How can there be an international dollar shortage when the major currencies are inter-convertible? Surely one can always buy as many dollars as one needs, at the market price.

Thank you Steve and Jeff - a fan of both of you for clarity and explanation and providing us all with the real frame of reference rather than fake news and expectation management!

They ignore one of the key reasons for countries wanting to transition out of the dollar system mainly because the US is always trying to use the USD as a weapon in trying to bully countries around and trying to sanction countries preventing them from access to systems like SWIFT.

I do not quite understand why China selling treasuries necessarily means they are facing a shortage of dollar inflows, economy is weak and therefore they are selling treasuries. Agreed some of it can mean that the are facing USD liquidity issues, but if that be the case, why are they actively changing the composition of reserves for the past 10 years, increasing the proportion of Euros, Gold and the like, apart from promoting direct Yuan dealing in some bilateral trades. Steven and Jeffrey are right to some extent, but I think they are overstating the case about selling treasuries only for combating USD tightness.

Hi all, Wasn't there supposed to be a follow-up Q&A video to this in the Exchange or whatever? How do I find it?

Great interview. Left me with one big fat queestion. Governments fund their deficits by issuing bonds. As far as I understand, governments get money for these bonds from the (commercial/investment) banks (primary dealers). Money that they can spend in the real economy. Are these bonds financed with existing private sector money or financed (indirectly) with Central Bank reserves? To my understanding, QE means that they are (at least partially) financed (indirectly) with Central Bank Reserves. A government is to spend that money in the way they see fit. IF they spend it on giving everyone a blank $1000 cheque every month for the next year, how is that not highly likely to be inflationary (Unless people just keep it to save of course). In other words... Inflation can still occur if governments decide to change their spending habits to effectively provide 'helicopter money', financed by their deficit, if that money is not sucked out of the private sector in the first place but financed (indirectly) with central bank reserves. Is this correct or am I overlooking something?

SOOO GOOOOD, These two gentlemen understand each other and the energy between them keeps getting amplified. As if to say, FINALLY someone that really understands! So nice to be a fly on the wall in this conversation.

Great conversation and intriguing at the same time. I keep hearing "Central Banks printing money" at several renowned podcasts. But you guys say QE is not inflationary and I see it didn't increase "consumer inflation" to high levels. What about the Financial assets and real state? I live in Germany and real state just don't stop going up! => OK I guess we could blame NIRP for this + high immigration. What have made stocks increase for 10 years? => This is hard to believe only low interest rates and retail have pushed it this high. All this increase in the value of assets in a deflationary trend, doesn't make our current situations super fragile? Ppl that have been buying these assets at current prices could face huge capital destruction if there is flight to cash.

I have a question: I believe I understand what you tried to convey: the FED can increase banking reserves but banking reserves are confined to the interbank market. Money is created when the banking sector lends. Fine. The banking system is not extending credit but then why M2 is growing at more than a 20% pace this year? Are bank deposits growing because of the transfers the government have provided due to Covid-19? And if this is the case, would not this bank deposit growth (which is funding for the banks) ultimately lead to credit growth and potentially inflation? Thanks for the help!

