A bit of flawed analysis. The primary banks aren’t really selling the treasuries but hoarding them and selling them back to the fed. If I am correct China will be buying treasuries soon enough. Right now china needs the dollars so its selling. I agree the debt is not repayable. The problem with China is that no one wants their funny money. If something is settled with funny money the other nation goes and sell them and buys dollars asap.

To maintain this monetary hegemony based on a pure fiat system , the US dollar has to be used as much as possible & the make sure it is the case by lending it efficiently globally in great quantity (even when there is a high risk of default). By contracting large amounts of U.S.D denominated debt , the American establishment has a direct influence on the policies of global governments , while creating sound financial alignment with various head of states & private entities ( through the World Bank , the IMF , & other private financial entities etc..). Thus , there is a limit to monetary sanctions by the American governments on a global scale to maintain & perpetuate this hegemony as it is anchored on extensive global lending. Hendry's comment about the so called benevolent aspect of the U.S state towards the rest of the world since 60 years is utterly amusing & delusional... Nonetheless great conversation as usual RV !

Hendry is a humble and congenial inquisitor that it’s pleasant even he “persecutes” and Gromen has the coherence of a philosopher. And coherence is a sure sign of a pragmatist who states what is and what is likely to happen and not what ought to be.

Would like to get you two in a room with Steve Keen and Jeff Snider. Steve may understand money (or at least understand it very differently) than just about anybody. And Jeff has studied overseas dollars, or Eurodollars, which are a different beast than domestic dollars. Let it run 2 hours, it would be very enlightening.

Maybe I missed it but why did the dollar go from 75 to 100 in 2014? Was the cause the foreign banks not buying treasures?

Gents “what’s so bad vs gold “?? Ur drinking to early , the debt of US is going to be $29 trillion in 2 months. The dollar And debt is the Fed . The fed allows debt to increase to unbelievable levels. What’s “bad “is the Capitalist system is going to end from this . So why (Liberty) did the US become the greatest nation in history your going to end. When we go down we will not get up in the same form ... it will be a communist dictatorship in my view which will come from hyperinflation.

Who's that stuffy long haired sweaty hippy? Total inappropriate for a serious channel.

I'm sure he's a crackup and I respect his achievements immensely, really, but honestly I haven't understood Hugh since he was loosing money immediately after the GFC but had the clarity of mind and morals to call the central banks out for what they are: grifters administering a ponzi. There are cogent comments below challenging his characterization of "benevolent hegemon". I'll add Hugh seems to pretend the 71 betrayal and default never occurred, and so he misses the "self-appointed" origins of our hegemony; seems never to have heard of Triffin's dilemma, which answers his first question, what's wrong with the system, explaining exactly why it must fail; ignores the growing rot brought to this nation by the very "elastic currency" liquidity he celebrates, even while he cautions we need a lot more of it; and seems never to have read Say's Law. Later in the interview Hugh suggests deficits are good, to be embraced and encouraged, and then references productive investments that produce revenue steams sufficient to repay the debt. Are u kidding me? What game of pretend are we playing? If US fiscal stimulus was productive, our debt wouldn't perpetually grow at a faster rate than the economy. We need an army of government paid bureaucrats to successfully generate completely falsified, substituted, weighted, hedonic-adjusted measures of inflation to hide the tax this elastic currency system imposes on its serfs. We live on a finite planet, with finite resources; maybe our money system should have some natural constraint. Hugh seems to believe an elastic currency has no costs and further is necessary for advancement. This seems to me to be self-evidently ludicrous. I look around our country and the world and fear a permanent loss of capitalism. To me, Hugh seems to have constructed some alternate reality on his way to a trade meant to overcome the very system flaws his premises deny. I don't get it.

Real vision maybe Hugh Hendry needs to be given his own show in the platform, and call it the Hugh Hendry Interviews just like Kiril and Danielle have. Hugh massive improvement from the Richard Werner interview in terms of letting the guest finish his thoughts and doing an excellent job in pushing back. In another note, I highly encourage subscribers to read Luke's book "Mr. X Interviews where he flushes out lots of the issues discussed and much more, and I believe a follow-up book is coming soon.

Fixed money supply forces a stark decisions on where we invest - invariably we will choose the opportunities generating the greatest productivity. Increase money supply and suddenly you've (in theory) decided that we have potentially infinite money. One hit from the pipe is not a problem maybe...but you've started the slippery slope towards slamming. That's dangerous when you have politicians and central bankers making decisions. At the best of times they make decisions based on data - always outdated, always incomplete. Usually of course they make it based on their own interests - they are programmed to slam.

