Missing Links at the Federal Reserve

Published on
July 4th, 2017
61 minutes

Missing Links at the Federal Reserve

The Interview ·
Featuring Martin Barnes

Published on: July 4th, 2017 • Duration: 61 minutes

Martin Barnes has been making economic forecasts since the late 1970s and with the sharpest perspective on policy from BCA Research, he connects the dots that the Federal Reserve has been missing. Completing the journey through the debt super cycle, Martin assesses the greatest risks to stability in global markets, with a warning on the Trump 2019 recession. Filmed on May 24, 2017, in Orlando.


  • MB
    Martin B. | Contributor
    1 August 2017 @ 18:34
    Thanks to all of you who posted comments on my interview - even the many critical ones! It seems my comment about "not understanding gold" went over badly. It was a rather tongue-in-cheek remark. Obviously, I understand very well its role as a store of value during times of economic and/or political distress. And its main drawback as an investment - the lack of yield - matters less at a time of low interest rates. Nevertheless, in the absence of a major rise in inflation or some catastrophic event, it is hard to make the case for a major asset allocation to bullion IMHO. I don't rule out a major rise in inflation after the next recession, but I see no need to front run that. When I mentioned a lack of imbalances in the economy I was referring to ones that threatened to cause a near-term recession. Debt levels are high, but at current interest rates do not pose an imminent threat to the economy. I can easily give a fire-and-brimstone view of the world, predicting rampant inflation, breakdown of the international monetary order etc. It's fun to do but will not be useful in getting the markets right in the next year or so.
  • BA
    Blair A.
    11 July 2017 @ 03:36
    Nothing new here. Move along. Boring.
    • AM
      Artem M.
      25 July 2017 @ 09:29
      Yep, and the whole Debt Super Cycle ending after 2008 is BS, US consumer debt has never been higher, the reason Millennials aren't buying houses is not because they hate or fear debt, it's because they cant afford the down-payment, and are instead living for free in thier parents homes.
  • GH
    Gary H.
    12 July 2017 @ 14:50
    Comments are always interesting. It appears most subscribers can fit more into the pessimistic camp than Mr. Barnes muddle through forever scenario. But, if we hold Japan out as the example the end scenario takes a long long time to play out.
  • GM
    Greg M.
    5 July 2017 @ 17:03
    I know my great grandfather is spinning in his grave at the utterance of a Scotsman saying - "I don't understand gold"
    • DS
      David S.
      6 July 2017 @ 19:27
      Gold is still subject to supply and demand. When Spain shipped huge amounts of gold home it caused massive inflation. I believe that gold will have its day, but I do not think major countries will go back on a gold standard. DLS
    • DS
      David S.
      6 July 2017 @ 19:31
      I wonder what the effects would be if a small country went on a gold standard to control its politicians from printing so much fiat currency? That could happen. DLS
    • RM
      Rainer M.
      9 July 2017 @ 16:10
      Think BTC and Cyrptocurrencies
  • NH
    Neil H.
    6 July 2017 @ 00:19
    Martin is one of the best macro thinkers of our time. For those who discount what he says go back and read the reports when he wrote the bank credit analyst. I think you will change your opinion quickly.
    • RM
      Rainer M.
      9 July 2017 @ 16:07
      as a true macro thinker how can he not have a view on gold and just casually remark its an emotional asset ? When he said that he sounded like a government paid Central Bank employee in my view
  • PS
    PD S.
    9 July 2017 @ 03:03
    great interview grant :)
  • RM
    Russell M.
    5 July 2017 @ 15:01
    This guy has very good perspective on the history and failure of central bank (and everyone else's) historical lack of accuracy at prognostication couple with an understanding of the complexity and inherent unpredictability of the system and limits of economic prediction. He recognizes the the folly of central bank controlling policy based on prognostication and explains over all central bank behavior which is to do whatever it takes to maintain the status quo regardless of the long term consequences such as clearing out the dead wood in the economy and permitting healthier growth. He explains a very real possible scenario where the economy continues to plod along at a low growth rate and low interest rates regardless of what the Fed tries to do while acknowledging that a 50% market correction is also possible. He seems to have a good grasp of the reality of the situation we are in (including acknowledging that political actions could well trump economic analysis) and is entertaining and effective in conveying it. Hearing him reinforces the need to follow the old principle that diversification is essential for maximum protection.
