Will there be Hyperinflation or Deflation?

Published on
May 25th, 2020
Duration
63 minutes

Will there be Hyperinflation or Deflation?

The Kiril Sokoloff Interviews ·
Featuring Lacy Hunt

Published on: May 25th, 2020 • Duration: 63 minutes

Kiril Sokoloff interviews Dr. Lacy Hunt of Hoisington Investment Management, the world's greatest monetary economist and expert on bonds, on the most important issues of the day. Dr. Hunt explains in very lucid language why many of today's beliefs about the global economy are incorrect: The Fed is not printing money now. QE1, QE2 and QE3 were also not printing money. The current massive U.S. fiscal programs will not stimulate the economy, only accelerate its long-term downward-growth trajectory. The productivity of debt has fallen sharply, and with it, the velocity of money. The best that can be expected from global growth post-COVID is 1% in real per-capita terms. Having reached the zero bound, current monetary policy may be counterproductive. The U.S. has no net national savings and is dissaving for the first time since the 1930s. This means there will not be capital to invest. Based on an examination of 24 over-indebted economies between 1900 and 2008, the over-indebtedness was solved through austerity. The Fed has the power to lend. It does not have the power to spend. However, if the Federal Reserve Act is changed to give the Fed the power to spend, it would result in hyperinflation. The early warning signs are there. The Bank of England may have crossed the Rubicon by giving £500 billion to the UK government to pay its bills. Filmed May 18, 2020.

Comments

Transcript

  • SO
    Shaun O.
    28 August 2020 @ 11:13
    can someone explain the difference treasury => Fed treasury => primary dealer => Fed isn't the primary dealer just taking a clip during the process or is there something more complicated with the amount/type of collateral the primary dealer needs to hold, or length of time it needs to hold or some mechanism to disincentivising buy hold a day then sell?
    • JL
      James L.
      13 September 2020 @ 01:24
      The primary dealer pays "cash" (actually creates a loan) to pay the treasury. The primary dealer doesn't get "cash" for the bond if the FED buys it, it gets a reserve deposit at the FED which it can't spend, it only counts towards the reserves which the bank uses to create more loans under fractional reserve banking. If the bank chooses not to create loans to the real economy because it sees the conditions as too risky to do so, no new "cash" (deposits at commercial banks) are created in the fractional reserve banking system. This is why QE only lowers interest rates (with a lag) and isn't actually printing money. The FED doesn't mind that the market thinks they are printing money because they want inflation expectations to rise. But QE in reality just keeps zombie companies alive and funds more government deficit spending which is ultimately deflationary to economic growth because we don't have creative destruction and new businesses started and because government deficit spending is only stimulative when government debt is below roughly 90% of GDP.
    • JL
      James L.
      13 September 2020 @ 01:29
      The Fed to admit that QE after the GFC did not cause a corresponding increase in loans being made "resulting in reserve balances far in excess of banks’ legal requirements": "Such large-scale operations are widely referred to as quantitative easing, which substantially expanded the size of the Fed’s balance sheet during the crisis and subsequent recovery. The Fed paid for those purchases by adding funds to reserve deposits, resulting in reserve balances far in excess of banks’ legal requirements." https://www.stlouisfed.org/open-vault/2019/august/open-market-operations-monetary-policy-tools-explained
  • DY
    Damian Y.
    17 August 2020 @ 01:53
    Dr. Hunt is one of the best economist. Japan has been doing QE since the late 80's, what did they get? Deflation and zero interest rates. Europe has been doing QE for about a decade and what did they get? Deflation and zero interest rates. The US has been doing QE for over ten years and what did they get? Deflation and zero interest rates. QE doesn't cause massive inflation, it cause deflation and it keeps interest rates very low. The same people who were screaming that the US was going to get massive inflation when the Fed started doing QE ten years ago were proven wrong and the same people are out there again screaming that we are going to get inflation, they will be proven wrong again. The people who are saying that the FED is money printing and that we are going to get inflation don't understand what the FED is doing. If we get MMT then we'll get inflation, same goods and service in the economy but more money chasing the same goods and services. QE isn't MMT and it isn't money printing it's creating bank reserves and the money doesn't even go into the system, it's nothing more than smoke and mirrors, it's amazing how many people who should know better are being sucked into the QE and the FED put delusion. As Jeff Snider said, "QE is nothing more than a puppet show and a really bad one at that."
  • Sv
    Sid v.
    13 July 2020 @ 00:12
    Great interview. Thank you RV
  • CT
    Crispim T.
