Sowing the Seeds of Inflation and Intergenerational Conflict

Published on
April 21st, 2020
Duration
28 minutes

“You Can’t Jawbone a Physical Oversupplied Market”


Sowing the Seeds of Inflation and Intergenerational Conflict

The Expert View ·
Featuring Vincent Deluard

Published on: April 21st, 2020 • Duration: 28 minutes

Understanding the way demographics drive the economy and markets is core to our coverage here at Real Vision. Vincent Deluard, director of global macro strategy at INTL FCStone, zeroes in on this theme and explains how the response to coronavirus is sowing the seeds of intergenerational conflict. As younger generations once again put their lives on hold to make sacrifices for the old, previously unthinkable policies are already rolling out with potential for lasting change as political power shifts from boomers to millennials. He also argues that political friction isn't the only risk being cultivated and cautions investors to think about the long-term risk of inflation. Filmed on April 17, 2020.

Comments

Transcript

  • RO
    Robert O.
    30 April 2020 @ 21:00
    Gold a crowded trade? See Grant Williams presentation - Nobody Cares - https://www.youtube.com/watch?v=qnZHMmCjpQ8
  • AM
    Alexander M.
    21 April 2020 @ 15:48
    Younger generations have had to put their lives on hold and at risk for generations fighting in wars. Don't buy into this generation unfairness. The banking industry is the abuser of young and old, let it be told. This guys narrative only muddies the waters.
    • SB
      Stephen B.
      21 April 2020 @ 16:48
      I couldn't agree more and would go even further. Bankers and their hired politicians want to distract us, by any means, from the core issue that fractional reserve banking (and central banking in particular) is The biggest problem we face.
    • AF
      Andre F.
      21 April 2020 @ 22:31
      Stephen B. Why and how is it that fractional reserve banking is so damaging?
    • TR
      Travis R.
      21 April 2020 @ 23:36
      Andre, a great place to start is The Creature of Jekyll Island by G Edward Griffin. There are several good videos on Youtube and Brighteon as well.
    • AF
      Andre F.
      28 April 2020 @ 07:16
      Travis, I asked you to explain what it is that boomers have stolen. You called them thieves further down this page. You were incapable of answering. You commenting to me here is ridiculous. Stephen is likewise incapable of explaining his claim that fractional reserve banking is "the biggest problem we face."
    • TR
      Travis R.
      29 April 2020 @ 13:18
      Andre; it is all in the comment thread ahead of your comment.
  • RS
    Ruben S.
    27 April 2020 @ 15:30
    bonds yields are low because states and companies owe a lot of debt, so they will never let yields go up dont you think?
  • CG
    Chris G.
    26 April 2020 @ 17:08
    We don't need inflation. Bonds need to be issued with an ability for the younger generation now to void them later or adjust the rates. If we did that they would be priced accordingly. Of course we can not do this, but something needs to reign in the borrowing of current generations to the detriment of the people now too young to know. Furthermore, inflation worked great in a 20th century economy. Everyone got a 3% COLA (makes the working class feel richer - even if costs are increasing), everyone works long term for a company that can gradually raise prices and give those regular pay raises, and the whole system works in sync. Planned inflation is a 20th C idea and will not work in the 21st century where having a quality of life and balance, is the goal for many. This usually means more self employed (no auto 3% COLA for them), freelancers, contract workers, work from home, etc so that they can have that balanced life. Higher rates benefit everyone except large asset owners. So yes higher rates would hurt the "voter"class, ie people over 55 with lots of home equity and larger 401k balances (and risk takers). Higher rates benefit savers, people who want to buy assets and people who can not handle high coat of living increases (younger and lower income people). This is a huge concept that needs more than a few paragraphs to discuss. But it is a serious problem to be stuck with 20th C thinking in government, government spending, policy makers, tax policy etc. PS point - We need to find out a way to reduce the cost to EXIST for everyone and find other ways to get tax revenue (and reduce some gov't) That means property tax system goes away etc. This would go far to alleviate poverty. Far too high a cost to simply exist. I welcome thoughts on this...