    • TS
      Thomas S.
      5 July 2017 @ 16:34
      Gave you a thumbs up because you summarized the interview well. But with respect to Mr. Barnes, at some point those who try to make an honest living as participants in the financial markets need to stop paying deference and fealty to what is essentially a cartel. The comment about not understanding gold is difficult to believe. Surely someone of his experience actually does understand gold, and also understands the cartel's unspoken war against it.
    • DS
      David S.
      6 July 2017 @ 03:17
      Mr. Barnes certainly has the right to his opinion. He was telling it as he sees it. He said it is OK to invest in gold maybe up to 5%?? I think gold would be higher now if it had not spiked to almost $2,000 and then back again. Many people lost their faith in gold at that time. They will return as gold starts to climb above $2,000 again. DLS
    • GH
      Gloria H.
      8 July 2017 @ 21:35
      Thanks, Russell. You just saved me an hour.
  • TH
    Tim H.
    5 July 2017 @ 00:35
    - Log into Real Vision for first time in a while - Notice video has half as many down votes as up votes - Assume it must be because guy is not predicting end of world - Real comments Yep, the ZeroHedge of video is alive and well.
    • TH
      Tim H.
      5 July 2017 @ 00:35
      * Read comments
    • js
      j s.
      5 July 2017 @ 14:41
      That seems kind of mean.
    • CY
      C Y.
      5 July 2017 @ 18:23
      but very accurate
    • IF
      Ian F.
      6 July 2017 @ 16:59
      The down votes are because he said he "doesn't get" gold. RV is built by gold bugs, for gold bugs. I'd rather watch water boil, than watch another hour long interview about bitcoin or gold.
    • JL
      J L.
      8 July 2017 @ 21:09
      raoul is pretty far from a goldbug, more of an entrepreneurship advocate and scooping up bargain businesses in funny countries bug
  • SS
    S S.
    5 July 2017 @ 11:56
    Why are we seeing so many videos on Real Vision, which were filmed on May 24th and we get to see them 6-8 weeks later? In financial markets that is a very long time
    • PW
      Phil W.
      6 July 2017 @ 00:22
      I posed this question last year or so ago. I do believe that we/you should/could turn the videos over a little quicker! All of course IMHO
    • VV
      Vanessa V.
      6 July 2017 @ 03:56
      I would agree with you if the content included actionable trading ideas. However IMO, with some discussions such as this one, the timing of delivery isn't a major issue. I think RV is doing a great job at delivering trade ideas as quickly as possible. Educational content carries less urgency IMHO.
    • JL
      J L.
      8 July 2017 @ 21:07
      just deliver as soon as it is ready to upload and let people decide when to watch, doesn't have to be one video a day
  • MM
    Michael M.
    7 July 2017 @ 18:28
    GREAT point about demand for bonds
  • GF
    George F.
    4 July 2017 @ 15:53
    He commented on a study of real estate in the late 90s based on existing demographic trends. The underlying date changed due to mass immigration. So the analysis was probably fine. So a good example why economic projections fail. The reason for the failure is the government and the real estate industry took the projections seriously and got busy and changed immigration policy. How did that work out? About 30 years of real estate growth in certain areas. What will happen for the next 30 years? Who knows? I think in Germany they are starting to wonder, but it is not clear they can do anything at this point. The Grenfell fire disaster is in part a story about the inability of a wealthy nation to manage immigration.
    • MH
      Mark H.
      6 July 2017 @ 07:23
      I highly question immigration as a way to boost growth with such non- libertarian economies like the West has. Stuffing a bunch of people into a system that isn’t set up for a disbursed prosperity and individual agency is nuts.