    30 May 2020 @ 14:10
    Time to stock up on Bitcoin (BTC) before it is too late.
    • CV
      Collin V.
      30 May 2020 @ 15:06
      The more I learn about our current system, the more BTC makes sense as a solution to this insanity.
    • Sv
      Sid v.
      13 July 2020 @ 00:08
      when the politicians come for your property, they will include digital assets.
  • GG
    Gero G.
    21 June 2020 @ 21:20
    Interesting interview, but unfortunately Kiril is wasted here. Anyone could have read those questions of the script, missing push-back and detailed questions.
  • SZ
    Sean Z.
    19 June 2020 @ 06:04
    Why is Fed not monetising government debt (MMT) when it buys treasury bills although not directly from issuances but indirectly from primary dealers? Government issues treasury bills to pay for fiscal spending and the FED is the ultimate buyer of those debts, isn’t it?
  • JF
    Jennifer F.
    11 June 2020 @ 03:45
    Excellent. Loved the both of them.
  • BC
    Brente C.
    9 June 2020 @ 19:58
    Very eloquent interview but not convincing. House prices have nearly doubled in many parts of Europe in the past 5 years and kept rising even as GDP contracted 20%. Health, food, and education prices have risen. Equity indices can't stop rising on what is primarily multiple expansion. None of this can occur in a deflationary environment. Central banks can create money supply much quicker than demographics can age.
  • VB
    Vikram B.
    25 May 2020 @ 09:02
    I was looking forward to finding out how the secret that the world's greatest monetary economist was a lady was kept so quiet all these days. Alas, the name Lacy misled me! Nevermind, I have a question that I would have loved to ask someone of his intelligence and knowledge (that maybe someone from the community or RV can help answer): if your native currency is Singapore Dollars, a country that has to have a budget surplus by law, and uses its accumulated reserves only for emergency purposes (such as today), would you hold SGD over USD? A complicating factor I feel is that Singapore does not have a central bank that sets interest rates but a currency board that manages the exchange rate against a basket (but essentially the USD) and doesn't like for the currency to appreciate for maintaining trade competitiveness. Also, I assume the national reserves are mostly invested in things like Treasuries so maybe no way around the fact that Singapore's thrift will also be punished? Apologies if I am spouting nonsense as I my understanding of these complex topics is poor.
    • GH
      Guillermo H.
      25 May 2020 @ 10:11
      MAS has always structurally maintained the SGD competitively undervalued for decades to ensure a happy and very positive current account, leading to ever rising foreign reserves. High and rising reserves, in turn made the secondary objective of FX stability rather achievable. FX stability (and even, slowly appreciating SGD) is one of the foundations of Singapore's financial and asset management industry: Singapore as a stable, safe haven, low tax, store of value - and notice that you cannot ever be a store of value if your currency is deemed weak and fragile to depreciations. I suspect that 10 years from now the SGD will have appreciated the USD, for nothing more than SG having a very healthy balance sheet (considering GIC and Temasek and MAS offsetting high household debt), and a very high current account. But in the short term, I suspect that the biggest challenge to the SGD would come in the way of a shock devaluation of the renminbi (assuming that ever happens), which is one of the key trading partners. Ever since China started enforcing ultra strict capital controls increasing the perceived tail risks of a big Renminbi deval (2016-onwards), I have stopped saving in SGD altogether, and I have left my undeployed/idle cash instead in a basket of CHF, Gold, and USD. Although I have happy expectations for the SGD 10 years from now, my stomach is too weak to handle the uncertainty of a China deval hitting me by my SGD allocation. If China ever delivers that big deval, and MAS devalues the SGD in sympathy, then I will go back to leaving my undeployed cash in SGD. But until then, I sit on Swiss Francs, Gold, and US dollars. Somewhat related: You might want to look at the relationship between the change in the number of foreigners in Singapore, which I have found to be a good leading indicator for both real estate prices and for the SGD.
    • VB
      Vikram B.
