“What is Wrong with Central Bankers?”

Published on
November 18th, 2020
Duration
76 minutes

“What is Wrong with Central Bankers?”

The Jim Grant Series ·
Featuring William White

Published on: November 18th, 2020 • Duration: 76 minutes

William White, former central banker at the BoE, BoC, and BIS and senior fellow at the CD Howe Institute, has been a thorn in the side of his central banking colleagues for decades, questioning their hubris and pushing hard for a paradigm shift from within. Together with legendary financial commentator Jim Grant of Grant’s Interest Rate Observer, White explores the difficulty of paradigm shifts within central banking and the overwhelming historical evidence that this easy money experiment will end badly. White also expresses what he believes to be the core problem with central bankers' analytical framework — namely, that it assumes that the global economic system is "comprehensible, understandable, and controllable" rather than a complex, adaptive system with characteristics that are not present in the models that attempt to decipher it. As well, Grant questions White on his views on Bitcoin, how he personally invests, what he would do if he were running the Federal Reserve, and if there is any possible way out of our current predicament. Filmed on November 16, 2020. Key Learnings: Central Bankers' neglect for history will be their ultimate undoing, and although new, previously unthinkable policies have been enacted recently, it can hardly be considered a paradigm shift but merely a more extreme implementation of the same flawed analytical framework. The outcome of the deflation vs. inflation debate is not cut and dry even to someone as learned as William White, and he himself has for decades implemented a barbell strategy of cash and property as a way to position for this uncertainty.