All nice argumentation. Only one thing makes me extremely angry: the relativisation of US vs China. How the fuck can you even contemplate comparing a democracy with a big brother society? That's one little factor most of the analysts / economists choose to ignore somehow. Hugh, would you also praise the state sponsored economic boom of nazi germany (1932 - 1938)? Is a bit of a moral spine something finance people could grow?

Luke is a joker

Good interview here Much as I like to hear Kyle Bass on his thoughts, Hugh correctly pointed out that 3y, no results would mean a time-out. Early is usually wrong. Also the thing is the $ isn't preferred coz govts say it is, it's that the international banking infrastructure is in place, transaction costs are lower and it is relatively more stable than alternatives. So individual exporters, importers and service providers prefer using the $ for the convenience. Almost like why a meeting of multiple European nationals often takes place in English, which wouldn't be the first language for most participants

Great minds. Great interview. Where do you find this stuff? RealVision.

Super interesting. Bring these guys back regularly RV

Are you convinced that the US was a benevolent hegemon? Or the cheap outsourced product of goods was necessary for the debt/asset fueled consumption expansion since the 70s. A "normal" country would not be able to sustain such de-industrialization and a market driven currency devaluation would stop the process. But if you have the ability to finance the gov with papers you print it is fine until Joe Regular becomes growing majority and the consumption pyramid starts to erode, leading to the quickest solution to print something directly to Joe, which we now is not philosophically acceptable if you do not observe the system as a whole.

8 minutes before the end - effectively commercial banks are doing the money printing for the US Government

Gotta say, this was brilliant. High powered master class on the world economics. Wow!

Very interesting indeed! A lot of this went above my head, I am not from a finance background. Was Hugh essentially saying that because the US had benefited from the reserve currency status they were able to become extremely efficient and offshore low cost labor to developing countries (India/China) and in turn increase the population wealth of those countries. In tandem to the wealth increase those countries experienced the US got the benefit of cheap consumption and consumer growth along with the opportunity to focus on new innovation etc. However, now there is an argument for the US slowing down with negative interest rates almost a flip in circumstance for the short to mid term as China and India now have the opportunity to benefit from the population wealth increase and becomes more consumers than producers? Ultimately meaning the price Americans will pay is some short term negative rates?

Hendry seems to think money and wealth are the same thing. I find some of his approach illogical.

One trade idea from this discussion is to buy uranium. With discussion of China moving to a negative current account, which I agree with, and US causing inflation, one thing is clear China can NOT afford to continue to import oil, especially at higher costs. Uranium could/ would be an obvious policy outcome of this dynamic. Would love to hear positive/ negative to this line of thinking.

Well! that hour or so flew by. Great discourse.

This was a great interview. The only potential problem you will have with future guests is their nervousness (reluctance to come on) when their views get challenged by Hugh.

Question Happens when BTC ETH GOLD SILVER go vertical. Feeling devaluing the dollar starts a snowball effect which could in end with a Bang to 50 on DXY.

Awesome interview/discussion.. +LGORF, +rare earths, +NG, +BTC, +GLD, +SLV, +QQQ Put Spreads, +SPY Low delta/Long dated Puts. We are at the inflection and, as difficult as it is to build the portfolio in the face of the bubble, it’s conversations like this found only on RV, that give me the courage to move forward. Thank you

Hah, more click bait for RV.

Hugh seems like the kind of guy whose mind will explode once he understands Bitcoin. I wish he'd read The Bitcoin Standard already.

My brain grew two sizes. The idea that the the dollar rate was the reason for the dry up in US treasuries was news to me. The lack of elasticity in SDR’s, loved it. Their are many things that could change their narratives, but wow. ... I do wonder though, forcing banks to buy treasuries and having the central bank assume roles branch banks previously held are end game scenarios, are they not?

In order to consume, you have to produce. It's really not that complicated.

Thanks for a great discussion between two interesting thinkers. This is the content for which I come to RealVision.

"What's wrong with the system" is that all the injection of the "magical money" is based on central "planned" spending. That creates a lack of productivity. Bigger and bigger, as time goes by. And this evolving lack was what made the bank system, in its search for profits, change from investing in production to investing in consumption, and then desperately to boost asset prices to support the overstretched consumption. Until you are in ruin. It creates a destructive vicious cycle. By the top 1% for the top 1%. That happened in Europe, Japan, the U.S., and now is happening in China. What you called "benevolence" is actually an act of despair. Because a fiat money system is based on credit expansion. Leverage. And when you get at the top of your capacity, to avoid the fragile system for falling apart you have to export the credit to keep the party going. It's not sustainable. The elasticity of money will never change the fact we live in a finite world. Where capital is scarce. And we have to operate accordingly. PS: The FED will never be able to create more elasticity. Because the greater the debt, the greater the dollar shortage.