    • MM
      Michael M.
      7 July 2017 @ 18:08
      The idea we can solve our problems by importing a new population is the most insane thing we believe right now (in a strong field of insane things)
  • DB
    Douglas B.
    7 July 2017 @ 14:33
    SETH L, what specifically made you change the way you think about markets and money?
  • SL
    Seth L.
    6 July 2017 @ 13:28
    Very disappointing interview in that it reveals entirely conventional thinking. I don't mean to be too harsh, but this could have been on CNBC or in a bulge bracket research note, with the exception of Grant's thoughtful questions. The saddest part, and Mr. Barnes is not alone in this, is how little a Scottish economist knows about the most successful banking system in history: the Scottish free-banking system of 1716 to 1845 (see Larry White's research here for quick hits https://www.alt-m.org/2015/04/28/what-you-should-know-about-free-banking-history/, and here for a longer version http://people.terry.uga.edu/selgin/ECON8620/documents/ExperienceofFreeBanking-Ch.9.pdf)
    • GR
      Guido R.
      7 July 2017 @ 10:21
      Thank you for the links
    • SL
      Seth L.
      7 July 2017 @ 14:10
      The works of Larry White and George Selgin have changed the way in which I view markets and money. I highly recommend checking out some of Selgin's talks on YouTube, and in particular his one from OCON.
  • TC
    Tim C.
    7 July 2017 @ 09:17
    A quick reference to a chart of global debt levels reaching all time highs may counter the comment made of "seeing no signs of excesses having built up"...
  • ML
    Malcolm L.
    7 July 2017 @ 03:03
    This was not an interview, it was a monologue, and despite not being a true economics expert I don't really think I learned much!
  • TH
    Timo H.
    6 July 2017 @ 13:26
    "I don't understand gold" = "I don't understand the history of money."
    • DS
      David S.
      6 July 2017 @ 19:07
      Mr. Barnes said gold has been a good investment at times, which is true. He said he wished he had bought gold in 2003. He believes that gold is an emotional investment and a portfolio could have 5% allocation. Just for context. DLS
  • VS
    Victor S. | Contributor
    5 July 2017 @ 13:06
    Sadly this mans thinking is worthless as he is like 100 other economists who tell us what took place ,but sees nothing of the future. Also any man who does not "understand gold" after 40 years in the business is really an academic not a professional. Lastly when interest rates are at 5000 year lows and US "STATED"debt growing AT 8.6% IN A RECOVERY and deficits growing at $1.2trillion a year using "cash accounting instead of GAAP is not someone to take any advice from! However he was a likeable man.
    • IF
      Ian F.
      6 July 2017 @ 17:05
      Read David Graber's 5000 years of debt. Gold was used as currency only very inconsistently over the last couple thousand years (or even less). There is no precedent for it needing to be currency in the future. Do your HW before you throw stones.
  • CD
    Chris D.
    6 July 2017 @ 13:30
    Ah. My head is finally at ease. Nothing to worry about here folks. Everything will work out just fine. Debt doesn't matter. And the "debt super cycle" did apparently end in 2008/2009 (despite the fact that credit is still expanding exponentially, way above the income growth and productivity gains). Nice. Where can I buy some off that hOPIUM?
  • AC
    Andrew C.
    6 July 2017 @ 13:16
  • GR
    Guido R.
    6 July 2017 @ 10:57
    As to governments unable to become bankrupt.... the diminishing marginal utility of debt along with an increase in the exchange value of the US$ buttressed by pension under-funding in the EU and the USA, may spring a surprise on most everyone.
  • LS
    Leigh S.
    6 July 2017 @ 01:13
    Same he did not allow Grant to have a discussion, was to keen on making a speach. Clearly Grant had a few things to take issue with, but no go.
  • PD
    Peter D.
