I love the reference to the canal bonds of the 19th century. There is so much to learn from that experience, especially given the certainty (at the time) that they were a "sure thing" investment on the right side of technological change. Alas, no one anticipated the rapid rise of the railroads.

I love Hugh, so glad you see his brilliance and have him on the show. I'd love to stop by his island when I'm sailing around the world next year.

Boy do I need a dose of Richard Werner.

"Bobby Bobby Bobby, Digi Digi Digi, stuck to your a$$ like a Victoria Secret wedgie" ... classic

Raoul at this point in the video 12:25 what if it's the millennials that have the idle cash and not the "Baby-boomers"? Have you guys factored that in? Why is the model always leaning towards Millenials as borrowers? What if millennials are scared and are sitting on cash?

I always enjoy Hug and his insights. I also have to say that I enjoy Raoul's facial expressions as he tries to figure out where the conversation is going.

I think hyper-bitcoinisation actually starts to look possible in this situation. It's simple, everyone and their grandma stop's saving in cash, in a more extreme way then we see now. Cash will be so bad, you won't even want it in you're chequing account. You will convert every piece of fiat you convert instantly to bitcoin and you will spend it instantly on goods and services with essentially 0 fees on lightning. You get the utility of cash, without the debasement and the added benefit of programmable money.

Epic

CBD or not, Hugh, you are on a the higher cloud of comprehension and you master it. Thanks to you and Raoul for making this available to fellow Canadians.

Hugh - Nice Wu-Tang Clan reference...

Hugh's interviews are truly unique.. they are always SO thought provoking... It's always a privilege to hear what he has on his mind, thanks for bringing him on!

It is constructive to compare Mr. Napier's clarity with Mr. Hendry's opacity. I know who I would prefer to try to help the Fed. DLS

I hope our central bankers really are questioning their models. My suggested solution is a combination of higher interest rates to encourage productive investment, while allowing the fed to make direct monetary transfers to all citizens on an equal basis to combat deflation. If much of this money is used to pay down debt, that is a good thing as it gets us out of this debt trap. This tool would actually be capable of causing CPI inflation, which the Fed is required to respond to, so it would not be overused like the current non-fuctioning policy response.

Raul and Hugh, as a commercial banker who worked on the PPP program you have no idea what you are talking about here. The main problems with PPP loans were related to clarity on the forgiveness portion: For example, on pg. 1 of the application, there was a certification from the owner/manager that the economic uncertainty from the current environment made this loan necessary. Guidance from the SBA and Treasury for this opaque certification threw off some potential borrowers because they didn't know what would be required for forgiveness. For instance, at one point they were saying you may potentially need to have to have a negative revenue impact of X%. A lot of companies weren't affected that badly. Then they weighed the idea of saying that you could only make this certification if you didn't have access to other forms of capital. Most small businesses had access to other sources of capital via lines of credit, etc. Then they had an affiliates test on the initial version of the application that excluded many private equity companies from qualifying because they would have had to many employees and not been considered small businesses.

I always totally enjoy every episode of "Fast Times at Real Vision High" with Spicoli

Bring back Werner. Hugh was too excited in the last interview and we did not get to hear Werner out. Interesting to see Hugh fully converted after his epic curmudgeonly interviews post-2008. This MMT is coming and of course it will just bring a different kind of pain and not solve anything. Without sound money and responsible local banking everything will continue to get worse.

Whenever I see Hugh I want a return to Werner. He is the most cool headed, intelligent and convincing professor regarding the current world conspiracy politically and financially.

Hugh is correct that broad money (M2) is usually created by the commercial banks when they make loans and extend credit. As pointed out by Raoul in the last segment of the interview, MMT (whether or not financed by central bank debt monetization) goes around the commercial banks and injects broad money directly into the main street economy. I highly recommend everyone (who is interested in money creation) read a fantastic article by Lyn Alden titled " Banks, QE and Money-Printing" dated November 1, 2020. It is on her home page and it is free. Just Google Lyn Alden Investments to get her home page. See walks through several examples of money creation. It is a must read in my view. She builds upon the work of Richard Werner in my view.

He is indeed a sociopath...

