Reality s Revenge on Emerging Markets

Published on
October 1st, 2018
35 minutes

Reality s Revenge on Emerging Markets

The Expert View ·
Featuring Daniel Lacalle

Published on: October 1st, 2018 • Duration: 35 minutes

Daniel Lacalle, Chief Economist at Tressis Gestión, debunks the illusion of synchronized growth in a global economy fueled by low rates and rising debt. Lacalle tackles China, where he sees stimulus delivering less growth at progressively higher costs, as well as mounting risks in Argentina, Turkey, India, and other EM economies. Filmed on September 18, 2018 in Madrid.


  • MZ
    Mike Z.
    11 November 2018 @ 16:36
    For me, this was a much better, more informative video than the Stanley Druckenmiller interview.
  • DS
    David S.
    28 October 2018 @ 22:17
    As you can see, I like to go back to listen to videos more than a few times. The only thing that politicians think and/or do is maintaining power whether in republics or dictatorships. Like late Rome, keep the people happy at least until you die. DLS
  • DY
    Damian Y.
    16 October 2018 @ 05:20
    Great Interview, it's always good to hear what Daniel has to say. The Mises institute just interviewed him recently which was another great interview. If you're interested in QE then listen to what he says about it on this interview.
  • RE
    Russell E.
    13 October 2018 @ 05:03
    Always love listening to Daniel.
  • DS
    David S.
    12 October 2018 @ 02:02
    Chinese shadow banking makes it very difficult to tell what total debt is in China. Much of the liquidity that China is adding through its central bank may be replacing diminishing balances in the shadow banking system. DLS
  • WP
    William P.
    9 October 2018 @ 19:46
    More of this guy, please.
    • EM
      Ewan M.
      10 October 2018 @ 03:42
      Follow him on Twitter, he's always got good stuff
  • WM
    Will M.
    5 October 2018 @ 17:35
    Superb. Daniel has a crispness and a clarity that clearly makes him a top 10% contributor to RV. Would be fantastic to get him on an interactive interview and maybe present us with some opportunities to protect ourselves for the coming debacle.
  • AW
    Aaron W.
    3 October 2018 @ 02:25
    Please tell the graphics editors to leave the graphics/text up for longer. Like double as long. Maybe triple. Please.
    • KN
      Keifer N.
      3 October 2018 @ 21:25
    • WM
      Will M.
      5 October 2018 @ 17:33
      Agree, easy fix
  • MM
    Mak M.
    2 October 2018 @ 19:13
    Excellent speaker and excellent summarizing of the global macro. Thank you for this interview.I live in Greece and i completely agree with the speaker, he has summarize the Greek issues excellently.
    • WM
      Will M.
      5 October 2018 @ 17:33
      I sincerely hope you are preparing for the next Greek downswing. Stay safe Mak!
  • PG
    Philippe G.
    4 October 2018 @ 23:44
    Great interview! Well-articulated.
  • DS
    David S.
    4 October 2018 @ 21:09
    It is hard for me to see that the problems in emerging markets are significantly different than problems in most developed markets. We are all floating in our own ocean of debt while FX traders try to figure out a moment by moment equilibrium. Some boats are just more stable. Since there is no free lunch, we will all suffer the same fate at different rates. DLS
  • MH
    Marco H.
    2 October 2018 @ 10:33
    Very interesting overview of current monetary issues. One thing I do not understand: If increasing the interest rate is exactly the opposite of what one should do (ie Argentine or Turkey) then why did Volcker get away with this when he raised rates in the early '80-ies?
    • JC
      John C.
      2 October 2018 @ 13:33
      My gut re Volcker versus the EM countries is that 1) there is a difference between rates in the country that holds the global reserve currency, and thus nowhere else for that money to 'flee to' (as an American I can attest to that) and 2) once you go above a certain rate and hold it there for awhile it just throws everything out of whack. I am not sure what that rate is, but given I've lived in former Soviet Union countries for 10 years now and seen lots of currency noise, and follow the Ruble and Hryvnia daily, I think it's sort of the 25-30% plus range. Capital controls also help suppress the volatility, but in the case of Russia for example the locals just 'take the pain' and the CBR has done an ok job of managing the currency even through sanctions and volatility spikes. Argentina and Turkey not so much, so very country specific.
    • IH
      Iain H.
      3 October 2018 @ 07:12
      Volcker's high interest period did negatively impact the US economy, there was a recession, the US did not have debt like they do today. In other words many things were different. The lesson is that economics is not linear, do the same thing today as happened say 20 years ago won't necessarily get the same result.
  • GF
    George F.
    2 October 2018 @ 23:16
    Secular stagnation, but will there be secular stagflation?
  • RA
    Robert A.
    2 October 2018 @ 19:46
    Very well presented thesis. Excellent RV presentation.
  • DI
    Deoraz I.
    2 October 2018 @ 19:31
    Excellent analysis. Refreshing
  • DK
    Daniel K.
    1 October 2018 @ 15:54
    While we're on the topic of emerging markets, does someone care to comment on the rumors that Poland's CB began buying gold too? Poland has lower government debt than most European countries and seems to be buying gold to defend their currency. What are the growth prospects for Poland? Here is the article I read stating that the FT claimed they bought 9 tonnes the past few months:,Poland-increases-gold-reserves-FT
    • JC
      John C.
      2 October 2018 @ 13:35
      Poland continues to boom, and was one of the only countries in the world that didn't suffer during the Great Recession. I suspect they are due for an inevitable downturn, but keeping their own currency and pushing back on the migrant policies of the EU seem to have served them well so far. We shall see.
  • PW
    Peter W.
    2 October 2018 @ 09:38