I appreciate the interview. However, I have a number of questions: #1 - The conversation focused on QE limited to bank reserves. However, below are a number of examples that sure look like the Fed is directly or indirectly infusing money outside of bank reserves. I would appreciate if each of these items were addressed. 1.a – Mortgage Backed Securities. Roughly speaking, a bank creates money, lends it as a mortgage, then sells the mortgage which eventually ends up on the Fed balance sheet. The bank sold an asset, didn’t they receive money? 1.b – Bond ETF. Roughly speaking, the Treasury gave the fed ‘capital’ which the Fed leveraged by 10x and purchased Bond ETF in the general public (not limited to bank reserves) which ended up on the Fed balance sheet. Technically, whoever sold the ETF indirectly received Fed money. 1.c – PPP. This appears to be a two-step process. First step, roughly speaking, is Congress told the banks to create money, give out a loan, forgive the loan, get reimbursed by the Fed. Second step, roughly speaking, the Treasury gave the fed ‘capital’ which the Fed leveraged with plans to purchase these defunct PPP loans, which will end up on the Fed balance sheet. Technically, whoever received the PPP loan indirectly received Fed money. 1.d – Corporate Bonds. Roughly speaking, the Treasury gave the fed ‘capital’ which the Fed leveraged by 10x and purchased Corporate Bonds which ends up on the Fed balance sheet. Whoever sold the bond now has Fed money. 1.e – Repo. From what I have read, it appeared that hedge funds and/or other investors had highly leveraged positions using bonds as collateral and the banks who normally do Repo were getting uncomfortable (or had limits set by regulations). The NY Fed would announce every morning the amount of Repo that was offered and they accepted as a lender of last resort. This money is invested in the stock market and the borrowers are clearly outside the ‘bank reserve’ system. 1.f – Treasury Purchases. The primary dealer is printing money to buy treasuries knowing that the Fed is the ultimate buyer. Sure, they sell some to retail, but the deficits are too large so the Fed is the buyer of last resort. If the Fed announced they would no longer purchase any bonds the primary dealers would stop buying at current prices/quantity. When the primary dealer creates money, buys a bond, sells the bond to the Fed, the primary dealer ends up with the funds the Fed gave them for said bond. It seems obvious that these funds are outside of bank reserves, seems likely the primary dealer allows these funds to find their way into financial assets. I am open to a detailed explanation on how this works, but on the surface it looks to me that this is how the Fed is funneling money to risk assets. #2 – This next section is regarding your thesis that QE can’t/won’t cause ‘economy inflation’. I like Stewart B. Billion Dollar example. He is exaggerating, but makes a perfect point. The only reason QE has yet to generate ‘economy inflation’ is because in the past QE was limited to bank reserves, and IMHO some found their way to financial risk assets which caused ‘financial asset inflation’. However, as Stewart B. points out, if money is placed in the hands of consumers ‘economy inflation’ will definitely occur. Below are examples, I would be interested to hear if you think these won’t cause inflation (I think they will cause inflation). 2.a – PPP Type Lending. Meaning, similar fiscal and monetary policy that tells banks to create money, lend, forgive, sell loan to Fed. 2.b – MMT-UBI Type Stimulus. Meaning, similar fiscal and monetary policy that continues on a long ongoing process to give direct payments to consumers (enhanced unemployment, $1,200 checks, etc). 2.c – Infrastructure-GreenNewDeal Type. Meaning, similar fiscal and monetary policy as 2020 (where the government deficit is many Trillions over budget) and the Fed uses it balance sheet to support the ‘purchasing’ of Treasuries and this money is being spent in the economy (in the Trillions). 2.d – Debt Jubilee. There have been discussions of forgiving college debt. IMHO that is just the beginning, I can see states and municipalities as well as overindebted corporations lining up next. All this will end up on the Fed balance sheet, resulting in the ex-debtor spending less on debt service (which means they have more available cash to spend in the economy).

Hi Steve and Jeff, thanks for the great talk. You promised to answers some q's later on, here some : 1. Is euro dollar a sort of stablecoin, but then issued by non-US banks at their decoration 2. Why does the S&P go up when QE happens? How buys how? Is there causality in the strong correlation? 3. Can handing out digital dollar cause inflation? What is the effect there upon? 4. What will the effect be of the digital dollar? Will we see more helicopter money? Will this increase the M0 monetary base? 5. What happens if we all start using Libra’s stablecoin? 6. When loans are paid off, what happens with the money on the banks’ balance sheet? Do they ‘delete’ it, as the opposite of ‘creating’ it? 8. Where does the money come when government auctions debt? 9. Is there money creation involved when governments issue debt?

So if you see deflation coming, then real rates are either positive, or much less negative than widely thought? What's driving precious metals? GDX looks like a signal to markets screaming that it wants A LOT more ounces. How would you answer to people like Rick Rule, who have an entire premise built on negative real rates?

