The Futility of Fed Models

Published on
June 26th, 2015
51 minutes

The Futility of Fed Models

The Interview ·
Featuring William White

Published on: June 26th, 2015 • Duration: 51 minutes

William White, Chairman of the Economic & Development Review Committee at OECD, sits down for an enlightening discussion on the model-based forecasts of central banks, the potential for a global 'debt holiday', and why '4' may not always come after 1, 2, 3.


  • GG
    Gerald G.
    25 March 2017 @ 00:00
    JS. You, like most people don't have a clue what "moral hazard" means. I didn't miss the disinction between the initial "necessary" intervention to avert an economic crisis and the subsequent excesses that have ensued. The slippery slope started with the "necessary" initial intervention where the normal laws of the marketplace were suspended, banks were bailed out, automakers were bailed out, money was printed and more debt was created to solve a debt problem. Once all the rules have been changed and suspended to avert paying for mistakes then there is no way back. THIS is "moral hazard" and is not some academic abstraction that can be ignored when it is convenient. Once there has been intervention to mitigate and avert the consequences of reckless disregard for risk, capitalism ceases to function properly. From that point forward, because it has been done once, risk is increasingly and artificially suppressed. So... Back to the initial point. CBs took the initial "necessary" steps to avert a collapse. THIS IS THE FALICY. It wasn't necessary. People just thought they were smart enough to avoid paying for their mistakes. The system should have been allowed to fail and then reset because there is no way to avoid risk and the consequences of mistakes. All that has happened is that payment has been moved into the future and it will be MUCH MUCH worse when the bill becomes due. To claim that central bankers had no choice is like saying that the mafia boss about to go jail for life has no choice but to murder the witnesses. WRONG!!! He has a choice... and the choice is to pay for his sins a move on. Murdering the witnesses and claiming he has no choice just diggs him deeper in the pit of moral decay that got him to there in the first place.
    • JM
      John M.
      19 September 2018 @ 04:05
      Gerald G I'm watching and reading the comments three years after you did. The downturn is coming. It will be more vicious and yes we've a bunch of problems that the moral hazard can't bail out. Its called government debt. JM
  • DR
    Dan R.
    2 April 2017 @ 18:20
    Exceptional interview. I believe 2 always follows one if you are counting forward. The problem is individuals are not allowed to move forward and make rational economic decisions because we have allowed our government to restrict enterprise through regulations, mandates, taxes and favorable treatment to some over others. It is always the government, especially the US Congress that creates all economic problems not the individuals. They play slight of hand trying to manipulate the invisible hand (which actually works) I think the Fed is trying to do what it believes is correct waiting on the congress to do its job. By doing that the Fed enables and gives cover to our elected officials to postpone their duty. Perhaps no one should do anything and at least we would know the game.
  • TS
    Todd S.
    1 April 2017 @ 02:58
  • CR
    Charlie R.
    30 March 2017 @ 15:11
    The truth well told! How straightforward and refreshing to simply have the inescapable world as it is explained! Bravo and thank you RV!
  • RA
    Ricardo A.
    30 March 2017 @ 13:27
    BRILLIANT. One of the few honest central bankers out there
  • SR
    Stewart R.
    28 March 2017 @ 13:25
    Guys, a superb interview with one of the greats of economic/ventral banking circles. You should try and get current leaders, both political and central banking, to watch this and think about what they should be doing right now to improve the economic performance of all countries before the next recession hits (assuming it's not too late already). I personally worry a lot about some of the issues alluded to right at the end of the interview and action needs to be taken now. Good luck if you pursue our leaders with this, and once again a great interview.
  • DY
    Damian Y.
    28 March 2017 @ 12:13
    Another brilliant interview from RVT. Thanks.
  • JL
    Jose L.
    27 March 2017 @ 18:41
    I really liked this episode, his thoughts are quite interesting.
  • JS
    John S.
    27 March 2017 @ 09:48
    What a great interview very worthwhile
  • SD
    Stephen D. | Contributor
    27 March 2017 @ 04:28
    Whoa! did Raoul actually say, 15 minutes from the end "It's a governments and central banks job to maintain a happy society"? Can they instead just get out the way so I can pursue my own happiness? Maintaining certain public goods like the air, water and money quality I will allow; but please don't make them responsible for societys wellbeing! Marxism apart it was an interview of great wisdom and clarity
  • CD
    Charles D.
    26 March 2017 @ 16:32
    Yes...John S.
  • CD
    Charles D.
    26 March 2017 @ 16:31
    Gerald on.
  • TW
    Tom W.
    26 March 2017 @ 12:31
    Fascinating discussion, loved it. Regarding commodities, it seems from other recent RVTV episodes that China's OBOR will lift industrial commodities as that infrastructure build gains momentum.