Mr. Hendry. I agree with your assessment of the US wanting to build a better world with global trade raising all boats after WWII. The US had a great set of leaders who were doing their best for as many as possible. Those days have been gone for a long time. Global trade was developed and intensified in the US as a labor expense arbitrage. This benefited corporate P&Ls and Americans were able to buy all the toys from China at a cheap. The cost was hollowing out American industry. Now with massive deficits even before COVID-19, the US is in the position of rebuilding industrial base from the ground up. Unfortunately for the American worker, corporations will be using robots to arbitrage the American worker's wages for a second time. It is the decline in middle-class jobs that is a major causes of anger that forces politicians to come up with all kinds of conspiracy theories as escape goats. Conspiracy theories are funding political campaigns, television stations, radio host who sell all kinds of snake oil to their followers. There is a direct line from McCarthy Communist conspiracy theories without any evidence or proof to politicians, media stations, and internet personalities of today. The people that yell about fake news are the ones promulgating fake news. The common ground is it cannot be my fault, there must be a huge conspiracy holding me back or trying to make me look bad. This is not the way to run a democracy anywhere. DLS

This was a fantastic, one of global macro interviews on RV. I agree on thinking about giving Hugh his own set of interviews on RV - the Dawn of Chaos series? I think he'd be great with a series building/analyzing global macro frameworks and teasing out the n-th order effects and hidden tails on both sides in those frameworks like he did here and did with Raoul. I think him and Ben Melkman would be great, and David Hunter of Contrarian Macro and Hugh would be a wild ride. But really I'd love to see Hugh sit down with experts in certain areas - eg, Jeff Snider on Eurodollars, Mike Green on passive, Lacy Hunt on bonds, etc. - to dive deeply into that area, let Hugh run wild with some of the out of the box macro implications of their theses, and have the expert and Hugh talk through which of those implications are reasonable, possible, or just insane. Thanks for this, RV team.

Great interview. I have been a subscriber to Luke's work for 3 years and he has connected the dots better than anyone in macro during that time. I think it boils down to this. The system as it is structured, to Hugh's point, only survives if the US Dollar goes lower. To Luke's point, the FED is going to print until we get a lower dollar. Gold is a no brainer given that it is what you want to own if the system holds together with a lower dollar and if the system falls apart, gold is what you want to own as insurance. Why make it more complicated than that?

Hugh Hendry is one of the best interviewers I have seen at pushing and challenging to get more out of the interviewee, great job!

One of the best interviews on the platform on a while. I love Luke’s worldview - and I think it’s all the more valuable when given the full proctological by a successful global macro portfolio manager like Hugh. Well done Hugh, Luke & Real Vision.

Great conversation. Would be great if RV could invite the two gentlemen back for an encore in a couple months.

Really? Luke is just adjusting to whatever opinion looks more trustworthy, and I couldn't connect the dots in his repetitive lines around oil, gold, current account deficits and dollar shortage... Give a bigger challenger to Hugh

A life-long struggle for me has been to learn to see the world as it is, rather than imposing my own view of how it ought to be. This conversation helped me in this effort. I was especially grateful when it was pointed out that the US did NOT run a negative account balance and hollow out its industry out of benevolence, but because it benefited those in positions of power in Washington and New York, who are not benevolent - neither toward their fellow citizens nor toward the rest of the world. They screwed the rest of the country in order to line their own pockets, while talking nobly of patriotism and US exceptionalism. And I am sure that anything that they perceive as threatening their wealth, position, and privilege, either in the US or elsewhere, will be viciously and violently attacked.

This was worth watching just to hear “Kyle Bass has been timed out.”

Fascinating interview. Very engaging. I am on my second listen now - real detailed and incisive content, I learned a lot.

I don't understand how the current system is in any way sustainable. Maybe there's an argument to be said that no system is sustainable, (why cycles are the only actual thing) but, my guess is, the system we have now is bound to fail more spectacularly than any other one. I mean, we didn't even get a cure for cancer or sustainable energy from this wasted credit expansion. I really like Hugh, but sometimes there's things he says that I don't understand, but I'm happy to keep listening to be challenged. He is a great person to do interviews for sure regardless.