How do you have an in-depth conversation about the prospects for inflation, or lack thereof, without referencing the government's ability to put spendable currency directly into people's bank accounts? They already did it on a mass scale, via $1,200 stimulus checks and months of topped-up unemployment payments at $600 per week. A lot of those funds were spent. As confirmed by surveys and data, a fair amount of government cash made its way directly into the stock market -- e.g. work-from-homers who used their stimulus check to YOLO on Tesla and Zoom -- and the personal saving rate of the entire country went up. If the government does more of this on the fiscal side, what happens? What if they do a lot, lot more? They are already talking about it: In May three Dem senators introduced a bill to provide $2,000 per month, per household. That ain't bank liquidity. That's spendable currency in bank accounts. How do you justify having conviction on an inflation versus no inflation macro outlook, in terms of your expectation as to what will happen, while ignore the fiscal elephant in the room? Talking about monetary without addressing fiscal, at this stage of the game, feels like analyzing half a pair of scissors. The sensation is that you are technically correct in all that you cover with impressive amounts of detail, and you leave out the plumbing variables that could swamp your non-inflation thesis completely.

Nice one. A question for Jeff and Steve. Consider the following scenario. The US gov sends every person a billion dollars. The US gov finances this by selling Treasuries with a combined value of 330 million billion dollars. The Fed buys up all of these with broker dealers as the intermediary as a QE program. Now, given the Fed returns any coupons paid on the treasuries it holds to the US government, then there is no cost to the US government from this scheme. Also, let's assume that the Fed keeps rolling these treasuries perpetually. I understand the social and political arguments of why the above scenario may or may not be a good idea. But surely if this scenario is mechanically possible, it should be inflationary, right? It is hard to imagine if every person had a billion dollars that we wouldn't see inflation. Or, if there are mechanical limitations that make this impossible, what are they?

This was low key epic

really great conversation, thanks guys!

Hey Steve, nice back drop of of 70’s paneling and barcolounger😂. Seriously, residential mortgage origination is at a 17 year high, so banks are in fact, lending and on inflated asset prices. What are your thoughts here vis a vis your negative outlook on bank growth. Thanks

The way forward is for central banks to start increasing interest rates. This will eventually wipe out the zombie companies and disincentivize poor uses of borrowed capital like share buybacks. More expensive money means companies will have to be more careful with it and invest in endeavours that are earnings productive. Managements will have to be better at increasing earnings organically or they will be out of a job. Savers will be rewarded and the central banks will have more wiggle room to ease when recessions occur. Wall Street will scream like a stuck pig for a while, but so what? Take the pain now in order to build a better future.

Men that was a good talk!

You guys said it. U.S. banks cannot directly use reserve assets to push markets, therefore they CAN INDIRECTLY use reserve assets to push markets.

Is it possible to calculate the size at which fiscal policy becomes inflationary? $23 trillion?

I agree with everything they say BUT everything is about to change - inflation here we come.

Thanks very much Steve and Jeff for a wonderful talk! I have a question for the follow-up talk: you mentioned that the current acts of the fed and the government are not inflationary, and that only some extreme action might be inflationary, but one thing was missing out in the talk - what about the asset bubble - cant that for itself cause inflation? if the stock market continues to go up and up, and the public participation increases, wont that cause a meaningful inflation? (and in this issue the U.S is different than Japan and Europe - Americans love stocks...). Take care, Amir.

Thank you for sharing the real world view of the Fed's smoke and mirrors. How / where can we look at euro-dollar futures? Any specific ticker symbol or website where this is published clearly? This is in reference to the end of the conversation, where Jeff Snider encouraged us to look at the euro-dollar futures -- how they are nearly inverted -- implying market risks of September 2019 recurrence.

Great interview guys. Would love to hear more about the effect of all this on the stock market. I get that bank reserves can't be used to trade stocks or buy assets. But how do you explain the ongoing bull market? Is it lowering of discount rates (via lower bond yields) pushing values higher? Is it fiscal stimulus seeping into the economy and supplementing company earnings? Or is it simply belief that the Fed is 'printing money' that creates its own form of stock market liquidity? Also, we know velocity from an economy wide perspective. Are there any measures of stock market velocity...how many times the same 'dollar' is going through a stock price and pushing it higher each time? cheers

Not sure why everyone is fixated with CPI for inflation. CPI is cherry picked to ignore sectors which people care about in their day to day life. Healthcare, education, real estate, stock market has gone up more than the rate of 2 percent since 2008. The big mac index is better indicator of inflation. Big mac was $3.57 in 2008. July 2020 it was $5.71. It is up 60 percent.