    Just brilliant. And very very worrying. If we are indeed heading for a period of prolonged secular stagnation, will this not have major political consequences? For example, what will be the reaction of the Chinese government when they realize they can no longer dump excess production on the US market as the solution to their lack of internal demand so as to keep their growth rate high enough to push back their debt problem for another year or two? Will they then change the direction of their current policies and call for painful structural reform, or find an external scapegoat for their problems?
  • CY
    2 October 2018 @ 07:59
    A great learning experience listening to Daniel Lacalle. Not only did I better understand the real drivers of the current EM collapse, but his insights, for me, lays out what will happen next and what I should consider for my portfolio. All this knowledge is slowly becoming second nature to me, and when I talk to friends and family who are 1) clearly interested in investing as well as 2) unquestionably smart, they don't have a clue of the narrative I'm talking about. They still say "Yes, no need for you to tell us, we know. Turkey went down because of Trump's actions, but now that Turkey raised interest rates they are rebounding towards recovery." This initially surprised me, but a thought came to me - if it wasn't for these few months binging through RV - I would be repeating the traditional talking heads just like they are.
    • AP
      A P.
      2 October 2018 @ 08:26
      It's not about being right or wrong. Lacalle's stunning presentation can give you a MT-LT perspective on macro fundamentals, while your smart friends/family an indication of what other market participants think (which might just be the consensus/ counter consensus; potentially very valuable information or just noise/confirmation bias). If you believe Turkey is improving ST, you can still make a trade if you deem price action follows your parameters/strategy/portfolio objective/time frame. Gurevich's 'Next Perfect Trade' states it at the beginning - "a methodology to identify great potential trades does not necessarily rely on being right about economics"
  • TR
    Thomas R.
    2 October 2018 @ 01:15
    I enjoyed the narrative. Having said that, at 28:00 of the presentation - a brief showing of a chart reflecting China Corporate Debt as a % of GDP reflected a rise from from 158% to 160.5% or 2.5% of GDP over, what appeared to be, one year – from Dec-16 to Dec-17 was provided. If China’s GDP, for example purposes, is $12T then a 2.5% rise would calculate to 300B. Without aggregating the Balance Sheets of China Corporations this calculation, by itself, seems meaningless. What is a $300B increase over a year as a percent increase in aggregate corporate debt? What is a $300B increase as a percentage of Total Assets? How does this compare to or impact Debt/Equity relationships over the same period? Despite what I have typed above, it is clear that in any economy, having Corporate debt as high as 160% of GDP, even without correlations of Corporate metrics, is simply a very high percentage. Acknowledged.
  • DS
    David S.
    1 October 2018 @ 19:34
    Where to invest during secular stagflation - any suggestions? DLS
    • DR
      David R.
      1 October 2018 @ 20:00
      Historically, essential commodities rise in stagflation. Bonds are obviously bad and stocks under-perform inflation during stagflation, so stock multiples collapse. Thus the 60/40 portfolio gets crushed, and so will passive investing.
    • CA
      Craig A.
      1 October 2018 @ 23:50
      Long bonds, bond proxies, long dollar? Short tech and momentum? Should happen by year end?
  • MC
    Matt C.
    1 October 2018 @ 23:43
  • DR
    David R.
    1 October 2018 @ 19:54
    Very good. Extend his central theme of "synchronized DEBT growth" to debt CYCLES (I forget who penned that last year). Point is, the business cycle has been largely replaced by the debt cycle. Blame government. ALL government; it's bipartisan.
  • DP
    Devraj P.
    1 October 2018 @ 15:20
    Simply the best. Easy to understand underlying issues and unearthed noise from media about synchronized global growth storytelling 🔥🔥🔥
    • SC
      Scott C.
      1 October 2018 @ 17:10
    • NP
      Nick P.
      1 October 2018 @ 18:54
      Synchronized DEBT growth. Excellent.
  • DS
    David S.
    1 October 2018 @ 18:20
    The Greek bailout was tragic for Greece, but exceptionally successful to get high risk Greek debt off the other European bank's balance sheet. There is no union in the EEU when it comes to protecting their own banks from bad balance sheet decisions by their banks. DLS
  • NI
    Noah I.
    1 October 2018 @ 14:55
    Always a pleasure to hear Mr. Lacalle's take on structural economic issues. I think one of the biggest problems with today's central bankers is that they view everything through their own paradigm, looking for evidence of the issues they already believe exist. Empirical evidence is thrown out the window when it doesn't match up with the central banks narrative. Ignoring reality because it diverges from a fundamental framework doesn't mean reality should change to match the framework - it means the framework should change to match reality.
    • NI
      Noah I.
      1 October 2018 @ 15:03
      banks' narratives**. Speaking of that grammatical error I have two request's for the Real Vision team -- please allow a window where comments can be edited (10 minutes, perhaps?) and make sure formatting works on the desktop/browser version of the site. Formatting is perfect for me on the mobile app but the desktop sites seems to ignore line breaks. Speaking of which, BRAVO on the quality of the site and especially the mobile app for Real Vision. It is BY FAR the best iPad app I have ever used and probably the only one where I've had very few issues. Whoever you're paying to develop your mobile app, please pay them whatever you need to keep them around! The UI is intuitive and the execution is flawless. There are trillion dollar companies out there that can't seem to make a mobile app with simple and intuitive functionality; I'm looking at you YouTube (Google) and Twitch (Amazon) apps.
  • PU
    Peter U.
    1 October 2018 @ 13:13
    Couldn't have explained it better myself! Bravo!!!
  • YB
    Yuriy B.
    1 October 2018 @ 09:41
    This guy is brilliant. Thank you Real Vision.