longer interview, please.
  • PB
    Pieter B.
    20 June 2018 @ 10:39
    Very interesting presentation David! Thank you and thank you RV!