Lending Booms and Credit Doom

Published on
October 13th, 2020
37 minutes

Lending Booms and Credit Doom

The Interview ·
Featuring Richard Vague and Joe Walker

Published on: October 13th, 2020 • Duration: 37 minutes

Richard Vague, managing partner at Gabriel Investments, joins Joe Walker of The Jolly Swagman Podcast to dissect historical financial crises to identify their common patterns, precursors, and outcomes. Vague analyzes everything from land bubbles prior to the Great Depression, to the central bank interventions during Japan's "Lost Decade." Vague and Walker then establish a framework for analyzing and interpreting financial crises, which they attempt to apply to the current economic environment. This interview features charts from Vague's book, "A Brief History of Doom: Two Hundred Years of Financial Crises."Filmed on October 7, 2020.



  • DS
    Donald S.
    27 October 2020 @ 16:46
    Here is an idea that is fair to the borrower the lender the public and the those who pay their debts. if you borrow the money for whatever purpose. Pay it back. Don S.
    • MH
      Martin H.
      27 October 2020 @ 23:07
      Personal responsibility, lord no Don... careful you are one step away from being called a right wing extremist!
  • JM
    John M.
    26 October 2020 @ 17:26
    Good interview. Don't agree with the comment on Trump election. Lots of good reasons why he was elected - failure of free trade to bring prosperity to all segments of society, wealth disparity, prior POTUS completely ineffective, Democrats corrupt & incompetent.......the list goes on and on! I hope I haven't offended anyone (FYI I am Canadian so I don't vote in your elections),
    • SD
      Shailesh D.
      27 October 2020 @ 15:48
      I am from India and agree with you.
    • MH
      Martin H.
      27 October 2020 @ 23:06
      No, they both pulled politics into it unnecessarily. It's funny how the bureaucrats get a free pass in all this, often held in high regard post the fact when in reality they have been the most reckless players.
  • MH
    Martin H.
    26 October 2020 @ 03:24
    Joe likes to censor valid comments on his blog just because they disagree with views he presents. Sad, but typical of media these days!
  • LB
    Lukas B.
    25 October 2020 @ 22:18
    Fantastic video. I really enjoyed the tone of the discussion; very pragmatic and thoughtful.
  • JP
    John P.
    16 October 2020 @ 23:28
    The comments on student debt Jubilee are interesting because we already have jubilee (forgiveness) programs in place. Minimum payments of around 15% of discretionary income for 20 years in private sector, 10 years in public sector and the debt is erased. These programs are so advantageous that for many professional degrees like medicine it is actually the preferred option because they effectively equal an interest rate of -1% to 1.5% depending on income.
    • LS
      L S.
      24 October 2020 @ 15:58
      The problem is that they are not reliable in many ways. That is, you don't know if they are going to pull the rug out from under you in 10 years when sentiment is even more "soak the rich" (which you are considered as a doctor or lawyer). Beyond that, they make you pay the tax on the forgiven amount, which is also another ticky tack behavior for nominal government gain, especially in a 24 trillion national debt system. It's funny thinking that you can trust the increasingly broke government to make good on something over that time period. As someone who paid off all of his crazy loans, I am against a jubilee but would be ok with a tax writeoff, FOR EVERYONE, which I personally think would be a far better solution than any other. Give me the ability to go entirely untaxed for a year if you want to lessen the moral hazard.
  • DS
    David S.
    13 October 2020 @ 21:35
    There is no doubt that the student loan program was/is out of control. How can we expect an 18-year-old student to understand that the loan must be paid back? Government do not understand. I would prefer to investigate the government paying the interest on the loan up to a certain amount for everyone. The ones borrowed a lot more to go to major private schools should pay interest after the free interest level is reached. Community service is a good idea, but at a pay scale reasonable for the value given to the community. College educations is way overpriced because they are funded by student loans. Colleges and universities have morphed into something other than teaching universities. DLS
    • JG
      Jave G.
      14 October 2020 @ 00:40