    • TR
      Travis R.
      26 April 2020 @ 18:05
      Property and income tax are both immoral and unjust. The most fair tax system would be a flat Sales tax on everything except groceries and utilities. For a sales tax of 10% a purchaser of a Rolls Royce would pay around $50k in taxes vs somebody buying a used Honda Civic would pay around $1k. Excluding groceries and utilities would allow the working poor to not pay taxes on necessities. This system would encourage thrift, investment, and give everybody skin in the game. It would also eliminate the need for individuals to file tax returns. The IRS would simply collect from businesses.
  • Hv
    Hannah v.
    25 April 2020 @ 20:49
    Well, I listened to this 5 times. Lots to think about in terms of wealth transfer. Thank you RV again for the top-notch platform.
  • SP
    Stephen P.
    25 April 2020 @ 08:22
    “Bonds are not an economic signal anymore?” Really? Why did the Fed push rates down so forcefully? Because of what they were seeing in the economy. Why did they roll out a surfeit of three and four letter programs to prop up agency, municipal, corporate bonds? Because of the credit and solvency risks appearing in the {recession, depression} economy. The signals are there but with a band pass filter applied by the Fed for investment grade and ‘fallen angels’.
  • PJ
    Peter J.
    24 April 2020 @ 08:35
    Gold may / will become a crowded trade, but I don’t think at this point in the cycle you can make that argument, unless of course you are bearish.
  • sc
    sung c.
    24 April 2020 @ 06:15
    Very good information and observations, but very difficult to understand his voice or accent; at least for me.
  • DQ
    Danial Q.
    23 April 2020 @ 15:33
    I understand the point about how inflation would benefit younger generations due to the higher debt loads they carry but how much of that positive gets negated by the reduction in their purchasing power that could also occur? (Wages not keeping up with price increases)
  • DS
    David S.
    21 April 2020 @ 21:17
    I do worry about millennials who come from lower income families. As for the millennials that come from the middle to upper class families, they have led much better lives than their baby boomer parents lived while young. Think of the trillions of dollars their baby boomer parents spent on them. In addition, thousands will receive trillions of dollars as their parents pass. Coronavirus is only the tip of the iceberg of financial problems. We will defeat ourselves by the blaming any group. Yes Dorothy, we can destroy our economy. Watch. DLS
    • TR
      Theodore R.
      23 April 2020 @ 03:48
      David, this is probably the most prescient comment you ever made. You really get this one, whereas most are looking at this as either or.
  • DM
    Dominic M.
    23 April 2020 @ 01:55
    I'm investing in pitchforks.
  • TS
    Theodoros S.
    22 April 2020 @ 20:03
    Inflation is coming!
  • MF
    Michael F.
    21 April 2020 @ 22:51
    I really love Real Vision but this time the intergenerational conflict issue is being pushed farther than the facts allow. 1st Deluard says that the death rate for the younger generation is essentially zero then he says they are putting their life at risk working service type jobs. So, if they can't die from it how are they putting their lives at risk working those jobs? This of course is nonsense. From Johns Hopkins at: https://www.hopkinsmedicine.org/health/conditions-and-diseases/coronavirus/coronavirus-and-covid-19-younger-adults-are-at-risk-too "Data in a March 16, 2020, report from the Centers for Disease Control and Prevention (CDC) are showing that younger adults are also getting COVID-19, and some are requiring hospitalization, even intensive care. For example, the CDC report shows that as of March 16, 2020, 508 people were hospitalized for COVID-19 in the U.S. Of these, 38% were between 20 and 54 years old. Half of those ending up in intensive care were younger than 65. Officials in Europe are noting the same trend, with reports that half of serious cases in France and the Netherlands are in people under age 50." 38% is hardly zero. In reality this argument can be abstracted to a simple idea - the rich are doing much better than the poor or middle class and they, meaning the rich, are rigging the rules for their own interest and that the "underlings" are getting restless. Sadly this is all true so no new news here. The conflict here is between the rich and the remainder of the population - age has little to do with it.
