The Monetary Policy Endgame

Published on
September 18th, 2019
24 minutes

The Monetary Policy Endgame

The Expert View ·
Featuring Simon White

Published on: September 18th, 2019 • Duration: 24 minutes

Simon White, co-founder of Variant Perception, explains his view that as interest rates approach the zero bound, conventional monetary policy tools do not achieve their intended goals, but instead create deflationary pressures. He argues that in a negative-rate world, the private sector increases savings rates to combat their lack of income - causing an even bigger deflationary push. White believes that conventional monetary policy is nearing its limits, and MMT will unleash a flurry of inflation as politicians take control of policy. Filmed on September 13, 2019 in London. Variant Perception's whitepaper on MMT can be accessed at this link:



  • Rd
    Ronald d.
    7 November 2019 @ 15:17
    Great Interview and perspective. Would investment real estate be considered real assets or is it really a financial asset? Cap Rates would go way up causing values to drop, but could rents go up enough to counterbalance this? Also, interest rates on refinancing the property every 5 to 10 years will be going up as well? Will there be financing available or will lenders shy away knowing rates are only going up, will this cause lenders to want higher percentage down 25% or more? Some who see much higher rates coming have suggested paying off all debt against the property, but if rates go way up the prices of real estate could fall dramatically so would it not be better to sell now while real estate is currently at a high and put you equity into cash and/or gold and buy later on? The key is rents can the market in a inflationary enviorment withstand rents that keep up with rates. Would be ironic if Wework turned out to be a great investment for Softbank having those long fixed rents.
  • IS
    Ivar S.
    17 October 2019 @ 23:24
    Great interview!
  • AM
    Alex M.
    1 October 2019 @ 11:33
    Simon is smart and I’d love to hear his views on MMT when he isn’t mischaracterising it. He makes several claims about MMT which just aren’t an accurate description of what the school of thought actually describes.
  • RH
    Robert H.
    26 September 2019 @ 13:08
    How can government "create demand"? Impossible. Japan failed. EU 10 years failing. QE in one way has taken costs of non-growth (inflation) and piled them into a closet. Here's $5 go into business? It doesn't work that way. Lenders don't lend just because money is cheap.
  • TW
    Thomas W.
    18 September 2019 @ 19:07
    It is interesting that he quoted Reinhart and Rogoff paper because I am pretty sure it was later discovered that there research had data entry errors and the results were actually found to be inconclusive. But I could be wrong. In addition, I am not confident that deficits matter with respect to the American economy, mainly due to the fact that other countries are purchasing US debt in order to gain access to the American consumer. Therefore the US doesn’t have the same borrowing constraints as a Jamaica, Bolivia, or Estonia. In fact if you look at the US share of the World deficit, over the last 10 year it ranges from 40 to 50 percent. Another way to think of it is that the US consumes about half of the worlds excess production. Again, this is only done if the rest of the world is willing to hold US denominated assets which usually comes in the form of US treasury (ie debt.)
    • DS
      David S.
      18 September 2019 @ 20:07
      US debt will matter as all debt matters at some point. DLS
    • BM
      Beth M.
      18 September 2019 @ 20:14
      And the world is willing to hold (buy) less and less U.S. debt = big problems!
    • wj
      wiktor j.
      18 September 2019 @ 20:44
      We are buying US debt because US dollar is still reserve currency and you still get yield. If that changes, we here in EU wont buy that much. For now I can hedge my gold silver pos with us debt. This give me access to the dollar also. As euro will default I wont lose much.
    • GH
      Gregory H.
      18 September 2019 @ 21:55
      Deficits matter indirectly in big ways. Whether artificial or not, if you have zero or close to zero rates, that is forgone interest income not going to the investors, and then not being spent back into the economy. The US can get away with running massive deficits, while artificially suppressing rates in the process (financed by investors or gobbled up with future QE/Monetization), but the cost of that decision is lower income to investors and a lower spending level than if bond rates were higher.
    • DS
      David S.
      19 September 2019 @ 08:49
      Victor J. - See Sept. 19th interview with Mr. Larsen. DLS
    • PW
      Paul W.
      19 September 2019 @ 22:34
      There was one small error in the Reinhart and Rogoff paper that is being used by MMT adherents to discredit their general thesis. I do not believe the small error in any way negates what their research showed about excessive government debt levels.