  • AA
    ALI A.
    25 March 2017 @ 15:12
    The longer term thinking discussion and that of happiness makes me think about how Dubai seems to be focused these days
  • KS
    Kathleen S.
    25 March 2017 @ 12:51
    Bravo Gerald G !!!
  • TS
    Tim S.
    25 March 2017 @ 05:12
    Fantastic engaging dialogue, ever reminding me that when I grab for simple explanations I miss the potential of the deeper currents. Thanks, RV, really nice work.
  • CO
    Casual O.
    24 March 2017 @ 22:27
    We should chat on the reaction functions to negative rates as i is poorly understood.
  • AV
    Alex V.
    24 March 2017 @ 22:14
    It's rare to hear a statist central banker discussing the need to confront a problem sooner than later.
  • VS
    Victor S. | Contributor
    24 March 2017 @ 20:10
    The problems are the world's move towards socialism and govt control of what is produced ie fascism . Central banks cannot create demand under these political systems. People hoard ! It will fail period. Also the best measure to explain this result is not GDP it is "median household income " adjusted for taxes. It is clear why demand has slowed.
  • JS
    John S.
    24 March 2017 @ 18:04
    Bill White has what most PhDs seem to lack...wisdom and a sense of humility. Perhaps they are (wisdom and humility) one and the same. I think GG missed the point that stopping the crisis was "necessary" but that policy makers have gone far beyond that with policies that have done much more harm than good. That's the difference between Bill and policy makers...the later have neither wisdom nor any sense of humility.
  • PV
    Peter V.
    24 March 2017 @ 16:58
    This is a great interview. Sadly, it hints at the social and economic challenges we face. Let's hope that Dr. White has a voice at the table when needed. Thank you RV.
  • GG
    Gerald G.
    24 March 2017 @ 16:51
    I've only been able to watch/stomach half of this interview but, so far, I've got two words for this guy (and every other idiot like him who claims that the measures taken by central banks were initially "necessary" and over the last 9 years "may" have averted something worse)... MORAL HAZARD!!!!!! For some reason people dismiss this as some kind of vague abstraction that can be suspended and ignored when convenient. "Moral Hazard" is NOT an abstraction. As soon as one tries to change the rules to avoid paying the price for past mistakes one becomes trapped in a world where the rules don't mean anything and can be made up as you go. Why in God's name, everyone always defers to "experts" (like this one) and no one ever calls one of these idiots on this FUNDAMENTAL mistake I will never understand.
  • PJ
    Peter J.
    24 March 2017 @ 16:01
    Missed this first time round a great watch and still totally relevant if not more so than ever
  • VK
    Viresh K.
    15 February 2017 @ 20:12
    Was that a blush from Mr Pal at the end there ;-)
  • EK
    Emil K.
    25 October 2016 @ 20:45
    I just saw Mr. White speak at the London Bullion Market Association conference in Singapore (Oct. '16) and his views have not changed. He continues to warn of the potentially sticky political end this is leading us to. Warns that complex, adaptive systems are not modeled very well by equilibrium models. Believed that the 1930s have something important to teach us. I mentioned the RV interview and he said he really enjoyed it and that Raoul was, "very kind". So there you go. Nice work RV. (White won "best speaker" for essentially the reasons people enjoyed this video. Good stuff.)
  • DS
    David S.
    27 January 2016 @ 20:17
    Great. I will watch several more times. Politicians use any economic theory to do what they want to do llike the Euro. The US congress obstruct to improve their chances of getting the Presidency.
  • NA
    Nicholas A.
    26 January 2016 @ 00:03
    I don't agree with the though "you can't get a forecast right". Tetlock's book "Superforecasting" (2015) actually tackles this question and proves that there are exceptional forecasters. Great Read!
  • GS
    Gordon S.
    25 January 2016 @ 20:26
    Wow, incredible insight! Must watch for every central banker I guess! I always wandered about the infrastructure problem too. You could for example move to clean energy in no time using CBs.
  • DP
    David P.
    25 January 2016 @ 14:09
    "The Man Nobody Wanterd to Hear" Global Banking Economist Warned of Coming Crisis (der Spiegel, July 2009) Mr White is far too modest.
  • RA
    Ricardo A.
    25 January 2016 @ 10:43
    Powerful interview: 2 questions for next time: 1. His views on gold 2. How does it all end?
  • WE
    William E.
    24 January 2016 @ 23:39
    Get him again! I agree that we need an update!
  • PW
    Phil W.
    24 January 2016 @ 21:26
    Just reviewed. A great guy to listen too! Please invite him again for a update!!!!
  • DH
    Dale H.
    13 September 2015 @ 00:35
    Wonderful interview. Both making it so. My second watch; even more powerful, and saddening in many ways. A small number of humans holding vast sway over results & no better way found. "Well being" VG
  • SB
    Stewart B.