      Here's all I can tell you: I went back to school late, so I can't use "18 years old" as an excuse. I knocked out undergrad at a fairly reasonable price, even with private school (first two years at county college). But then I went to grad school - film school. Laugh if you want. But at 8% a year, I can't afford to make more than the minimum payments each month, and when I do, my principle goes up and up every year. (Owed about $190k at graduation; now owe something like $325k ten years later - again, that's making payments on time all the time.) At the very least, no one should be paying interest on government backed loans. Anyway, I'm praying for lots of inflation in the next decade. :)
    • DS
      David S.
      14 October 2020 @ 16:22
      Jake G. I am shocked at the increase in your debt while making payments. There is a major problem that needs to be fixed for sure. The whole system needs to be studied and changed. Are there any lobby groups for Congress? Maybe students could organize by university. Then university organizations can build a network. The straight facts need to be known and shared to make a real change for the better. Just an idea since most of us do not know the facts. DLS
    • JP
      John P.
      16 October 2020 @ 23:36
      Interest rates are now under 2% to negative for most student loans using REPAYE program net to the borrower because the government subsidizes 50-100% of the interest. It's even less in the public sector where you only have to make minimum payments for 10 years. I agree the governments involvement raised the price of college, but at this point the subsidy also benefits the borrower. Especially for students that go into fields such as law or medicine.
    • ML
      Mary L.
      18 October 2020 @ 10:04
      @David S: I’ve been getting bills for loans I paid for my daughter 10 years ago. Record keeping is wretched to nonexistent and there have been massive amount of this kind of thing going on. There’s no way out; incompetence and maliciousness are indistinguishable and equivalent in this whole mess
  • ji
    jayanth i.
    15 October 2020 @ 23:59
    Another pundit focusing on the symptoms of the problem and not the root cause of these booms itself. Fiat currency and central banking is the problem, sound money that can’t be manipulated is a clear solution but this wasn’t mentioned once ....
  • ar
    andrew r.
    15 October 2020 @ 15:46
    One more thing. The recovery from 1920 -- with no government intervention (except for a slashing of the govt budget! imagine that ...) -- began in the summer of 1921, and led to the best decade of growth the US ever had up until that point. Unemployment never got much above 4% the entire time. Ten years later there was another recession. This time, policymakers did the opposite, and got the opposite result (15-year depression -- yes, including the early 1940s, despite the absurdly misleading GDP numbers).
  • ar
    andrew r.
    15 October 2020 @ 15:39
    Good discussion, but they left out the most critical part to the credit-expansion-led booms: the artificial suppression of the price of credit (interest rates)! And, preventing the healing from the boom (liquidating malinvestment) by "propping up institutions" is exactly the wrong medicine. But still, good interview; thumbs up from me.
  • TZ
    Tibor Z.
    15 October 2020 @ 00:45
    The interviewer definitely needs a studio-quality microphone! The audio quality from his side is just terrible!
  • DF
    Douglas F.
    14 October 2020 @ 18:02
    A little something on Mr. Vague's book, which uses nothing from Austrian economists, who have done the most illuminating work on booms and busts https://www.douglasinvegas.com/blog/2019/9/19/more-financial-doom-on-the-way
  • JR
    Jeremy R.
    14 October 2020 @ 02:52
    I'd love to see Joe Walker speak to Jeff Snider, as Joe is very steeped in academic economics tradition, and belief in the mastery of central bankers over currencies and economies. While Jeff spends most of his blog space criticising how ineffective central bank economists are, how hopelessly divorced from the true monetary system - the Eurodollar system - they are, and it was multiplication of money here that has funded our most recent bubbles. He regularly says central banks only have expectations policy in their toolkit, and that monetary policy no longer contain any money in it.
    • JW
      Joseph W. | Contributor
      14 October 2020 @ 05:02
      Thanks Jeremy! I'm afraid I'm steeped in neither of those. You might enjoy my recent podcast with former RBA Governor Ian Macfarlane, 'The Rise And Fall Of Monetary Policy': https://josephnoelwalker.com/101-the-rise-and-fall-of-monetary-policy-ian-macfarlane/
  • AB
    Al B.
    14 October 2020 @ 02:54
    Excellent interview. Focused and informative content. Look forward to seeing both on RV again.
  • DS
    David S.
    13 October 2020 @ 23:51
    Very good content, BUT is no one paying attention to the new & existing home sales prices? Case-Shiller? Pull up the chart and see how ridiculously far above the prior 2008 price bubble we are right now. Plus bank lending standards now tightened and mortgage credit available is nowhere near supporting this.