Comments

Transcript

  • NL
    Nikola L.
    24 November 2020 @ 07:28
    the last 3 min.. best.
  • ds
    durgesh s.
    24 November 2020 @ 05:03
    Excellent Conversation of two great money minds,
  • RY
    Roy Y.
    23 November 2020 @ 13:31
    Brilliant interview ...
  • Mv
    Matthias v.
    22 November 2020 @ 15:33
    Hi Mr. Grant, Very valuable conversation, yet again. Thank you. I specifically was interested to hear your reference to and questions on Felix Somary. There's so much in his book (the Raven of Zurich) that rhymes with and explains today. E.g. inflation, currencies, 'the reset', politcial consequences, but also that the ascent of nationalist China (which was actually induced by the US). As you mentioned, we need to be better students of history and our economy as an adaptive complex system, not the simplified economic models. I wish you'd have a follow-on conversation with Mr. White after he's read Somary's memoires and academic work. Can I ask one more thing? Somary integrates politcial- with economic developments very fluently. There are still some people alive that knew Somary in person and operated on the interesection of politics and economy. For example Prof. Goldman (emeritus professor and head of Center for European Studies at Harvard). He was co-chairman of the US-German Marshall fund. It would be great to get his view on what we can learn from history, his associations with Mr. Somary and I would be very interested in what he says about today's predicament. Thank you very much, Mr. Grant, Mr. White and Real Vision. Best, Matthias
    • RH
      Ron H.
      23 November 2020 @ 04:30
      This was a brilliant discussion. The Raven of Zurich (Somary's memoir) is a terrific book. It's properly a work of political-economy (written by a banker), and full of the interdisciplinary wisdom of earlier days that has long been devalued by our society, with institutions (including CBs) plowing their narrow analytical domains with blinders on to everything else.
  • TC
    Thomas C.
    22 November 2020 @ 21:49
    Very good interview. Well done Jim and Bill is very in touch
  • HS
    HANA S.
    22 November 2020 @ 18:06
    Enjoyed every minute of this chat, great company! Hana
  • JL
    John L.
    22 November 2020 @ 14:38
    Fabulous. Two beautiful minds talking finance. This one is an instant classic and needs to be watched more than once.
  • JJ
    John J.
    20 November 2020 @ 20:39
    That was fabulous and I enjoyed every minute. Jim's audio was awful - something should be done to improve it.
  • GM
    Gary M.
    20 November 2020 @ 15:32
    Brilliant👏👏I could listen to these two all day.
  • RM
    Russell M.
    19 November 2020 @ 20:45
    A wonderful interview! Pretty much confirms the irresponsible nature of the world monetary regime that pretty much everyone who thinks deeply about it knows. But nice to hear it from a central banker "horses mouth". Ultimately, its a political human problem. Central banks are the handmaidens of their governments that are the constantly tempted to spend to buy votes and preserve the short term status quo. The moral of the story is that when things get extreme, by gold, buy bitcoin, buy a productive asset or anything the government can't undermine.
    • MM
      MAX M.
      20 November 2020 @ 11:33
      Don't forget that they're tempted to spend to buy votes so that WE vote for them.
  • AL
    Aaron L.
    19 November 2020 @ 06:07
    All of Jim's interviews for the last 15 years sound the same, central banks are dumb, the debt is too high and the end is nigh so buy gold
    • CS
      Christopher S.
      19 November 2020 @ 13:54
      Sounds about right.
    • DD
      Darrell D.
      19 November 2020 @ 14:19
      That may be, but it doesn't make him wrong.
    • CW
      Claude W.
      19 November 2020 @ 18:15
      Don't disagree with that. Eventually he will be right.
    • AL
      Aaron L.
      20 November 2020 @ 04:53
      Can we please get Jim to interview Hugh Hendry! :D
  • DM
    Dominic M.
    20 November 2020 @ 03:58
    William White is punk. 10/10
  • MR
    Michael R.
    19 November 2020 @ 23:03
    These guys are terrific! Wonderful conversation. Not very good news for economies though.
  • GE
    Greg E.
    19 November 2020 @ 22:51
    Love Jim Grant but could someone please buy him a decent microphone?
  • CD
    Christopher D.
    19 November 2020 @ 20:13
    what is the M&L against Argentina? I am aware of the holdouts from 2001 being rewarded for their patience and creating the wrong incentive in future rounds of structuring as more private creditors will also want to hold out. That was Elliott a.o. if memory serves. But M&L ? An excellent paper on the topic btw https://dash.harvard.edu/bitstream/handle/1/14010997/alfaro_sovereign-debt-restructuring.pdf;sequence=1 the judgement sent shivers down the spine of other sovereign nations, in particular France filed an "amicus brief", excerpt from the above: France filed an amicus brief supporting Argentina’s petition for certiorari on the grounds that the ruling created a "powerful incentive...for private creditors to forgo participation in voluntary restructuring in order to enforce full payment of debt against an already distressed debtor.” So everybody knows, but we can't act collectively, so we're headed to crap. The free rider problem can in principle be solved with crypto, see quadratic funding of public goods article by Vitalik Buterin a.o. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3243656