I had to watch it 3 times. So much to learn in one video. Thank you!

Wouldn't this actually make the Central Bankers some of the smartest people in the world? To manage to pull off one of the greatest slights of hand in history. They have spun a "fairy tale" and managed to keep it in place for over a decade, that's incredible work .

Jeff & Steve-Would love to hear you guys do a deep dive on Richard Koo's "balance sheet recession" concept and his recommended approaches. In particular, Koo recommends two secular cycling paradigms (i.e. two phases in a 80 yr + credit cycle)... One of monetary policy dominance and central bank independence (dominated by private credit expansion and relative gov. fiscal conservatism), and then another of continuous (as opposed to purely counter-cyclical) fiscal stimulus (deficit spending) to offset a backdrop of private sector deleveraging / credit contraction.

Similar discussion of deflation and the Fed by Grant Williams, Bill Fleckenstein and Lacy Hunt. https://ttmygh.podbean.com/e/teg_0006/ The End Game Ep. 6 - Lacy Hunt August 9, 2020 Bill and Grant welcome a man who is the absolute epitome of the phrase 'a scholar and a gentleman', Lacy Hunt, to The End Game. The three discuss arguably one of the greatest trades of the century: Lacy and his partner, Van Hoisington's 40-year bet on deflation. Lacy talks about staying the course, the methodology they used to simplify their framework and what it might take for them to change tack after all this time. The perfect counterpoint to Russell Napier's appearance in Episode 5 of The End Game, Lacy uses his encyclopedic knowledge of econometric analysis, financial history and regulatory frameworks to explain why he remains resolute in the face a rising number of calls for the return of inflation.

It would be really helpful to know Jeff’s thoughts as to how QE inflates asset prices, particularly stock prices and precious metals?

Can we put Jeff Snyder and Richard Werner together to talk about the "Eurodollar" system and Cenral banks.

Please stop pairing people who agree on everything, this takes away the thought provoking aspect and results in an hour and a half of ranting.. Schneider is good, but Van Metre doesn’t guide the interview and doesn’t he let Schneider to fully explain his views.. please get rid of Van Metre as an interviewer.

Wow! That was an eye-opening discussion! By far the best and most educational interview I watched on RealVision so far. Great job!

Still don't understand why housing prices continue to rise, food/cars inflating at 10%/year since 2000, college tuition, healthcare both inflating.

Guys, can you guys link the IMF report from the video above to an attachment?

Guys, I've watched both of you, and Brent, and Luke. What I want to understand is what happens when the government borrows so much that there aren't enough dollars to cover all borrowing at auction. For instance, what happens in a hypothetical situation where there is a $20 trillion spending bill. The auction "fails", and pulls only $5 trillion from the market to buy bonds. The bonds likely have some ungodly yield. Are the other $15 trillion new dollars which are added to the system, creating inflation?

I voted thumbs down on this but I will refrain from indicating why I did this. There is no way I could express my views without offending one of the participants.

@Steven you speak a lot about dollar going up which then will prove your thesis (bonds up, equity down, gold down). What indicators are you tracking behind your thesis and what sort of timeline do you expect?

@34 ish There is a massive dollar shortage, and the Fed doesnt *want* to fix it. Great talk guys I love hearin me some Fed knockin

Questions for Jeffrey and Steven: In mid-March the Fed lowered the interest rate from 2.25% to zero. Was this necessary? Damaging? Alternatively should they have left the rate as is with everything else they were doing?

Great interview Steve! The only criticism... on your YouTube channel, I always look forward to your bond king crown and the "Bond Kingdom Under Siege" intros. Kindly renegotiate that into your deal with Real Vision.