    5 August 2015 @ 19:40
    Great questions. This man is head and shoulders above other central bankers.
  • PM
    Pippa M. | Contributor
    9 July 2015 @ 23:55
    Bill White is a legend and this interview is a coup!! He is the most feared and respected person in the central banking world because he says what he thinks and is always right!
  • BA
    Bruno A.
    7 July 2015 @ 21:43
    Very good interview. Him being an insider a question on BC's interventions in the gold market would have been interesting.
  • JO
    Jens O.
    2 July 2015 @ 19:56
    Marvelous ! One can read hundreds of pages written by savvy newsletter writers, money managers or clueless journalists throughout the last seven years - but this 50 minutes sum it al- up. Wonderful.
  • LV
    Luís V.
    2 July 2015 @ 11:02
    Upsss! BIS published a speech from Ewald Nowotny - "The Austrian school of economics and Austrian economic policy" (see <a href="">here</a) last May, 31st.
  • MB
    Mike B.
    1 July 2015 @ 19:01
    The sad part of this interview is that he admits the BIS passes on great advice to its CB and they do not listen to it. So what purpose does the BIS serve. Would like to have known his end game view?
  • SP
    Steve P.
    30 June 2015 @ 23:20
    A top economist had no answers to many questions. We can assume global CB's are in a similiar predicament. If so a very disturbing outlook.
  • CD
    Colin D.
    30 June 2015 @ 16:23
    Great interview with someone with vast experience and knowledge to share being questioned in a very intelligent manner. He also confirms my long held fear that there is a second leg of the GFC to come
  • JA
    Jack A.
    30 June 2015 @ 09:12
    Brilliant interview!
  • AE
    Alex E.
    30 June 2015 @ 04:31
    They also don't like having their idols shot down in flames.....
  • AE
    Alex E.
    30 June 2015 @ 04:30
    Roger, CBs, like Pols, have a limited time frame so they really don't care about outcomes too much, and CBs also don't like to be told that what they're doing is wrong, thus they don't listen!
  • ml
    michael l.
    30 June 2015 @ 02:19
    What a great, yet humble mind. Too bad our central bankers haven't been inclined to listen to him and his ilk.
  • ZC
    Zachary C.
    29 June 2015 @ 18:39
    Liked the comment about SNB cutting rates to negative territory and Credit Suisse raising mortgage rates by 50 bps. Zero bound rates like event horizon of black hole. All econ rules no longer apply.
  • JH
    Joseph H.
    29 June 2015 @ 16:17
    The Road to Serfdom is paved with promises to pay by power hungry pols and a stupefied body politic. Great interview, great questions. 'We'll all be Hayekians in 40 years', can we make it 5?
  • LV
    Luís V.
    29 June 2015 @ 16:09
    Very nice to ear that WWhite thinks a cashless society is a bad idea, though! Let´s hope it doesn´t take 40 more years for us to wake up from this socialist nightmare. Kudos Raoul & RV.
  • LV
    Luís V.
    29 June 2015 @ 16:05
    It´s the kind of answers that take us to the middle of the road, but leaves there. Leading institutions to invest in infrastructure is just another distortion on the market and it´s energy. Right?
  • LV
    Luís V.
    29 June 2015 @ 16:01
    The ideas expressed in the interview are a matter of public knowledge already. If a person follows WWhite´s interventions in the last 2/3 years. But I get mixed fellings on the answers given. (1/2).
  • KD
    Kevin D.
    29 June 2015 @ 12:17
    Brilliant, and depressing at the same time. Confirms fears that 'second leg of gfc' likely necessary to finally force necessary changes, and that central banks are too rigid and blindered by theory
  • LC
    Liliana C.
    29 June 2015 @ 06:21
    Raoul is also a masrer interviwer! It's obvious he knows his sh* and the logical answer to his questions . Yet he too can be surprised att times. Thank for letting us go on this enlightening ride!
  • WP
    William P.
    29 June 2015 @ 01:52
    Interviewer and interviewee, great exchange. RV is such a treasure.
  • JW
    Jürgen W.
    29 June 2015 @ 01:21
    Simply put, Governments and CB are strongly influenced (lobbied) by banks and the financial industry, this is why CB invest n financial assets and not in infrastructure where it would serve society..
  • TR
    Tim R.
    29 June 2015 @ 01:17
    You would be hard pressed to find a more impressive combination of experience, intelligence and thoughtfulness than Bill White. Nor someone more open about what he/we don't know. Great job RV.
  • NP
    Nirav P.
    28 June 2015 @ 18:59
    Absolutely Fantastic. Thanks RV. Learning continues.
  • tW
    tgwtom W.