  • DF
    Douglas F.
    18 November 2020 @ 18:49
    You have this cute, well-spoken, red-haired woman who only appears to pitch custom videos at the very end of videos. She should be doing the daily briefings. She's not being used to her full capabilities and we're stuck with others less talented.
    • GF
      Gordon F.
      18 November 2020 @ 21:38
      Justine left RV several months ago. :-(
    • TS
      Timothy S.
      19 November 2020 @ 18:55
      "Justine Underhill graduated from Georgetown in 2011 with a double major in economics and theater and performance studies, along with a minor in mathematics." per Berkley Center Interesting talent stack!
  • JT
    John T.
    19 November 2020 @ 18:21
    With regards to central banking, the theft has already taken place, it's just a question of how losses are allocated. Well said.
  • SB
    Stewart B.
    19 November 2020 @ 18:15
    “WHAT IS WRONG WITH CENTRAL BANKERS?” Where do we start... ha ha! Our society needs capitalism to deliver what we need. Central bankers have the potential to destroy our engine of prosperity. Next crisis, the voices will grow louder for abandoning capitalism completely. Let me leave you with this: If I were an evil genius, I would hold rates as low as I could, for as long as I could, until everyone was indebted as they could be, and asset prices were as high as possible, then I'd wait for a shock to aggregate supply (something like Covid19), then I'd try as hard as possible to unleash inflation. Central bankers sitting on a pile of debt wishing for inflation is like a fool sitting on a pile of gelignite wishing for a spark. We haven't seen it recently, but most economists would be surprised to learn that long rates tend to follow inflation expectations higher. This is because creditors want to get something approaching inflation back, and if they can't they will buy real assets instead of lend. In a highly indebted economy, a little inflation might help, a moderate amount or more will be catastrophic.
  • DS
    David S.
    18 November 2020 @ 23:35
    It was a pleasure listening to Mr. White. Of course, Mr. White is correct to worry about the future. The Fed has done everything it can to keep liquidity in the markets. Mr. Grant is correct when he said the stock market stopped the Fed from trying to normalize interest rates. The Fed was on the correct path but went to fast. Each coat of paint never dried. Each time the stock market had a temper tantrum so it could force the Fed to provide more liquidity for its bonfire. The US, Europe, and UK governments and citizens chose to ignore the possible damage of COVID. They turned an epidemic into a pandemic into a plague. From an economic viewpoint we started the journey at the end of a major debt cycle, an experimental currency in the Euro, bifurcated voting on false news in representational democracies - both sides, etc. A bad why to do business. Nevertheless, we must work toward the future. We can hopefully be over most of the COVID by the end of next year. During that time, we need to focus on health care, starvation, and shelter. We also need to keep enough of the economy going. After COVID Times, they governments will have to choose economic winners and losers. There is no other way. We will be in much worse condition than now. The Fed cannot help anymore except for working on liquidity. The US Congress and the New Administration must solve the problems or fail the nations. Both Congress and the Administrations have not been known recently as effective to say the least. To stop insurrections, they need to keep the citizens going with MMT. They will have to pick winners and losers like the airlines and soup kitchens. Pork barrel politics must wait until after the plague. I am certainly not smart enough to figure this out, but I know that business as usual during a plague does not work. I know identifying the real problem will work. I know that fighting stupid pollical battles for personal and party benefit will not work. It is easy to figure out what will not work. I hope someone in power can figure out what will help us through 2021. Sorry this was not better organized, plumber at the door. DLS
    • WG
      Wade G.
      19 November 2020 @ 11:53
      I'm afraid pork barrel politics waits for nothing, certainly not in today's zeitgeist. And William White, and people of his intellect and character, will never get near the levers of real power. I believe its more likely that the picking of winners and losers will bring the insurrections. The gov't will exacerbate rather than mitigate the losses. There's no appetite for an honest appraisal, for compromise, or for shared sacrifice. An intense misery, arbitrarily shared, will come when it must.
  • WG
    Wade G.
    19 November 2020 @ 11:26
    William White is a genuine treasure. He stands tall in his profession among peers whose thinking and ethics are completely and hopelessly muddled.
  • JA
    John A.
    18 November 2020 @ 16:42