Feels to me like negative rates will force more and more wealth into real assets and the average Joe who can no longer afford said assets will be left having to rent the means of production. Sounds like a feudal system.

Wouldn't materially negative interest rates just push more money into tech stocks? There is no reason to take business risk when the Fed has engineered a financial market that only has upside. Haven't we essentially reached a point where financial markets are cannibalizing the real economy?

Both Hugh and Raoul, IMHO, remain stuck in monetary policy discussion when the real price is unprecedented fiscal policy (spending, equity, guarantees et al) finally creatING the credit central banks where unable to create for two decades (reserve requirements, Basel III etc). A good example is the UK Coronavirus Bounce-back Loan schemes. It guarantees credit to banks and forces them to lend. Was taken up in 3 months. GBP 40bn. Small example of credit creation, using banks as utilities and taking credit tests off the table. Again, this already happened. More programs are ongoing and will come. Not big enough? Check out IMF numbers on Covid response page to get a craps for OECD size: think $17 trillion or 22% of OECD GDP! Some of it will fix past problems, keep overcapacity in place and thus remains deflationary. But other will not. The size only gets bigger and is likely changing everything in combination with vaccine rollout and normalization. By then, credit has been newly created and will lead to transactions, thus increase velocity. With 17% more M3 in system, not considering inflation as an option is negligent at the very least. anchoring effect?

Looking at the velocity of money is really misleading. Velocity of money is not measured but calculated by dividing the GDP by the money supply. For the same GDP, it should surprise no one that if you double the money supply, you will halve the velocity.

Just like MMT, another idea of how to hand out the money to the right people to make things sing. The problem is always who gets to decide who gets it. It always ends up with the politicians or other central planners none of which are knowledgeable enough to know where the money should go. In addition giving politicians and central planners this kind of power inevitably leads to crony capitalism, corruption, waste and unproductive uses.

Finance meets #microdosing story telling. Going to fix a BIG T&T

Here's an idea for the Central planners, leave the free market to work.

Cant help but to think that a massive deflationary event is close everybody is always on the wrong side. They will print 30 trillion but not without blood flowing deeply in the streets.

Reading the comments I see that most people loved it. I struggled. Its really hard to follow. Would be great if Steven V M does an explainer.

That was epic, my mind is exploding. Main take aways...1) sell a kidney and buy dec 2022 100 strike call options. 2) Grow my hair and start rubbing in CBD oil, as there is a chance it could increase my intelligence to a minuscule fraction of Hugh's 3) Casually approach my dad to "Persuade" him to switch his life savings into Bitcoin. Thanks for the great content, always brings a smile to my face watching Hugh "Man-Splain" topics that would normally go totally over my head! Well done

I'd say Boomers have Gen X children more than Millennial.

Absolutely loved that! The finance rock n' roll pide piper! Playing the tune of the realm with such eccentricity and flamboyance you can only either be dazzled or appalled. The former here!

The problem statement is that despite negative/low yields banks are not lending enough and the proposed solution is shock and awe more negative rates? I take issue both with the problem statement and the proposed solution. I think Raoul is closer to an answer than Hugh, digital is the way to go. The issue is not rates themselves, they are were they are and it’s not really up to the Fed. The issue is the liquidity is not targeted enough. Either you bet on technology and go digital. The other option not discussed is political, which we probably all don’t want, but China tells it’s banks when, where and how much to lend and that’s the end of it. Banks provide a public service, and perhaps elements of this model are not dumb, since banks are just facilitators of money at the end of the day not get rich quick without skin in the game machines.

The Cayman Sultan and the Mad Hatter! Loved that!

Hugh, it is called chaotic thinking. The real buzz is when the pieces fall into place.

I'm pretty sure Hugh is the love child of Robin Williams and Kate McKinnon who decided to go into finance. Endlessly entertaining while intellectually captivating.

Hugh is a hoot, as always. The CBD seeping into his scalp as the interview wore on was perhaps my fav distraction.

Loved it ! I like the top comment below and wanted to regurgitate it. What would happen if the free market set interest rates?

Seriously though, why not just give people $2000 each month?

Take away Hugh’s inflating houses and see if he still likes his negative 3% world.

For Hugh's interviews, I would suggest subtitles.