    • RS
      Riccardo S.
      21 April 2020 @ 23:42
      Your stats are off. The number of deaths in the world: 48% is above 75 years old. 25% is 65-74 years old. 23% is 45-64 years old. So 95% of deaths are 45 years old or older. Source: https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/
    • LS
      Lemony S.
      22 April 2020 @ 00:10
      I get your point but there are age requirements and subsidies by the government based on age --- regardless of wealth. There is a generational aspect to this, it's probably a voting block one, ultimately, given the demographics.
    • VD
      Vincent D. | Contributor
      22 April 2020 @ 20:02
      I agree with your point on the rich faring better than the poor. But look at the generational distribution of wealth, and how it has changed in the past 40 years! We are saying the same thing. And yes, my point on death rates was not clear enough. What I meant to say is that: - either this pandemic is indeed as bad as initially feared and Amazon workers, truck drivers, and nurses will die to save the rest of us - or Covid-19 mostly affects older generations, in which case it makes sense to re-open the economy to minimize the damage on younger ones
  • MS
    Michael S.
    22 April 2020 @ 02:55
    A lot of people seem to have missed his point. He wasn't whining, as some have said, or being a proponent of anything or against anything, he was describing what he thinks will happen when generations look out for their own interests, which people are known to do sometimes. This all made a lot of sense to me. And it's not just millennials who need inflation -- the entire world needs a reset, via a de facto debt jubilee.
    • VD
      Vincent D. | Contributor
      22 April 2020 @ 19:55
      Thanks for the kind words - it would be preposterous for me to whine as I am among the fortunate ones who do not really suffer from this crisis. And yes there is a culture of victimhood and virtue signalling among my generation, but one cannot argue against the objective fact that older generations have fared relatively better than younger ones in the past 30 years. It is what it is.
  • RM
    Russell M.
    21 April 2020 @ 18:32
    I'm a Boomer. I have said from the beginning of the crisis that everyone under 60 or with high risk factors should go to back to normal. The economic pain cure on families and long term harm to the economy is worse than the disease.
    • DS
      David S.
      21 April 2020 @ 20:10
      Not if you have Coronavirus and no ventilator. DLS
    • LS
      Lemony S.
      22 April 2020 @ 00:15
      David wasn't saying that for the bad flu seasons, which is why he can't be trusted on this subject; another manipulated one trying to manipulate you when in reality, there's nothing to see here but normal life.
    • DB
      Douglas B.
      22 April 2020 @ 14:39
      Lemony, do you see conspiracies everywhere you look?
  • TF
    Thomas F.
    21 April 2020 @ 21:17
    Would have been nice to actually lay out the trades he thinks are best...
    • AF
      Andre F.
      21 April 2020 @ 22:40
      The writing is on the wall at Real Vision when you look at the videos on your monitor screen, ever since they created new membership tiers. Can't you see it?
    • DS
      David S.
      21 April 2020 @ 23:53
      Agreed Andre. Sub for a second year. Had access to much more content until they decided to change the tiers. Plus the Daily Briefing being given away for free and the other important relevant content behind the tiered paywall. Don't find the same value anymore.
    • DB
      Douglas B.
      22 April 2020 @ 14:36
      I will be letting my subscription expire I feel I got shafted. Maybe this is why Grant left?
  • NR
    Nelson R.
    22 April 2020 @ 00:35
    This video is millennial propaganda. The victimization is nauseating.
    • DB
      Douglas B.
      22 April 2020 @ 14:32
      OK Boomer.....
  • AS
    Arjan S.