    Great line: "In a world where the theft has already occurred, the question is how do we allocate the losses?"
    • PB
      PHILLIP B.
      19 November 2020 @ 06:24
      An instant classic.
  • DJ
    Daniel J.
    19 November 2020 @ 05:13
    Here's a link to the Sargent - Wallace paper referenced in the interview (around 52 minutes in): https://www.minneapolisfed.org/research/qr/qr531.pdf
  • JL
    James L.
    18 November 2020 @ 21:41
    William, What is your barbell today? Surely it is not bonds and real estate? What do you think about gold and commodities? How do we reset this mess? Terrific discussion!
    • MO
      Master O.
      19 November 2020 @ 04:48
      He said in the interview that his portfolio is real estate for inflation and cash for deflation.
  • CS
    Christopher S.
    19 November 2020 @ 04:39
    Sober, rational, reasonable, responsible. The opposite of Hugh Hendry's recent apostasy. Assuming HH is not just trolling. Of course none of these words will be heeded, and the unwind will be disorderly. Thanks Jim and William.
  • CH
    Clayton H.
    19 November 2020 @ 04:01
    Love listening to the old boys chewing the fat! Would have liked to hear a little more on the Canadian Banks, nonetheless it was great to learn from them guys!
  • PP
    Patrick P.
    19 November 2020 @ 04:00
    When you have two people with this much experience ......absolutely at a loss for a reasonable solution to this mess.... you know you have a mess of epic proportion.
  • JB
    Jack B.
    19 November 2020 @ 01:08
    1:12:45 "the theft has already taken place ... you think you have something which in fact you do not have because it has no value" Be careful out there.
    • JG
      John G.
      19 November 2020 @ 02:01
      Heh, you beat me to it.
  • JG
    John G.
    19 November 2020 @ 02:00
    That was an amazing declaration by William White, "The theft has already occurred. People only believe they hold assets at an illusory value. The question now is how to divvy up the loss." (paraphrasing) Assuming that's true, the smart money needs to start selling? (Thus beginning the crash reaction, becoming a self fulfilling prophecy?)
  • OA
    Olivier A.
    18 November 2020 @ 19:34
    Fantastic interview. This was so much better, more nuanced and thoughtful than the endless amount of lazy fed-bashing that's out there in the financial media / podcast / fintwit universe.
    • AR
      Alexander R.
      19 November 2020 @ 00:57
      100% right. The simple truth is : there is no way out, no easy way anyway. Powell did try to exit but was stopped at 2.25% facing total bubble collapse It is not his fault, all the mistakes were made in 1987 and 2008. Even you put the smartest people in the Feds with best intentions ( they are nether of the above ) there is no solution. Easy money create zombie and misallocation of capital, plus gambling in financial markets. The capital that is efficiently allocated is leaving USA and builds China, what good that do for Americans? you get wealth disparity and running risk of destabilizing the whole system of capitalism. So you can not rise rates due to debt , and you are on a pass of disaster with low rates. So there is no way out : Just allocate loses and inflate way out. MMT financed by THE EVEL CENTRAL BANKS and you can blame them all you want, the have no choice !!!!!!!!!!!!!!!! BUY GOLD , save your savings and your family wealth.
  • DG
    Dave G.
    18 November 2020 @ 20:38
    Jim grants sound is horrible. Good think the is CC
  • TP
    Timothy P.
    18 November 2020 @ 18:22
    It won't happen from within. Asking a corrupt system to change itself when maintaining the status quo is their tantamount goal is folly. The only thing that will wrest control from these unelected financial carpet-baggers is decentralized cryptocurrencies. The less control they have, the better off the world's economies will be. After papering over every financial crisis, banks have outlived their utility and deserve to be refactored.
  • PU
    Peter U.
    18 November 2020 @ 16:40
    One of the best RV videos. Jim and William are legends and they always deliver.
  • SH
    Samuel H.
    18 November 2020 @ 16:27
    Bill Nye's best interview yet
  • DM
    Dom M.
    18 November 2020 @ 15:42
    Paradigm shift occur when confidence collapses.
  • JG
    Johan G.
    18 November 2020 @ 14:55
    Loved it!
  • JL
    Jake L.
    18 November 2020 @ 14:25
    Great interview.. Jim, did you ever get Jonah Hill back for eating your Goldfish on new issue day?
  • AR
    Alexander R.
    18 November 2020 @ 14:14
    Wow!!!!! The theft already happened, the question is how do you allocate the losses. This Will not end up well. Anyone who saves in dollars, need to hear that !!!!!
  • GB
    Gordon B.
    18 November 2020 @ 13:57
    JGs best interview.
  • jm
    jeff m.
    18 November 2020 @ 13:33
    William White is a treat he’s the only central bank insider that “gets it” (Or at least the only one willing to tell the truth)
  • DG
    David G.
    18 November 2020 @ 12:39
    Nice to see Grant back.
  • HK
    H K.
    18 November 2020 @ 11:21
    Great piece. Grant incisive as usual.
  • CC
    CCosta C.
    18 November 2020 @ 11:16
    I have been hearing this story for years and years and years, yes it will happen... eventually