That was the best discussion I have seen so far on Real Vision. I learned so much! Bravo. Quick question- can you elaborate more on with graphs and charts regarding the amount of Bonds and ETF's the Federal Reserve has purchased since this those buying programs began. To what extent do you think those purchases have propped up corporate bonds and stocks?

Jeff is such an authority on the the Fed, the eurodollar and Treasuries. Thanks to RV introducing me to him several years ago in his first video, I have followed Jeff's daily market blogs without fail, and have learnt so many things about these three topics. Over the past few decades, we have seen a number of supposed "bond kings" exposed as emperors without clothes. For me Jeff and Dr Lacy Hunt are my bond kings as they firstly know their markets inside out and secondly have been consistently proved right with their market analysis. Jeff and Steven's discussion is another priceless video from RV! Bravo!

Steve, your the reason I signed up to Real Vision. What are possible black swans that may surface by the end of the year (besides this video becoming widely known)?

I like the discussion because both speakers are objective and layout the framework logically. It is a breadth of fresh air when both of them commented on the problem of USD - it certainly beats the previous the prevalent thinking of "It is my USD, but it is your problem" that surfaced back in the 70's. As a resident in Asia - I've seen the the negative effects of low rate since 2008. And I think its negative effect finally shows up in the US when I heard the comments of Ed talking about his mom struggling to find interest incomes and the only advise a financial advisor can provide is to put the money onto assets with higher risks hence higher returns. Do we really want to do this to all those folks out there who're in their 70's ??? And the central bankers can go to sleep every night thinking that they've done such a great job in "saving the world" ???

Thanks Steve and Jeff. Great Interview. Question: We know Fed QE does not create new money. We also know now tht govt, borrowing money from market/public does not create new money. So, when the stock market falls >10% , we know Fed will again do bigger QE and asset purchases. This will create "new purchasing power" in financial sector (non banks). That money wud end up in assets again and stocks should go up again. And we know Fed can do infinite QE without causing any inflation since no new money is created. Then why would stocks ever crash? Fed can always do more QE and asset inflation keeps going. Whats u both's thought on this. Thanks

I can't believe you are both still getting it wrong. What will it take for you to understand that the reserve balances are used to gross settle trades between the participants in the payment system (in most countries just the central bank, the government and the banks - there is nothing special about a primary dealer in this sense they will appear in the ledger system the same as any other bank that has direct access). FWIW, the fed covered this topic fairly well in 2009 - "Why Are Banks Holding So Many Excess Reserves?" https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr380.pdf Primary dealers settle the purchase of newly issued bonds using their reserve account balance. When the Govt issues the bond it gets reserves debited to its reserve account from the banks (and their customers with a lag) that buy (and they lose their reserve balances). Most modern countries will run a Real Time Gross Settlement System ... and banks do not want to find themselves in a position where they are gross settling the purchase of the bonds from the auction and they don't have sufficient reserves - they would have to immediately try and rectify such a breach by borrowing in the cash market (borrow reserves unsecured from another bank to settle the trade) or by borrowing secured (ie repo). Just this simple example - that banks need reserves to settle the purchase of a Govt Bond with the Govt - should prove to you that reserves are a means of exchange between the direct participants in the payment system (ie only those entities that have a reserve account (in most countries this is just the central bank, government and banks)). And once you understand this simple point there are still other "magicians tricks" that are going on. The "words" regarding Broad Money doesn't prove what you think it proves, you misunderstood, and it proves my argument. The "reserve account" balance is only useful for a participant in the payment system - ie you are the central bank, the government or a bank. If you are a customer of a bank your deposit is tracked in a ledger of the bank you bank with - you do not have a reserve account because you are not a direct participant in the payment system. But a bank can exchange reserve balances with the Govt in exchange for getting a Govt Bond Asset. Dr Asset (Govt Bond) Cr Asset (Reserve Account) This is Accounting 101 ... do the double sided journal entries and it is crystal clear what is happening. You don't get a ticket to the debate if you can't do the journal entries.

My question might sound stupid, but what if the FED knows they cannot create inflation, and their goal is simply to inflate financial assets, so demographic trends can act and alleviate those negative effects?