This is why I own Gold and sleep at night.

Who said finance and macro was boring! Hugh is like an artist of finance...thanks for this interview...he was at his best...thanks Raoul for making this happens....btw...it was much easier to follow his thoughts and ideas versus the tweet thread! :))

I think Krugman would agree.

It's way beyond my understanding of the world financial system to think out what the consequences of such a policy might be, but my intuition tells me that making a change like this would likely break a lot of things, and possibly in devastating ways. I already feel like our situation is rhyming with the 1930s, and if this time around ends with another world war, money and banking may be the least of our concerns. What Hugh is proposing is a different take on "Move fast and break things," and as fragile as the monetary and political systems are, I would caution against such a radical step. Just remember: The unforeseen consequences are nearly always more powerful than those we foresee.

So...moving forward. If the Fed will look to charge negative interest rates to savings, would this hurt bitcoin and ethereum since they are listed as securities. This may be a dumb questions, but as securities would they be put in that "savings" bucket.

This guy is fun and different really enjoyed this interview. We need to see more interviews with Raoul and his guest.

Very entertaining, please have Hugh on often, he makes me laugh out loud. Good discussion too

No way the idiots who got the world into this mess are going to turn it around. They can only make it worse.

Very entertaining, please have Hugh on often, he makes me laugh out loud. Good discussion too

The Fed didn't extend the PPP loans. The SBA did. It's not a perpetual debt. They will be forgiven. The cost to those borrowers will be not writing off the expenses attached to the loan and the social credit they will lose when the private information is published.

Please do part 2, 3... inf (as many as it takes) of this line of reasoning until you, me and Hugh all have a good common understanding of his idea. Very good discussion.

Well, very interesting discussion gents! But; The problem with banks not lending is that there is no good collateral in the banks view, so they do not lend, and the public have no appetite for more debt, because they do not have enough income to serve the debt even at todays low rates. Since the 1980's the central banks had the job of stimulating the economy out of any doldrums by lowering the interest rates going all the way down the long slope created by Volckers 'mad actions'. We got the 'independent central bank doctrine' because it delivered the goods. Now they ran out of ammunition, they are now just trying to 'push a string'; creating idle bank reserves instead of stimulating real High Street borrowing. And we all know there is now little they can achieve in the real economy without fiscal assistance. IMHO there will be no reflation unless money is placed in the hands of the people who would actually spend the money, i.e. the lower income percentiles. Perhaps a negative tax rate for the lower income would work? That would stimulate both demand and labour participation. Combine it with VAT to raise tax income and increase prices, and then we are on our way to reflation. Today the income and wealth inequality kills any attempt to reflate. I do not buy into massive negative interest rate. It would only increase the wealth and inequality gap in the US,put more resources into unproductive finance industry and potentially destabilise society even more than we see today. I do not mind that some make more money than others, but today it is so uneven that it makes the economy dysfunctional. That must be corrected before the US can succeed to grow out of this mess. as for the mercantilist states, they just respond to the system that was set up by the US at Bretton Woods when the US dollar was set as the new world currency. That mandated that the US 'produce' USD(at zero cost) to the rest of the world and the rest of the world produce real goods(At a real cost) for the US. Those who understood this 'division of labour' did well(Germany,Japan,China and others) those who did not did badly.(Argentina and others). This implies a trade and budget deficit for the US, and ditto surplus for the 'mercantilists'. The system served the US well until recently, the question is if the US no longer covets this system, what will replace it? Does the US really want a change?

Hugh always stretches my mind---great stuff.

Interesting conversation. Always entertaining to listen to Hugh and I learn something!

For those wondering about the USD power and its ability of staying the world reserve currency, just know that USD has been, is and will remain the world reserve currency!

ahhh... Now hugh is sitting infront of the outhouse! allways interesting! hahahaha ;-)

"I had a inventory of timelessness in my mind."

The "real answer" is this shambling hybrid chimera of a banking system needs to be entirely replaced. Negative rates, Trillions in debt, Holding reserves back from the people who really need them, all the rest. Bankers seem to be so clueless that they think using the same tools will save them this time. It won't. No more rigged markets (LIBOR anyone, and probably Gold and the Yield Curve), no more accounting tricks, no more rolling losses into perpetuity. Crash and burn, and I can't wait to see it happen. Its in process now.