      27 May 2020 @ 05:25
      Much appreciated Guillermo! 1) What is the dumb way for a retail investor to keep cash holdings in CHF? I tried the lowtech (fintech) way of keeping it in my TransferWise account until MAS decided it is a 'wallet' and max-ed the account max to 5000 SGD. Do you have to open a 'Swiss bank account'? 2) I assume you mean the drop in number of expats leads to weakening of real-estate and SGD? I am already noticing a number of 3-bedroom units in my apartment opening up as I see expats being repatriated or breaking their leases. Surely it is weak for the real-estate market to be balanced to some extent by people upgrading their house sizes as they are forced to WFH more. 3) Is CNY a key existing component of the MAS basket for SGD or do you think in case of CNY decline, MAS will change its policy band? I fear a dramatic deval of CNY too (which is why I closed my Bank of China CNY deposits in late Feb). However, if you believe that the world is undergoing some sort of Thucydidean struggle, isn't it wise to keep some exposure to the possibility that the rising power consolidates its strength? Or your view is that's a trade for the next phase?
    • EO
      Elena O.
      27 May 2020 @ 12:52
      2 currencies that consistently appreciated against USD over the long term - CHF and SGD - however in the interim I am also worried about SGD devaluation due to CNY devil. But unfortunately can't do much with my CPF and SRS savings in SGD. I think Temasek/GIC will take on household debt books from local banks to inject capital into 3 main local banks via some restructuring and prevent the property market from imploding. As for SG fiscal policy - it's been crumb #4 now - it seems Singapore is oblivious to other nations' printing presses rumbling...it won't be good for the economy and aggregate demand. I expect more ex-pats leaving the country in Q2, Q3, Q4.
    • VB
      Vikram B.
      28 May 2020 @ 11:07
      Elena - I guess you are aware that to a limited extent you can invest your CPF OA (and with caveat, SRS monies) in gold, stocks and certain approved funds (which can indirectly change your currency exposure). I have tried to max my CPF OA gold limits for example. Of course, you can also use your CPF OA to buy local property which is a good inflation hedge I suppose, especially if there is a dramatic drop this year in prices making it attractive to time it.
    • GH
      Guillermo H.
      9 June 2020 @ 05:33
      1) I am a retail investor as well! The way I "save" in CHF is primarily by means of my brokerage account. I use Interactive Brokers, exchange my SGD for CHF, and then simply sit on CHF while I wait for opportunities to emerge. 2) Yeah - the number of foreigners is a great leading indicator both for real estate price indexes but also, for the currency. 3) MAS does not disclose what are the currencies underlying the FX basket supporting the SG - but any econometrics regression you run will show that CNY is hella well correlated with the SGD. Over time SGD should be okay, but I fear that so much of the SG economy depends directly on China, that even if SGD depreciated against USD or EUR, it would matter too much: If the CNY devalues 30% and SGD only devalues 15%, mainland investors parking their cash in SGD will not feel that they are too worse off (and the rest of the Singaporean economy would pick up healthy price competitiveness). I could be wrong and this is definitely above my paygrade, I am a value investor simply trying to avoid being a turkey during macro thanksgiving.
  • dk
    dorothea k.
    8 June 2020 @ 00:46
    Dr. Hunt doesn‘t present a convincing case. He plays with semantics. He says QE is not monetary printing, though he says at several junctures that QE increases the money supply but it remains a first round effect, then peters out. That‘s semantics. His contention that money printing only seriously starts when Central Banks directly finance government spending, without a middle man, is also unconvincing. The primary dealers (Goldman, JP Morgan, etc.) take a cut of every $ of government debt that is issued and it‘s riskless free money for them. When the government issues a $ of bonds on Monday, a primary dealer buys it and sells it to the Central Bank on Tuesday. Neither is there a limit to the bonds the primary dealers can buy. Commmercial banks will be happy to lend them unlimited amounts on a credit line to buy those bonds, hold them for a day, take their cut, and pay the commercial banks back. I do understand and acknowledge that Dr. Hunt is smarter than I and has the experience and also that he might be right. But the argument he presented in that video does not make the case.
  • JA
    John A.
    27 May 2020 @ 02:59
    Everyone can't implement austerity at the same time. Your spending is my income. The idea that you can cut public spending when private spending is also contracting is what brings about pretty much every prolonged recession. I agree that the money spent hasn't gone to growth, and it has been mismanaged. But the idea that austerity alone is going to fix this is a fallacy. We need to stop promoting the wholesale raiding of our Treasury through bailouts and buybacks. But if you want to see a bunch of people shot in this country, try to cut social security in the next few years as we face a global depression. All you will accomplish is getting AOC elected president, or worse. I'd like to see Lacy Hunt have a conversation with Mark Blythe.
    • NH
      Nathan H.
      28 May 2020 @ 15:55
      That was my thoughts. Austerity won't work and it will cause some pretty serious social problems. According to some other prominent economists printing, direct fiscal spending and inflation is the way to go.