Another excellent installment of Snider U, and Steve was the perfect guy to interview him, adding some good color of his own. Well done.

Here's a fantastic dive into the complexities of inflation/deflation: https://www.lynalden.com/fiscal-and-monetary-policy/ Rather than a binary around QE inflationary/QE deflationary, Lynn explores the nuances that make it more of a situational calculus. I won't go point by point in terms of what these gentlemen discuss; suffice it to say Alden's work could very well help some make better sense out of this topic.

...so Quantitative Easing is really Qualitative Easing...

Hi guys, Following Jeff & Emil for years (and now Steven) I really recommend their Eurodollar university content. My question is: For some years now I have seen a revolution brewing in international cross-border payments. Including a system allowing the use of a centric digital asset, eliminating the need to use Nostro / Vostro accounts. Their key point is that it would free up trillions of dollars stuck in these accounts. My question is 1. Would that in fact free up liquidity for the banks? 2. If so, could this be the signal as a bank 'now that I have plenty of cash, it's gone 'let's lend and restart the machine', 'dare to lend again'!

Hi Emil K, Steven Van Metre Emil I like the explanation in your first paragraph to Antonio P. regarding the increase in M2 and that it is due to the increase in reserves or base money and that M2 = M1 + M0. Doesn't the government stimulus differ to FED QE in that it would increase money directly into the economy? I think it would be interesting to display the composition of that M2 in M1 and M0 on a graph and breakdown where the figures are likely coming from i.e. government packages. Why because we haven't illustrated in sufficient detail if the money is primarily going to paying back debt, increasing saving or spending. My main question is what happened to the seasonal financial market liquidity squeeze or collateral fail. Shouldn't this be a hot topic as per continuing my reply regarding liquidity crunch on Macro chat - US TREASURIES – Lodged Chicken Bone? Possible Coughing Fit Ahead. My screen shot on Treasury fails this time last year shows a spike in treasury fails in early September 2019. Currently we've basically skipped the collateral problems that shut down the financial plumbing at this time of the year or delayed them. Is it partially due to the stop on QE over the last few months combined with the FED buyout on corporate bonds? My burning question is what has prevented or delayed the seasonal fall in confidence in the collateral markets?

Thank you for sharing your thesis. I have a question regarding. You state that the low interest rates of treasuries are an expression of a global dollar shortage. Why over all these years of lower interest rates do we not see the the dollar appreciate significantly in the FX markets? Thx, e

Just excellent. Pause - google - Pause - google, etc. Extremely deep and insightful discussion.

incredibly insightful!

given the deflationary outlook, what are the investment implications for capitalizing on it? Sure, bonds, but are there other asset classes that make sense? Great interview!!!!!

Thank you Steve and Jeff and RV! What an awesome discussion .. I will be greedy and request much more from these men! It would be great to have a static infographic of the truths they laid out in this discussion; such as, the Fed and central banks do not print money. I did not know what SDR was, so that sent me to go learn and the first article I opened immediatley framed their argument about the Central Banks printing money. Having these truths of how the system does work in a list or infographic would be great reference for simply 'fact checking' articles and discerning good and bad author narratives. It would also be very good to have a sketch narrative (cartoon) that narrates visually what they are describing of how Central Banks and the banking system do not work (i.e.; inflation, QE, ..). Again, VERY MUCH enjoyed and appreciate these men and RV!

Really great video! As you are gathering questions, I’d really like to hear more about the link between QE and rising equities. It doesn’t seem it is even clear how the first influences the latter and I’d love a deep dive on this point.

This was really great. Both has a knowledge of how the system work thanks RV for this amazing interview

I went down the rabbit hole and found this episode from Jeff: https://www.youtube.com/watch?v=P7Wx7AYFDsQ When you listen to that, read the article sited in the video, and couple those ideas with Raoul's insolvency thesis, Houston we really have a problem. At the very least I will be investing in stocks/etfs with a completely different background attitude. Essentially, invest as if it can all disappear quickly or slowly over time.

Incredible, fantastic discussion plainly spoken.

Same rant. Different year.