Truly enjoyed this. I have great respect for Hugh brain. His thoughts are 10 miles ahead exploring what if. Btw Volcker was a crazy m... indeed and very effective too (historically appointed by Carter and Reagan was trying to get rid of him - you would think the reverse no?)...

Such an interesting discussion. I think this discussion needs to include what Kiril Sokoloff refers to as malinvestment. (I think his gentle term for 'mistakes' which includes fraud.) The recent Kodak fiasco would be a small example. The 'system' often has a hard time differentiating between Steve Jobs and Kenneth Lay in the present moment. Increasing the velocity of money may be part of the solution but I don't think it is sufficient.

If a proposition to sail to an undiscovered land was put together today Hugh would be the perfect proponent for it. "Just imagine the opportunity to find new seashells." Waves his hands around "small shells and enormous shells. What If we find bananas? what can we do with a billion more bananas? "

Raoul and Hugh - bravo!! This is one of those videos where i don't need an explainer , but just need to watch / hear this over and over again to digest this and think about all the implications ...

“The Nameless Depression”...

I love that Hendry has referenced Steinbeck and Kerouac in a video on economics and we are only 15 min in.

Mr Hugh Hendry for next Bond villain, please. No script necessary: it will flow naturally.

capitalflows

Hugh really does have a unique way of looking at the world. But I wonder if I should be scared that he sounds more like Jeff Snider now than I have ever heard him sound before. TSLA is going into the SP500. My spider senses are tingling lol.

The Mad Hatter of RealVision strikes again.

Hugh as always exceptionally genius and charismatic. Those moments of enlightenments that comes to him is funny. Greetings for both of you from the aforementioned Saudi 🤣

Raoul. As always a great chat with Hugh. When might we see the next episode dealing with your closing remarks: “Implications of Fractional reserve banking vs CBDCs...”

Enjoyed the conversation, and it certainly seems like a big binge/boom is coming soon, although I think it's more likely to take the form of what Russell Napier said a few days ago - huge fiscal stimulus rather than the huge monetary stimulus Hugh fancies. Will be a very interesting year though! As a funny aside, Hugh reminds me of the second Scotsman from the Harry & Paul sketch. Skip to 1:47 in this video: https://www.youtube.com/watch?v=rv2BcBZan2A

Excellent interview... However... if I have to choose between the financial history brought forward by Russell Napier and the Caribbean dreams brought by Hugh.... I stay with Russell... :)

Hi RV team, Can you please ask Steven Van Metre to do an explainer attempting to reconcile the disinflation narrative that Raoul and Hugh agree on in the first part of the video (which is also Steve's narrative) ie "banks don't want to lend, therefore there is no inflation" with Russell Napiers u-turn on inflation ie "banks are already lending more because governments are offering banks principle guarantees".

Great talk. But is revolution not the thing that collapses this system? Seems like revolution is coming closer and closer?

I constantly seek out Hugh vids, always delivers a head twist. Be great to get his take on Australian situation.

Understand the mixed ratings, Hugh shows his usual flashes of brilliance and annoying randomness... almost got interesting when Raoul asked « and what about the pension system? » and then Hugh just went off a tangent again... Ask Mike Green instead: won’t interest rates go negative anyway if Vanguard has to keep rebalancing its target date funds and buy more bonds every quarter stocks outperform bonds?

Hugh always a good time

Yes Hugh! Mega negative rates + MMT mean one thing for Bitcoin. Number. Go. Up.

Regarding the Eurodollar trade - any concerns about the Eurodollar rates being Libor-influenced, rather than directly following changes in official rates? I see Hedgeye have many countries forecast to be Quad 2 or 1 next year, (until approx Q4) including the US. What would compel the Fed to go to negative rates if Hedgeye are right in 2021?

Wow... That was great interview. Made me think in a completely different way about negative interest rates and a reason for taking rates that direction. Educational and super entertaining. Thank you!

love these guys! Hugh has def done some shoomies over the years with these amazing ideas! hah

on hold.. forgot my beer. Can't watch this without a drink.