Why would the Chinese CA moving to -1% of GDP trigger a currency crisis? That seems a little extreme but I am curious to learn more about why this would be the case. Does anyone know? Thanks.

The Mad Hatter of RealVision returns.

If Hugh was a real RMB fan boy he would be in Hong Kong not St. Barts. China manipulates it’s currency, has a plethora of fake gold, and everything internal is a lie from their GDP, COVID case count and corporate revenue. They can’t lie about their aging demographics, bad geography, massive dependency of raw commodities. On the bright side, it seems Hugh can have a follow up to Princes of the Yen, the Princesses of the Dollar featuring Pelosi, AOC, Warren, Shelton and Kamal Harris and how the US went negative rates because working age millennials should not be bothered with a job.

Still don't understand how China doesn't pay for gold from their vaults when Iran or Russia turns over their Yuan to the Shanghai Gold Exchange. Can somebody explain?

excellent interview. thank you.

0 mentions of 'Bitcoin' It's hard to talk about the coming decade without including that.

WOW! Stella quality real vision.

firstly, I love Hugh Hendry and watching him and Raoul Pal discuss the "Princes of the Yen" was why I joined Realvision. I think the analysis of Hugh is flawed in that he gives too much power to the economic over the political. The "Benevolent Hegemony" hollowing out it's industrial economy for the benefit of other sovereign countries much poorer then the USA in order to bring them the wealth and prosperity enjoyed by the first world. I think displays a detached world view of the overlord and the serf.... The reality I feel is more that a corporation that makes refrigerators wanted to expand his market so everybody in India and China would buy a fridge. His own market is saturated --- etc etc ... you all know the rest and in the process he sacrificed the working population of his own country. I think if Hugh Hendry came from Maryhill in Glasgow and not Kelvinside he would look at the world though a different window. --- that is both tongue in cheek and a bit of a needle -- sorry . I think Mr Gromen is correct in that politics is going to one of the most important factors and that politics will decide how well or how terribly we navigate the next few years. So. ... when you make the statement "politics aside' I think you have a weakened argument ... right now politics is going to be everything.

Hendry - "You don't have an elastic currency basket ... " - Yes, its a shame that the Central Banks has economies used to inflationary/devaluing currencies that rob savers for short-term gains. I had to laugh when he was complaining about that, its the same line any Fed chair would give you. "But you can't change it, because this system benefits us! (the banks)" Screw the banks. Time for something better.

Luke is Brilliant!!!!! So is Hugh!

Good will is not what drove the US to bring prosperity to other parts of the world. The rest of the world will not through good accept the low rates that money print is producing.

https://ftalphaville.ft.com/2019/03/13/1552487003000/How-to-diagnose-your-own-Dutch-disease/

Brilliant RV discussion.

Hendry is completely right. To think a country that does so much export to run out of $$, it is insane. Kyle Bass is totally timed out. Just look at where the USD/CHN exchange rate. It got to 6.98 a couple of days ago from 7.10 in March. Kyle Bass is waiting for a 10. Next century.

Wow, what a great conversation !!! Very eye opening. The US took a big hit for exchanging green paper for cheap goods. Common sense but first time to hear it talked this way. Thank you, Gentlemen.

Who wants to Party with Hugh? I know I do.

"Continued spending" to get the Dollar down to "where they want it" so the Fed and US banks can step back and foreign demand can step in would bring us to Peter Schiffs point. Hypothetically, if the world didn't want to fund the US deficits, what happens then? Is the fed going to keep monetizing the debt? Last years Jackson hole summit the BoE Governor expressed the need to move away from the Dollar system. Perhaps the world doesn't want to keep the system going.

Very Good Interview

You are assuming the Velocity of the USD will increase and the Value of the USD to increase, I dont see it Buddy

Off topic : is there any good read on how to pick the bottom in stocks? In technical analysis....what to use? Like RSI and the others. And what page or program to use to put everything together? Or maybe it would be a great next video! :) Thanks in advance for your comments!

Two of my favorite minds in one brilliant confab! I'll sit and think and watch it again tomorrow.

Gromen made Hendry's bed for him, great stuff

Fantastic. Well done gents.

Great conversation. I think I've been following Luke's work for 5 or 6 years now, which astounds me it's been that long. That call isn't the only one he made, for sure. Hugh is always a blast.