    21 April 2020 @ 19:58
    If it’s cheap to own inflation wouldn’t the easiest trade be buying TIPS? I know TIPS are indexed to the CPI, and there are a whole host people arguing about manipulation of the CPI’s set of inputs. Anyone have thoughts on this?
    • PA
      Paul A.
      22 April 2020 @ 10:29
      My understanding is that TIPS would also be very sensitive to the interest rate (due to their fixed coupons). If there was high inflation, presumably the government would raise rates in response, which in turn would take the principal value of the TIPS right back down... I've not invested or researched TIPS properly however - so please feel free to correct my understanding...
  • FA
    Fisseha A.
    22 April 2020 @ 01:03
    This man demonstrates incredible awareness (inter- and intra-) and shrewdness.
  • DS
    David S.
    21 April 2020 @ 08:08
    I will listen to this video tomorrow. I enjoyed Mr. Deluard’s presentation before. I do not want, however, to ruin a good bottle of red wine tonight with a narrative structured on the fourth turning. I know this concept is very popular and sounds erudite. The following is an edited quote from Wikipedia giving both sides: “Academic response to the theory has been mixed—some applauding Strauss and Howe for their "bold and imaginative thesis" and others criticizing the theory as being overly-deterministic, unfalsifiable, and unsupported by rigorous evidence.” (More information is given in Wikipedia.) I will enjoy listening to the presentation for information purposes only. If you are using the fourth turning as a narrative structure and it helps you to invest, then I am happy for you and wish you good luck in your investments. DLS
    • LS
      Lemony S.
      22 April 2020 @ 00:20
      Hmm, I wonder how it is unfalsifiable ...
  • JA
    Jernej A.
    21 April 2020 @ 18:50
    His thesis seem to be that we (the young) are sacrificing our situation to benefit the old. I kinda disagree with this perspective. As far as I am concerned I am staying in lockdown so that we don't overwhelm our health care system.
    • RS
      Riccardo S.
      21 April 2020 @ 23:44
      The young WILL sacrifice to benefit the old. Right now lockdown, nothing is moving. Wait until things start rolling again
    • LS
      Lemony S.
      22 April 2020 @ 00:13
      You mean the health care system that was never overwhelmed? No, not in Sweden, either.
  • PU
    Peter U.
    21 April 2020 @ 09:50
    Let me get my tiny tiny violin out for this guy and his generation! "It's not fair . . . . . " typical of that generation.
    • JS
      James S.
      21 April 2020 @ 10:18
      He didn’t say that and was completely objective.
    • TR
      Travis R.
      21 April 2020 @ 13:38
      Baby Boomers, the children of the Greatest Generation; became the most slothful, entitled generation. Boomers were able to work part time jobs to pay for college; they haven't a clue what college costs younger generations today. Boomers went to college in the 70s; went back to work at those "higher learning" institutions, received tenure, then sat back and voted themselves pay raises (far above the rate of inflation) every year for the last 40 years; paid for by younger generations. Boomers were able to ride unprecedented bull markets in stocks and housing since 1980 then turn around and sell or rent to younger generations at insane prices. They saddled state/local/ federal governments with massive pension debt, raided social security, enabled skyrocketing healthcare costs, let infrastructure fall into disrepair, and allowed politicians to send younger generations to fight ridiculous wars in Iraq and Afghanistan (just to name a few). Boomers then turn around and have the audacity to point the finger at their children or grandchildren and call them entitled or whiny for pointing out the blatantly obvious. Delusional.
    • BM
      Beth M.
      21 April 2020 @ 16:40
      Wrong = Travis T. ...we are the ones paying for your college education! "Slothful"? = cluelessness on your part. What is blatantly unfair is the federal, state and local government pension system...THAT is the greatest ponzi scheme ever perpetrated on a "multi-generational" people.
    • TR
      Travis R.