    • GS
      Greg S.
      6 June 2020 @ 18:16
      How about hitting the reset button called debt jubilee and starting this whole thing over?
  • AK
    Ado K.
    27 May 2020 @ 12:17
    Listen this guy is a little to f ing cute for my taste. The balance sheet is up 3-4 trillion in a few weeks. QE is not MMT simply because we are pretending that it will actually be paid back. Well I call BS on the pretending part, and what are we left with then? Hard core MMT. The mere fact that the MMT goes directly to banks, completely lacks relevance. It terrifies me to the core to see how many people have swallowed the cool aid on state money theory. People like Lacy literally carry the argumentation point that it is not money printing because it goes to the banks reserves, listen Sherlock either you are increasing the balance sheet or not, saying yes they are but...... just makes you a snake oil salesmen, with all due respect.
    • LS
      L S.
      31 May 2020 @ 22:18
      You're missing the part about how MMT will get to the real economy because of its ease and political underpinnings. I always had a question about the cash the government gets by selling treasuries, but most of this ends up going to particular asset inflation and doesn't go straight to mom and pop (well at least up to now). It's also inefficient as heck so it tends to not be productive and thus velocity doesn't increase.
    • GS
      Greg S.
      6 June 2020 @ 18:13
      Some of the "cash" the government gets by selling treasuries goes to retiring currently due government securities. How does this figure in?
  • MJ
    Mike J.
    4 June 2020 @ 19:23
    What does deflation mean for gold?
  • SG
    Shu G.
    2 June 2020 @ 23:53
    Dr. Hunt is probably the best who explained why the Fed is not "printing money". Bank reserve doesn't go to the economy when there's nothing good to invest in. Bank creates money through credit insurance. Now with banks put massive loan loss reserves, why would they lend out more if any. On top of that, the flattened yield curve just prohibits banks to take on that kind of risk.
  • TB
    Timothy B.
    29 May 2020 @ 22:21
    Regarding Lacy's insistence that for a new technology to overcome the low velocity of money caused by net dissavings it must be transformational (internal combust. displacing horse) rather than evolutionary (better horses replacing worse horses). Does this mean that the tech needs to be disruptive across all major sectors with energy being the ONLY essential sector?
    • SG
      Shu G.
      2 June 2020 @ 23:47
      well, China is investing and building a massive 5G infrastructure throughout the country to support AI and all sorts of autonomous stuff. I wonder if they are trying to implement that "transformative engine" to pull it out if 5G powered new world turned out to be transformative.
  • OO
    Oliver O.
    1 June 2020 @ 19:00
    So basically this is the case against gold? QE does not create (print) money and over-indebted countries will turn to austerity rather than borrow their way out of debt. Japan and Europe have been in an ultra-low interest rate environment for decades, and have experienced deflation and tried to devalue their currencies to increase exports. What is Dr. Hunt's take is on gold vs. the USD?
    • JN
      John N.
      2 June 2020 @ 22:25
      dunno if it is a case against gold. the safe haven aspect, the bet against usd aspect and most importantly the way the fed and politicians are going to do everything to fight deflation are supported by what he is saying. I dont think that gold needs inflation to go up (that is only one of the reasons) and I dont think that is the reason for the current bull market. I think it is coming from a distrust and fear of the current monetary system more then anything else. it isnt a prediction of inflation but an uncertainty of the future that is causing it. gold has the ability of storing wealth through other situations rather than just inflation. if assets are volatile and cash is uncertain gold can go up in a deflationary period. the more systemic fear there is the more that pushes money into gold. i think of it as scared capital trying to hide from the looming deflation. in that way deflation can be a reason that gold stays in a bull market. as long as people have fear of the currencey.. although a deflationary spike mat cause a drop in the price it will be temporary. to me the most telling thing about gold is that governments are buying it. all money is psychological and the psychology right now is very bullish for gold. one thing that might be very bullish for gold is that the fear is getting to the point where many people are going to want the physical product that could cause a really bullish supply demand situation for gold that is basically the inverse as to what happened in oil.
  • KG
    Kurt G.