Thank you for sharing your knowledge here. Bonds are to me much more complex than understanding Equities, Blockchain and even alt coins. Could you explain where and what to look at to see fully what the bond market is currently telling us. Also how the short term, medium and then long term bonds paint a picture of what is happening / will potentially happen. I was also starting to understand the repo market stuff you were mentioning at the end here but didn't fully grasp it. Really appreciate your work here. Wayne

Reserves creation by the Fed and holding bonds on their B/S is displacing funds that otherwise would have been spent on Treasuries and forcing those funds into all other assets, including corporate bonds and equities. This displacement effect is the entire reason that asset prices are inflating. This whole inflation/deflation debate is getting really stupid because we all know QE doesn't cause consumer inflation. Let's talk about what all of us on here are interested in: asset price inflation.

Great conversation, though I can't say I'm knowledgable enough to follow all of it. Here's a fundamental question: where does money come from? For most of my life, I was taught that the US government "prints" money - only the Treasury can create dollars. (I come from a non-financial and non-economic background.) Yet, I've recently learned that banks create money through loans. And I can understand this latter idea, to an extent. (Mr. X deposits $1000; bank uses that account as a reserve against a $10k loan to Mr. Y; now there's $11k in the system.) I've seen elsewhere people say that if all debt were magically forgiven, all money in the system would cease to exist. While I can see how much of the money would cease to exist, I don't see how all of it would go bye-bye. So I guess my over-all question amounts to: how is money created and destroyed; how has this process led to any of our current problems; and how can that process be reformed in order to fix those problems? (Easy answer, I'm sure!)

If FED doesn’t print money, which they don’t, why is M1 up? Doesn’t it mean, that more USD is in the system?

Hi Steven, hi Jeff. As i know you both from your YouTube Channels i didn't expect less than this extraordinary video. One question, is money created if the banks buy the TSYs from privates first and then sell it to the FED. You always start with banks already holding them. Thanks, great interview.

You have not covered how Dollar value will change in the short term and the long term with these fake money printing and ineffective QEs?

Question about the efficacy of our fiscal response. I’ve seen some charts recently that indicate that our trade deficit is larger than it has ever been, so it seems that at least some of the US stimulus flowed to China/other trading partners (i.e., US consumers buying Chinese goods). Are there any estimates for how much of the stimulus was mostly a benefit to China et. al.? Assuming this is non-trivial, how should we shape fiscal stimulus going forward?

Why can’t you clip coupons on bonds?

Ps Steve and Jeff are great, awesome to have them on Real Vision!

“Was March a one off event, or was it really the warning?”

FedCoin is the missing part? Completely go around the impaired banking system

Holy mackerel that was excellent.

Wow - that was fantastic. Congratulations to both Steve and Jeff on a marvellous interview. Extremely intriguing ideas were unveiled within a good humoured and stimulating conversation. Bonds are looking bloody cheap after watching the video!

I am intrigued by this mysterious person that Steven references with one minute left in the show. He sounds handsome.

Great interview thanks.

This was long, but fun. Bonds selling well; would that not be more relevant with Basel regulations? Buying them because it is required.

This video need to be on Youtube for FREE ASAP, everyone needs to know this

Who could possibly down vote, real vision is turning financial dissemination of information on its fucking head. Get on board!

This video (style and substance) is the reason I subscribe to RealVision. Outstanding job guys!

Thank you Both - must admit that the Eurodollar market impact is extremely misunderstood.. Question though, Bank Reserves, if considered as part of the BASEL framework of RWA for banks, have a much lower risk weight no? Wouldn't this improve bank balance sheets thus attempting to foster 1) credit growth/lending increase or 2) Asset price growth/speculation by these same institutions (either by lending to hedge funds, more reputable speculative counterparties).. But seems #2 happens more easily..

If QE + stimulus have not produced inflation, then what will? $10T stimulus, $50T, $100T? Which at $100T stimulus, just looks like currency debasement to me.

It would be nice to have some flow charts in a presentation like this.