      21 April 2020 @ 17:05
      The federal, state, and local system that was groomed and exploited by the boomers. I agree it is a ponzi scheme that enriches the boomer generation at the expense younger generations who will likely see nothing in real terms. Theft plain and simple. Your claim of paying for the college education of younger generations shows is mind blowing.
    • WG
      Wade G.
      21 April 2020 @ 17:18
      Travis is right. I'm a boomer and my generation makes me want to puke. I'm sorry we ruined this country for u. Seriously.
    • TR
      Travis R.
      21 April 2020 @ 17:38
      Wade, my parents say the same thing. When I say boomers it is a reference to the majority. There are millions of good people who are boomers who are on the right side of history. You sound as though you are one of them.
    • BM
      Beth M.
      21 April 2020 @ 17:56
      What is mind blowing is you "claiming" Boomers are "slothful". The generations that preceded us are the slothful and ooze an arrogance that is shameful.
    • BM
      Beth M.
      21 April 2020 @ 19:12
      Travis and his cadre are among the "snowflake" generation and blame the ills of society on everyone else but themselves. They dare not pick up a shovel and lend a hand in a spirit of cooperation. The "snowflake" generation has had the easiest path to wealth...unlike the generation before them. You have no clue whatsoever to be in a cue for a gas and determine whether it's your day to get what is available. You're the kind that voted for Obama and declared world peace. Heaven help you going forward...you're going to need it!
    • TR
      Travis R.
      21 April 2020 @ 19:35
      Beth and her delusions. I am conservative. I believe in hard work, thrift, and investment. Unlike the thieving boomer generation.
    • TR
      Travis R.
      21 April 2020 @ 19:38
      For the record I voted for Ron Paul in 2008 and 2012.
    • GV
      Grigorios V.
      21 April 2020 @ 21:55
      Ok Boomer
    • AF
      Andre F.
      21 April 2020 @ 22:36
      Travis R. "The thieving boomer generation."? What did they steal or cheat others out of?
  • GF
    Gordon F.
    21 April 2020 @ 16:49
    With the crises that we are passing through, I suspect that the elections this fall are going to bring about some big changes. The focus right now is mostly on the presidential election, but I would not be surprised to see the biggest turnover in the congress and senate in a generation or more. And with all the leadership in the hands of people in their 70s and 80s, it is probably time for a change. They certainly have not shown themselves to be especially competent or adept. This campaign season could be more interesting than we have seen in recent years. And who knows what a younger generation in congress might undertake. I don't expect a lot of improvements, to tell the truth, but changes, yes.
    • RS
      Roger S.
      21 April 2020 @ 22:28
      Having come of age in the 60's, I witnessed the age of "don't trust anyone over 30" and the entry of many new young leaders to power at the time. Demographically the young were the largest and all things fashion, music, etc. changed to whatever they preferred. That was the baby boomers. As they fade from the scene all things political, economic, and social norms and desires will be determined by which ever demographic age group is the largest and therefore the most influential.
  • DS
    David S.
    21 April 2020 @ 21:52
    United Airlines is offering to sell 39 million shares of stock when the stock price is nearly 70% lower, hoping to get a billion dollars back on the company's balance sheet. United Airlines used over 80% of its free cash flow, or 1.6 billion dollars, to buy back stock in 2019 alone. If this information is correct, it is an excellent example of buying high and selling low. Bailing out extremely good executive performance like this will certainly save the economy. DLS
  • DS
    David S.
    21 April 2020 @ 20:48
    If I were advising public or private pension plans with pension funds, I would tell them to exit them or remove the defined covenants. Do what everyone else did in the 70s and set up retirement funds. Most people realized that defined pension plans cannot be funded. As we move into the depression caused by a thousand things, defined pension plan will identify the dinosaurs both private and public. DLS
  • CT
    Crispim T.
    21 April 2020 @ 15:40
    Gold is not your bet choice for protection against inflation. Look into Bitcoin (BTC). Soon we'll see it surpass Gold in stock/flow.