    28 May 2020 @ 02:30
    Many thanks to RP and the RV team for bringing together two of the finest minds and people in finance. One theme that I've picked up on over the last several rounds of interviews with Tom Kaplan, Kiril Sokoloff, Lacy Hunt, Raoul Pal, Hugh Hendry, Chris Cole, Tony Deden, Stanley Druckenmiller, and many others is that history books are at least as important as financial reports to intelligibly invest today. I can't say how thankful I am for this platform and what the RV team has accomplished. Many viewers seem (rightfully and understandably) confused why QE has tended, at least until now, to produce medium and long term deflationary impacts. Based on the comments below, I'd offer that you have to start with the initial auction of government securities. When the government issues debt, someone or some entity must purchase it. Many of these buyers are purchasing out of their savings, e.g. pension funds, corporations, and individual savers, but primary dealers also bid (and in some cases must). By virtue of the transaction, the Treasury drained a pool of capital to finance government operations. In Macro 101, this is the government "crowding out" private investment. The Fed noted this phenomenon, for example, in its annual report last year regarding repo market problems (see page 1, https://www.newyorkfed.org/medialibrary/media/markets/omo/omo2019-pdf.pdf) When the Fed purchases these treasury securities back through its permanent open market operations, it does so through the primary dealers (https://www.newyorkfed.org/markets/treasury-reinvestments-purchases-faq.html). When primary dealers sell to the Fed, the Fed credits their reserve accounts held with the Fed. Consequently, the Fed has effectively pulled a yielding (at least until now) security out of circulation and replaced it with zero yielding reserves. Dr. Hunt's point, if i understand him correctly, is that while the Fed has effectively "replaced" the capital that the Treasury initially drained when it issued the bonds, the reserves are idle until the primary dealers actually find attractive lending to engage in. As Dr. Hunt mentioned in the interview, this is by design, because the Fed can only lend, not spend, at least as the law is currently understood and implemented. Bear in mind that regardless of what's happening with the primary dealers, to the extent real economy buyers have used their savings to purchase treasury securities, these buyers have done so at the expense of any other private or public investment opportunity. Thus, my understanding of Dr. Hunt's other key point is that if the government spending doesn't pay for itself, i.e. doesn't generate returns at least equal to the cost, then the multiplier on the money is less than one. This ultimately results in a less productive economy. Dr. Hunt cites the Rogoff and Reinhart work in support of this, which shows that eventually government debt tends to choke off productivity, and therefore growth, in the economy, with the most deleterious results occurring when a country passes about the 90% debt/GDP threshold. In other interviews and quarterly letters Dr. Hunt has cited at length the studies that have shown the multiplier on government spending is less than one. In my mind this is the fatal flaw behind central planning generally and its off shoot keynesian economics. It just doesn't work once you get to a financial crisis in an over-indebted economy, even if it shows some efficacy coming out of a garden variety recession in a vigorous economy. Many of the those commenting negatively on Dr. Hunt seem to be knocking his economic observations, as if he's an armchair economist, tenured professor, or Twitter personality that doesn't understand finance. In reality, he runs a treasury fund (as he mentioned), with a real mandate, to make real money. And make money he has. If you invested in the fund when he became a manager, you made 7x your investment . . . in a government bond fund. And yes, he's trounced his index and peers the last ten years. He doesn't have to hold maximum duration. But in his quarterly letters for the last several years he's laid out why he has and why he would continue to do so. Could he be lucky and right for the wrong reasons? Sure. He's just been lucky for almost 25 years now.
    • NA
      Naiem A.
      28 May 2020 @ 15:47
      I really don't understand why Lacy Hunt continues to quote The Rogoff and Reinhart work which is known to be riddled with errors: https://theconversation.com/the-reinhart-rogoff-error-or-how-not-to-excel-at-economics-13646 Lacy Hunts observation of the data maybe correct but he has the causality the wrong way around. Excesses in PRIVATE debt cause the slowdown, and Government spending occurs in an attempt to counter this. The events of the past few months should I think demonstrate this fact completely. It fails not because the government in excessive debt but because it fails to deal with the overhang of PRIVATE debt.
    • ms
      matthew s.
      2 June 2020 @ 04:51
      Roger said in the recent AMA that the banks are finding lenders, wall street, who, in turn, buy stocks and lead to increased asset prices like we see now in the stock market
  • BN
    Benjamin N.
    1 June 2020 @ 13:22
    Lacy, you are so good!
  • MZ
    Matthew Z.
    26 May 2020 @ 14:38
    We need to see Lacy Hunt vs. Stephanie Kelton. If anyone can get this done it's Real Vision!
    • LS
      L S.
      31 May 2020 @ 22:39
      Lacy doesn't want to make any statement even approaching policy or politically affiliated. Kelton is the essence of it.
  • JB
    Jim B.