    5 July 2017 @ 23:24
    Fantastic piece Grant. Barnes, who is an accomplished professional, could give those comments anywhere and come off as a droll, wise, world-weary man of wisdom. However in this venue those comments came off as hollow. It really looks like they are losing control of the narrative.
  • DT
    Douglas T.
    5 July 2017 @ 18:09
    One thing he said was "Governments can print money", which is only true of paper money. A government cannot 'print' bank money. They 'print' treasury bonds, and the banks purchase them in exchange for a demand deposit that the government probably spends the same day. Govenments must have somebody buy their debt in order to create new circulating bank money. Also, remeber the Fed returns interst payments on treasuries to the government. In QE-1 when the Fed bought all those 6% 30 year bonds, they essentially converted them to zero coupons. So the debt service paid by the government has been deeply reduced by all the episodes of QE.
    • TS
      Thomas S.
      5 July 2017 @ 22:53
      An important point that gets overlooked. All QE is not created equal.
  • MH
    Mark H.
    5 July 2017 @ 22:07
    So the economy will grow based on procreating and “ importing” productive, people, having libertarian laws that promote productivity (inventions, entrepreneurs, individual initiative) and there is NOTHING a central bank can do about that beyond backing up the financial system in a ***punitive*** way (“penalty rates” on real bills). . Congress ***honestly*** GUESSING about infrastructure “investment.” What’s left? Look around. The whole Western economy is a joke. Mises.org is right about everything.
    • MH
      Mark H.
      5 July 2017 @ 22:14
      I got my sentences mixed up, but you get the idea. LOL Brutal discussion.
    • MH
      Mark H.
      5 July 2017 @ 22:18
      Yellen needs to fix this https://www.the-american-interest.com/2017/06/29/minimum-wage-campaign-highlights-blue-model-contradictions/ * https://www.wsj.com/articles/ill-funded-police-pensions-put-cities-in-a-bind-1499180342 Too late now.
  • AB
    Arijit B.
    5 July 2017 @ 19:40
    He was right to criticize Michael Woodford and the 'forward guidance' that influenced, and all the rage with Mark Carney a few years back.
  • LJ
    Lucille J.
    4 July 2017 @ 12:08
    Is he a CNBC contributor
    • TS
      Thomas S.
      5 July 2017 @ 15:54
      Should be.
  • TH
    Timo H.
    5 July 2017 @ 04:41
    I'm shorting this guy. That's why I need to understand his thinking extremely well.
  • JV
    Jason V.
    5 July 2017 @ 01:58
    Very interesting and rich in information content. As to how you personally process that information is unique to you, the listener. Always useful to hear an educated opinion built over decades of experience. Another excellently conducted interview by Grant.
  • PR
    Phillip R.
    5 July 2017 @ 00:17
    Great balance against a lot of the 'edge of a precipice' kind of stuff, which while more exciting, you can expend a lot of premium chasing.
  • JS
    John S.
    4 July 2017 @ 23:15
    Would have never guessed he's an economist!
  • BM
    Bryan M.
    4 July 2017 @ 22:19
    I too am over 70, whatever relevance that has, & I agree with Gerald. But then...maybe when all the current Fed members retire and/or get fired they will create the magic/nirvana the current Fed could not.
    • DS
      David S.
      4 July 2017 @ 22:50
      Over 70 just gives people a point of reference. DLS
  • GG
    Gerald G.
    4 July 2017 @ 20:51
    Wow! With all the intelligent and sober comments they actually managed to completely dance around the most fundamental question of where continued Fed induced market distortions were headed. On one hand Mr. Barnes asserts that there is an inevitable and natural market downturn/correction coming and then conveniently ignores the evidence that the Fed won't allow that to happen (and certainly what the markets believe). More importantly, if he's not in the Armagedon camp, where exactly does he think the continued "engineering" of market outcomes is headed?
    • BM
      Bryan M.
      4 July 2017 @ 22:10
      Well said.
  • DS
    David S.
    4 July 2017 @ 21:38
    I wonder if the Japanese demographics are really as bad as most people think. Once robots are fully employed, Japan may still have unemployment. Time will tell. DLS
  • DS
    David S.