    • RA
      Robert A.
      19 September 2019 @ 23:29
      Interesting that you pointed out the data inconsistencies in R & R’s work. I did some reading on this when the matter first came up and found that the data inconsistencies, while true, were not germane to their thesis or to the core findings of their work. Hope this helps.
    • TW
      Thomas W.
      21 September 2019 @ 00:00
      Let me start off by saying that I do not completely agree with MMT as they believe that this theory can be applied universally to any country, I on other hand believe that it can only applied to the US and to a lesser extent the UK. That said, the problem that I believe everyone is getting tripped on is how trade plays a role in repaying debt. This is the savings identity (T-G)+(S-I)+(X-M)=0 Where Public savings consists of T for taxes, G for government spending. Private savings consists of S for household and corporate savings, I is Investment. Foreign savings consists of X is exports and M is imports. If we rearrange this equation we get (T-G)+(S-I)=(M-X), which essentially means a surplus in public and private savings leads to a deficit in foreign savings. In the case of the US has a deficit in public savings and private savings therefore its debt is paid for through foreign savings. What separates the US from other countries is that it actually has the production capacity to produce all of its own good, which is what happened up until it began openings up its markets in the early 1980s. The reason why it doesn’t is because other countries through the purchase of government debt or other purchases of US dollar denominated assets undervalue their currency in order export goods to the US. Keep in mind, the liquidity of the treasury is not being used as an investment vehicle but rather as a savings vehicle in this instance as countries try avoid currency devaluation the result in trade imbalance through the aforementioned purchases. Therefore if other countries decided they no longer wanted to purchase treasury, it would lead to the appreciation of the countries respective currency, reduce a boost of Americans imports, as well as reduction of exports. Keep in mind, if it weren’t for this system of importing to the US and then buying its treasury, this how these countries would get repaid in the form of US exports. T
  • db
    don b.
    19 September 2019 @ 20:06
  • MS
    Marcio S.
    19 September 2019 @ 17:38
    Has the assumptions of GDP Threshold and Central Bank self financing ever taken place on a global reserve currency? I truly get the point for a non-reserve and I believe this also can happen anywhere, but I al just trying to understand the history with a global reserve currency...
  • JH
    Jesse H.
    19 September 2019 @ 16:36
    Excellent. Please have Simon on for a longer form interview with Raoul / Grant. He is a great thinker and offers some different views in places.
  • EK
    Edward K.
    19 September 2019 @ 15:24
    So what will be the answer to the end of the 60/40 portfolio which all insurance companies seem to use to guarantee their pension obligations?
  • CL
    Charles L.
    19 September 2019 @ 07:06
    I'm not sure I get that governments are inherently inflationary because they borrow "with no limits". I get that they would benefit from inflation since they are borrowers but how does borrowing by the government contribute to inflationary pressures? I get further present spending through borrowed moeny increases present demand for goods and services but you also have a larger debt burden limiting your cashflows. Would love to hear anyone's thoughts on this.
  • LH
    Laurent H.
    19 September 2019 @ 04:16
  • SS
    Shanthi S.
    19 September 2019 @ 04:04
    This was great! Very clear and sounds about right. Thank you!
  • FL
    Fernando L.
    18 September 2019 @ 23:35
    The government's inherent inflationary bias is what is commonly known as Argentina.
  • JE
    James E.
    18 September 2019 @ 20:31
    Very well presented, agree with Simon's summation.
  • RM
    R M.
    18 September 2019 @ 14:41
    A bit of a bummer that the white paper is only available with a corporate email address. Milton, can it get posted on RV?
    • M.
      Milton .. | Founder
      18 September 2019 @ 15:15
      You can complete the fields with your personal details and you will receive the report on your email. They’re trading the paper for your email in case they want to mail you in the future.
  • Nv
    Nick v.
    18 September 2019 @ 11:54
    Brilliant. No one else is watching Velocity of Money with anything other than extreme recency bias. In fact, 20 years of recency bias. Thanks Simon and RV
  • DS
    David S.
    18 September 2019 @ 08:10
    Well done. Great summary and insights. DLS
  • DS
    David S.
    18 September 2019 @ 06:51
    Can the Fed manage MMT and the Congress spend what is supplied? Just trying to have some control of the money supply. I agree that Congress and the Executive branches would be buying votes with MMT as fast as possible. DLS