Seems like a huge flaw in the monetary system that it needs to keep expanding in order for there to be more money to pay the interest on the debt. That seems to be why at every economic crisis the banks need to be bailed out because no one is creating additional base money during an economic expansion. If they had let the markets clear and debt deflate then maybe it could oscillate around a point rather than constantly try to expand. Under the gold standard at least we did add to the monetary base during expansion keeping up with population / economic growth, but that also could not be expanded unnaturally by central banks.

Great interview Steve Three broad questions for Jeff, 1) Please elaborate on the different repo markets, how the TGA fits In to the picture and how the fed shot themselves in the foot with wqe that wasn’t qe 2) Use your framework to explain the 1970s inflation, it's drivers and how it’s different today 3) is there a way to get inflation beside credit growth via private banks, such as a loss of confidence due to fiscal mismanagement, cost-push etc etc Cheers Aaron

I would have been fantastic to have a threeway with Prof Rich Werner adding to this conversation as well. He was the one who termed the QE term afterall.

Steve and Jeff, Fantastic conversation. I think slowly, but surely we're peeling back the layers of this wholesale shadow system onion, and also pulling back the curtain from the central banking wizards. I have a question to put to Jeff: I'm in Australia, and our central bankers are lamenting the "limits" of monetary policy and interest rates, cuts. They hope for a Pavlovian inflationary response in the economy, yet constantly wish the government would fiscally spend more. My question is: if we were to conduct our own research into how the eurodollar system is impacting our countries' economies, where would Jeff recommend we start looking?

Well done guys this was very interesting and I have learnt so much.

Hi, Thanks for a great discussion. My questions: 1. I understand the argument that the fed can't pump freshly printed money into the economy without the help from the banks because the fed can only create bank reserves, but it is up to the banks to use these reserves to actually lend new money into existence. But I don't understand why you say that stimulus checks handed out by the government, funded by newly issued treasuries and monetized by the fed, is not inflationary. Please explain. 2. If the fed's QE cannot spark inflation, can it pump up asset prices like stocks? If yes, please describe the mechanism of how this works.

Absolutely epic, a tour de force! Kudos to Steve, Jeff, and the entire team.

Got a two-part question: a) What policies in the past would have prevented us from reaching the zero bound? b) Now that we are effectively at the zero bound, what type of event is going to allow us to escape? Thanks guys for a great discussion!

What an incredibly amazing conversation.

Value is always added listening to Mr. Snider. The primary function of the Federal Reserve when it was established was bank stability. The additional official mandate by Congress is employment stability. Employment stability would be much better handled by Congress with fiscal policy. Congress just uses the Fed as a whipping boy for their fiscal incompetence. Consciously or unconsciously the Fed seems to believe its real second mandate is to keep the stock market up to protect the stability of the pension markets. If the stock market crashes, many more pension funds will be markedly underfunded. By assiduously protecting the stock market, the Fed has fallen into the current interest trap. We are, however, in the same monetary trap regardless of Fed’s reasonings and subsequence actions. As an aside, Dr. Friedman certainly respected both the money supply and the velocity of money. From the 1960 to 1990 the velocity of M-2 was stable. It is misleading to assume that Dr. Friedman would “roll over in his grave” concerning inflation with the increase in M-2. He would merely point out the precipitous drop in the velocity of money – elementary. DLS

Excellent conversation! Please wrap Jeff in bubble-wrap, somewhere in that brain is our path into the future! Would love to hear his thoughts on two questions: 1. "Stimulus" doesn't work because it's inherently temporary. Are we moving into a new phase where (fiscal dominance) UBI allows governments to bypass the banking system (even as fractional money continues to deflate) and stir demand directly in the real economy? Also, a 'permanent stimulus' has the actual effect of changing behavior permanently. 2. Are we seeing the consequences of the US not hoarding gold reserves? At this stage, with USD overvalued, the one asset that Americans could buy in the past is the one asset that can safeguard the value of their savings to eternity (without 'counter party risk'). The US buying gold would reset the price of the USD against other currencies in ways that swap arrangements don't ... because swaps eventually unwind. Gold is also the only import that pushes USD out that doesn't require US consumption / indebtedness.