This was great! Loved the interview and the energy! Thanks.

outstanding perspective. omg

Fantastic interview! Thanks, Luke, Hugh and RV! You guys were great. Best. B

favorite video for a while - would love to see Hugh v Kyle

Loved the interview. The positive chaos from Mr. Hendry's mind opens my mind to new points of view. Mr. Gromen is a perfect counterpoint of linear logic. The two together were just fantastic. For me, the FX and commodities markets define value with each trade. For you younger folks digital currency fits the bill also. The days of any long-term fixed exchange rate is dead for good reason – it does not work. This is the new world where each investor in FX and commodities set the market price. Deal with it. - skin in the game - chaotic but better. DLS

Easily one of the best things I’ve watched on RV! Please ask these two gentlemen to have another discussion 6 months hence! Thank You!

I cant see this video; just get a circle going round :(. Is Hugh actually wearing a jacket? :)

That was f'n rad. Great work, gentz.

Fantastic interview, thanks for bringing us your insight, Hugh & Luke (and RV)!

I agree - give Hugh a regular show.

Outstanding! Thank you Hugh, Luke and RV

These two together... Wow!! I can't even imagine what it would be like to get these guys to sit down and hear them brainstorm a macro portfolio composition together. Awesome interviewing Hugh, thanks for coming on and talking Luke, and thanks RV for hosting!

Sound is pretty bad. Would like to see (hear) these guys get a decent microphone setup

Priceless. Pure RV gold.

Fascinating discussion.

Brilliantly done gentlemen! Thank you.

Good stuff guys, and I have to say that not only is Hugh becoming a much better interviewer this time around, he also is a riot. Can RV have an entertainment / comedy classification? He is a real character, and I tuned in as much for the substance of his discussion with Luke, who was great as always, as I did for the entertainment value. Well done gents. Many thanks.

I listen to anyone with trees in their name.

No transcript?

Hugh is a fast learner. This is how you interview guests by not interrupting and not calling them 'conspiracy theorists'

Headline . . . . Hendry v Gromen . . . . Gromen takes it by one round. When is the rematch . . . I'll a buyer!

Hugh, I notice that you often say "putting the politics aside" when discussing economics. What happens to your narrative if the benevolent debtor decides that being benevolent no longer serves its interests because the creditor has bitten the benevolent dictators hand one too many times (I think this is Kyle's point and evidently becoming US Foreign Policy if you follow US Secretary of State Pompeo @SecPompeo)? For someone who loves philosophy and history I don't see you discussing the macro implications of ideological conflicts that are clearly becoming insurmountable differences between the China sphere and the Western democratic sphere. Perhaps you don't think there are any macro/FX implications and you think its just all bluster? What about the growing incoherence between economic and foreign policy? There is irony in the knowledge that the financial system needs a weaker USD to stay alive but democratic society and respect for human/individual rights needs a strong USD. These philosophical issues were not a concern in 2008. There seems to me to be so much more at stake here than would be solved by just having Mr Munchkin and the Wizard of Oz declare DXY at 75.

Good right up until the last five minutes. Negative real rates are a function of misallocated capital (using Luke's examples, entitlements). Fed policies keep increasing the amount of capital that does not yield a return and making the system more fragile (at zero % interest rates you can knock down the rocky mountains as Daniel Oliver discussed). The bad capital needs to be cleansed (you know capitalism), not just let the dollar fall to DXY = 75, and we can all play the nominal game for 10 more years, but the reckoning is that much worse.

Is the paper that Hugh mentioned at the beggining of the interview accessible?

Fantastic, finally an interviewer who has critical questions! Will he be re-invited? I hope so

Phenomenal conversation. Kudos!

Fantastic - will have to watch one more time to fully process everything While he may not be everyone's "cup of tea", love Hugh Hendry's energy, personality, and insights! Keep it up!

Hugh nailed the interviewer role this time. Great work Hugh!

excellent!

Thanks guys this was fantastic

Superb interview. The mutual improvement is evident: Hugh made Luke express some fundamentals of his reason that bridge the difference with usd bulls and the tradition of macroeconomics. Luke estimulate Hugh's mind to focus in an aproach that use his creativite to build a more sistematic analysis. Beautiful!

Great conversation! Thank you!

These two are terrific. They are individually great but something special happens when they bounce off each other.

He's BACK!!!

Hugh as an interviewer is really growing on me - it's like he's automatically tuned to the role of devil's advocate whoever he speaks with

Just brilliant. Thank you!

Good to see the otherwise rare practice of the host challenging the guest on RV.

That was great, Hugh, Luke. Man, the stuff I am learning!