    28 June 2015 @ 15:42
    Not to be overlooked implied reference to the right to the pursuit of happiness........ And BL comment below is right on:)
  • JP
    Jeronimo P.
    28 June 2015 @ 15:30
    Another fantastic and thought-provoking discussion - really appreciate how Raoul draws out interesting ideas so effectively in these interviews.
  • CZ
    Catherine Z.
    28 June 2015 @ 13:34
    Amazing insights! Another recent interview with Bill White is at:
  • GR
    Guido R.
    28 June 2015 @ 10:21
    The "silver bullet" therefore, would be to enable individuals the ability to retain title of their earnings. This would necessarily require a roll back of fiscality and regulation driving indvdl wealt
  • GR
    Guido R.
    28 June 2015 @ 10:18
    Is seems to me, that the fundamental problem resides in the impossibility to acquire title, driven by a currency that, although imposed, does not become the property of the individual that earns it.
  • RA
    Robert A.
    27 June 2015 @ 23:38
    After listening to him it sure seems that there is a better chance of "what comes after 1,2,3" is 3,2, or1 than 4. I never would have believed how thought provoking RV would be. Kudos you guys, again!
  • RA
    Robert A.
    27 June 2015 @ 23:32
    "Happiness" and the "Sense of Well Being" are indeed different! This guy can make more dang poignant points by illustrating simple truths. Not easy to make Raoul blush as well.
  • CC
    Charles C.
    27 June 2015 @ 22:46
    Another exceptional interview. He and Pippa Malmgren, who have been on the inside of central banking and government, expose the lack of understanding and hubris of the world's central bankers.
  • KG
    Keith G.
    27 June 2015 @ 21:29
    I deleted my original comment. Here's a new one: I have rarely heard more crap from one of your interviews. KFG
  • WM
    Will M.
    27 June 2015 @ 15:46
    A pleasure to listen to a man with 40 years of banking experience, especially regarding the BIS or "Tower of Basle". Younger analysts can be so certain in their views but this was "wisdom" speaking.
  • GT
    Graham T.
    27 June 2015 @ 14:34
    So what you are saying is a leverage of 20-1 in Economists isn't needed at the FED. 50 is perfectly adequate to identify the problem. Thank goodness I've got RV.
  • sh
    simon h. | Contributor
    27 June 2015 @ 09:57
    always new his brilliant and down to earth mind- always followed him at the BIS but never appreciated what a delightful and charming guy he is.
  • RS
    Robert S.
    27 June 2015 @ 09:40
    best yet, you should allow limited shares outside the netword because I know friends that would sign up after watching this.
  • TH
    Timo H.
    27 June 2015 @ 08:26
    Someone downvoted this! Problem with the RV user interface?
  • CM
    Christopher M.
    27 June 2015 @ 03:05
    Brilliant! Please bring him back again in the future.
  • db
    don b.
    26 June 2015 @ 23:43
    Nice interview but of course in 50 minutes there was no mention of gold. A little different twist than they mentioned is falling growth and tax receipts accompanied by falling confidence in fiat $.
  • RS
    Roger S.
    26 June 2015 @ 22:53
    Its hard for me to understand that there are many smart people that understand the risks we are taking but are unable to educate & change the direction of our political leaders.
  • RP
    Richard P.
    26 June 2015 @ 22:51
    Mr White is charming, wise and thoughtful- what a pleasure to watch and listen to this interview.
  • LP
    Lynn P.
    26 June 2015 @ 21:12
    "Good" versus "Bad" deflation, and central banks' not perceiving the difference (which was recognized in the literature in WWII times), is brilliant. Occam's Razor indeed.
  • BL
    Bruce L.
    26 June 2015 @ 20:33
    Stunningly good interview. Plus fun to see Raoul get a little embarrassed by a compliment from someone he obviously respects.
  • MM
    Milly M.
    26 June 2015 @ 19:55
    Utterly brilliant interview! Thank you Raoul and RV! Opportunity to hear people of this rank, sharing their knowledge, experience and insight is priceless.
  • AA
    Adam A.
    26 June 2015 @ 17:44
    I find myself again glued to the screen at 2AM not being able to let go. What a wonderful interview! Thank you for exlplaining this complex world of finance in such a straightforward way.
  • CU
    Clay U.
    26 June 2015 @ 17:44
    Bill White's warnings to CBs, while falling mainly on deaf ears, are invaluable. Probability of a 'beautiful deleveraging' is basically nil. CBs are building a higher platform from which to plummet.
  • dd
    darrell d.
    26 June 2015 @ 16:01
    Great "insiders" look at Central Banking thought process. Jaw dropper how he questioned the wisdom of current bankers regarding QE monetary instead of fiscal-infrastructure route.
  • EL
    Elizabeth L.
    26 June 2015 @ 15:00
    What a privilege to hear this brilliant man share some of his understanding of the financial system.