    • SB
      Stephen B.
      21 April 2020 @ 16:27
      We simply do not know which will emerge as the winner. Personally, I believe gold is the safer bet and that is where I have put my savings but I recognize that Bitcoin may be the winner.
    • MT
      Mark T.
      21 April 2020 @ 17:49
      I'm of the belief that financial shields come in the form of something you can hold, like physical gold and silver. While Bitcoin is certainly out of the banking system, it's still got counter-party risk and can be erased from existence with a good magnet.(at least that's how I understand it)
    • DS
      David S.
      21 April 2020 @ 20:08
      Why not some of both? You can choose the percentage. As we exit the denial stage in the markets, both will go down in favor of cash and paying off leverage obligations. Be careful. DLS
    • LK
      Lauri K.
      21 April 2020 @ 20:20
      Mark, you can engrave your BTC private key on a gold bar. Then you don't have to be fearful of magnets, can have something tangible and can take both bets.
  • WM
    William M.
    21 April 2020 @ 20:07
    Excellent analysis! each bear market adds more excesses and distortions and unintended consequences. the cure has become worse than the problem but we can't seem to reverse course...ever. a lot of inflation and/or generational debt jubilee etc. all seem inevitable over the next few years
  • SW
    Scott W.
    21 April 2020 @ 12:33
    Very interesting. Raoul (among many others in the space) has stated that the bond market is the real market and that it generally knows what's going on. And from my personal journey in public markets that certainly seems to be the case. Mr. Deluard is saying however that does not hold up using evidence gathered over a longer time horizon. Some fascinating implications and exemplary of the diversity of opinion one can find here.
    • DS
      David S.
      21 April 2020 @ 20:04
      When we are paradigm shifting and constantly disrupting, no one knows what is going on - stock, bonds, Ouija boards. Stock markets around the world are in the denial phase on the damage this virus is doing to our economy. You just hang on with both hands. I am mostly in cash. I can react if there is any real resolution. I will not make money, but I will not lose it in the short run. DLS
  • AT
    Andrea T.
    21 April 2020 @ 09:14
    I don't understand how it's possible to stimulate the "real" economy without stimulating the "financial" economy. Given that governments don't produce anything, they must make use of taxes and especially debt to finance their spending, and, in the end, are completely dependent on central banks. Which means that any government must be intertwined with the most powerful financial institutions of the world. I have a very simple stimulus policy proposal: no more stimulus, get governments and central banks out of the way, just leave the people alone so that they can figure out how to come up with solutions to the crisis which will surely be more effective than any centrally planned and stimulated economy.
    • DS
      David S.
      21 April 2020 @ 19:46
      If you are a voting citizen talk to your representatives and administrations who are the cause of the multiple spending problems. In addition, they are the only one who can deal with the situation. The CBs are used to deflect the blame in a representative government. CBs have their faults also, but they are not the origin or the solution of the problem. DLS
  • SB
    Stephen B.
    21 April 2020 @ 16:57
    The gold trade is overcrowded? Really? How can that be true when almost no institutional investors hold gold and where we have not even recovered to 2012 price levels?
  • EK
    Edward K.
    21 April 2020 @ 15:05
    Have heard the inter-generational conflict thesis before but it has increasing resonance in my opinion. This is likely to play out over the course of the decade as evolution not revolution. Like it or not the generations after the boomers will have to rebuild institutions but healthcare insurance model in particular is a poster child for debauching of the social contract. Lived through the miasma of the 70's but a lot of things happened in that era (good and bad) with inflation or stagflation returning seeming like a reasonable scenario.
  • SS
    Shanthi S.
    21 April 2020 @ 10:18
    A little more than a few seconds on the trade thesis would have been nice. Felt cut off at the end there.
  • PU
    Peter U.
    21 April 2020 @ 09:49
    Another proponent of MMT!