    4 July 2017 @ 21:36
    Unlike most of you, I am over 70 and really enjoyed this interview. In five years, I will bet that overall he is correct. The Fed is trying but does not know. The Bear Market will happen. Inflation will not be excessive. Nominal GDP will be lucky to get to 4%. Trump will work on making his base happy. There is a lot of good information here, just not given with FB drama. DLS
  • SS
    Sam S.
    4 July 2017 @ 15:13
    Complacent narrative, sit back, relax, it's all good, don't worry, it could happen and so forth. But then spoke of how wacko the Fed has become, so getting both sides of a stretched coin. I'd rather keep my eyes on the ball, be open and prepared to act one way or the other. Likable gentleman for sure. Grant always caries a positive tone which I find special and refreshing.
    • DS
      David S.
      4 July 2017 @ 21:30
      What ball are you going to be watching? Mr. Barnes is expecting a standard Bear Market. Is that complacent? It is just not hyped with FB drama. DLS
  • CL
    Chris L.
    4 July 2017 @ 18:44
    Poor Grant can't get a word in.
    • DS
      David S.
      4 July 2017 @ 21:26
      Grant can hold his own. Mr. Barnes is being interviewed. DLS
  • BG
    Bruno G.
    4 July 2017 @ 19:11
    I enjoyed listening to grandpa, he doesn't seem to worried about much of anything. I guess their is some value in that? I just get the feeling when he gets his crushing chest pain, he will just think it's gas and take a nap
    • DS
      David S.
      4 July 2017 @ 21:26
      Since I am older than Grandpa, I feel he has perspective and not overreacting with every headline. DLS
  • CH
    Colin H.
    4 July 2017 @ 20:41
    He's mastered the art of talking louder when someone else is trying to speak
  • AH
    Andreas H.
    4 July 2017 @ 20:28
    very layed back gent.,very clear and KIIS Thinking, refreshing...
    • AH
      Andreas H.
      4 July 2017 @ 20:33
      LOL "we have not built up imballances"...
    • AH
      Andreas H.
      4 July 2017 @ 20:40
      LOL2 "I see no massive policy failure by the fed". wow, I am an optimist, but I will have an eye on "the ball"....
  • SC
    Shane C.
    4 July 2017 @ 20:34
    Everyone should go look at the feds balance sheet before during January. Then find the February balance sheet. You should check the reserves being held for the treasury. This is what caused the liquidity tsunami that hit the Financial market and currently seems to be hitting the real economy (weird ISM numbers) Trade takes longer to develop velocity. However, It can be a boost to P/E ratings will engage in financial securitization instead of CapEx first. I've got more theories as to why it happened.
  • JM
    James M.
    4 July 2017 @ 14:02
    A likeable gentleman, and the final chapter was useful for me. I think it could have been edited down a fair bit.
    • JL
      J L.
      4 July 2017 @ 16:08
      I see where you're coming from but wouldn't favour any sort of editing in these interviews and rather take the guests as they are
    • GP
      Glenn P.
      4 July 2017 @ 17:03
      When a speaker drags a bit. click on the icon in the lower left to speed things along a bit.
  • KT
    K T.
    4 July 2017 @ 16:16
    In this time of uncertainty its important to keep a wider perspective to prevent or confirm any bias. Nice interview, felt like I was listening to my father.
  • HJ
    Harry J.
    4 July 2017 @ 16:08
    Excuse me, what did he say?
  • HC
    HJ C.
    4 July 2017 @ 15:35
    likable guy, clearly the establishment doesn't see any surprises on the horizon.
  • MD
    M D.
    4 July 2017 @ 12:59
    G could have asked more pointed questions., perhaps. Decent video.
    • JM
      James M.
      4 July 2017 @ 13:56
      Seems he is not an easily interrupted!
  • LJ
    Lucille J.
    4 July 2017 @ 12:11
    Endless rambling