    • MC
      Mark C.
      14 October 2020 @ 02:29
      Those who do qualify currently out numbers the small supply. What does that look like with forebearance over? Or will inventory pick up to meet demand and those who are in forebearance sell while they still have equity? I feel like we are a few months away from figuring this out...there might be some adjustments.
    • MC
      Mark C.
      14 October 2020 @ 02:30
      And I also agree. Great Content.
  • cd
    chris d.
    13 October 2020 @ 19:46
    One of the most straightforward but deeply insightful interviews you’ve had. An interesting question is why when we really do see from history how It plays out, we don’t take steps to avoid it. The behavioural and regulatory aspects are worth diving into even more deeply. If you go back and see the report by the controller of the currency into the Conti Illinois collapse, their analysis and playbook to avoid said it all. But a few decades later it all happens again. Trouble is you have to be a lot older to get it!
    • JG
      Jave G.
      14 October 2020 @ 00:33
      Agreed. I started reading his book some months back - probably got through about 2/3 - it's good, but I more or less got the thesis from the first few examples. My question to him would have been: ok, too much private debt is what most often leads to crisis. And he says public debt is often not as relevant. But what happens when you move from big private debt to big public debt? If Japan's crisis in the late 80s was due to private debt, is not their continued stagnancy due to increased public debt? And how will that answer be applied to the current situation of the US (and the world)?
  • KR
    Kelly R.
    13 October 2020 @ 23:47
    ...'Building after Building after Building after Building' Sounds like all the cranes in Toronto currently !!
  • MJ
    Marcus J.
    13 October 2020 @ 22:52
    Great to see the Swagman on Real Vision!
  • JK
    John K.
    13 October 2020 @ 22:12
    Great interview !
  • ac
    adam c.
    13 October 2020 @ 12:47
    What about Steve Keen's idea of giving everyone an equal amount out of new money in a debt Jubilee. Which they are then use to pay down any existing debt they hold. If they are debt free they are required to buy new issue shares and the companies have to use that money to pay down their company debt. I am completely guessing here but I imagine interest rates would then be allowed normalize.
    • DS
      David S.
      13 October 2020 @ 20:15
      Debt is an addiction. There is no easy way out. DLS
  • GK
    Gautam K.
    13 October 2020 @ 20:11
    Unbelievable content, just priceless! Richard Vague is so insightful.
  • cd
    chris d.
    13 October 2020 @ 19:47
    PS I’m definitely going to get his book!
  • DS
    David S.
    13 October 2020 @ 18:29
    Excellent. It is a pleasure to listen to someone who is practical and experienced in both macro and micro effects of lending. I am looking forward to seeing both gentlemen back on RV soon. DLS
  • RC
    Robert C.
    13 October 2020 @ 09:45
    Good to have Joe back, his recent interview with the ex-reserve bank governor of Australia was a very insightful conversation.
    • DB
      David B.
      13 October 2020 @ 12:43
      Robert / RV, I can't find the mentioned interview with "ex-reserve bank governor of Australia" - can someone point me in the right direction pls.
    • EK
      Emil K.
      13 October 2020 @ 15:38
      Here you go David. https://josephnoelwalker.com/episodes-list/
  • EK
    Emil K.
    13 October 2020 @ 15:02
    Am reading "A Brief History of Doom" this VERY second! Enjoying it. Appreciate the effort put into this book. I sense that the book is underappreciated and likely should've made a bigger splash in the financial media and business press. Also do highly recommend unique and interesting podcast by Joe Walker "The Jolly Swagman".
  • ac
    adam c.
    13 October 2020 @ 12:46
    What about Steve Keen's idea of giving everyone an equal amount out of new money in a debt Jubilee. Which they are then use to pay down any existing debt they hold. If they are debt free they are required to buy new issue shares and the companies have to use that money to pay down their company debt. I am completely guessing here but I imagine interest rates would then be allowed normalize.
  • VD
    Vishal D.
    13 October 2020 @ 12:07
    joe is a great interviewer
  • JL
    Jake L.
    13 October 2020 @ 10:46
    It's refreshing to hear someone that actually understands the great depression. Ben Bernanke's views on it are unbelievably ignorant.
  • AO
    Audie O.
    13 October 2020 @ 10:10
    This was a great video and thank you.I liked the fact that it was easy to understand and could relate really well to 2007 and 2008.
  • BG
    Bart G.
    13 October 2020 @ 07:17
    CC subtitles are from Pedro da Costa interview.. just sayin' ;)