    26 May 2020 @ 19:28
    Dr. Hunt keeps insisting that the Fed does not create money, despite the explicit statement of Powell (and a prior statement by Bernanke) that this is exactly what is happening. Hunt seems to be saying that when the Fed buys a bond, it is only creating bank reserves, not real money (see 15:00 and 19:28). But that is not correct. If a pension fund sells a Treasury bond to the Fed, the Fed essentially writes a check to the pension fund, which then deposits the check with its bank. The bank then presents the check to the Fed for payment and receives "bank reserves," i.e., a deposit at the Fed. (It's all done electronically, but it is the same process.) So under QE both new money (M1, which is of course included in M2) AND reserves are added to the system. This new money is not "transitory." It will remain as money (on the liability side of the banking system as a deposit) until that bond is sold or matures out of the Fed's balance sheet. This makes total sense because one of the major objectives of QE is to bolster the money supply when money-creation from bank lending is drying up. I understand Dr. Hunt's point about velocity - It is low and declining, which will put downward pressure on price inflation, but it is still a fact that the Fed is creating new money when it buys a security from a non-bank. In our system, nearly all money is loaned or purchased into existence by a bank. Either a commercial bank or a central bank can do the job. Dr. Hunt also implies bank reserves play an important role in commercial bank lending. They do not, other than the regulatory requirements set by the Fed. Banks do not lend their reserves. They create new money (deposits) by the act of lending. "Required reserve" levels are now zero and have been irrelevant to bank lending for years. Hunt has been correct about falling bond yields for years, so I would like to believe in him, but if he cannot clearly and correctly explain how money is created and destroyed, how can he be considered a credible economist? Contrast Dr. Hunt's confusing interview with the clarity of Richard Werner, who understands and clearly explains money and banking. Read his essay, "A lost century in economics," and watch his videos. https://www.sciencedirect.com/science/article/pii/S1057521915001477
    • MH
      Mark H.
      27 May 2020 @ 00:37
      As I have argued below, RV should do a money week special where different views on these issues can be aired.
    • VL
      Vitaily L.
      27 May 2020 @ 00:56
      Pension fund can't sell anything directly to the fed, only participating primary dealers can. Therefore, every purchase by the fed results in creation of reserves, nothing else. By the way, reserves are not part of any of the M1-4 measures u are listing, hence Fed does not print money. In order for it to become part of M1-4, it has to be lent out... now hopefully his point makes sense....
    • TM
      The-First-James M.
      27 May 2020 @ 01:00
      I'd like to see an RV-hosted debate between Lacy Hunt and Richard Werner.
    • LS
      L S.
      31 May 2020 @ 22:33
      Yes, Vitaily has it, the primary dealer linchpin/their constraints is the key to understanding why QE hasn't really caused any inflation (that record is clear).
  • JL
    James L.
    26 May 2020 @ 21:38
    Cut government spending and eliminate half of today’s government like after the 1918 pandemic! Not likely today!
    • PB
      PHILLIP B.
      27 May 2020 @ 00:47
      "Austerity." No way this is going to happen in the U.S. in these times barring some event that provides a shock. Losing a war would perhaps be one, such, cathartic shock. Climate change obviously is not enough. A pandemic obviously is not enough. Perhaps a global SDR that is trade weighted. Don't see any plausible scenario where this would happen barring a financial collapse. There are no good choices. At some point, we each are going to be on our own to figure out what is best for ourselves and ones who are close.
    • LS
      L S.
      31 May 2020 @ 22:26
      Yup, when you coddle people and keep them alive forever (with other people's money) what ends up happening is what seems to be a sudden rush of the realities of survival/lack of survival --- realities that should have been an honest part of life already. Sadly, now they set these up to happen all at once - an illusion of a tragedy - so it seems like the world we were living in was honest, fair, or realistic. Hint: it wasn't.
  • DM
    Dominic M.
    27 May 2020 @ 00:37
    This age's combustible engine is blockchain.
    • LS
      L S.
      31 May 2020 @ 22:22
      Yes, the issue is that the common man is left behind on this particular innovation. The common man by and large would be less common if there were actually more constraints on spending life was more "honest" if you will. As they say, however, anything that can't last ... won't. You know what that means (cue famine, plague, war).
  • SK
    Shammi K.
    31 May 2020 @ 19:05
    Outstanding
  • ND
    Nitul D.
    31 May 2020 @ 12:03
    Dr Lacy Hunt is a wealth of information and knowledge! Wow. Thanks RV for this interview.
  • TC
    Tom C.
    30 May 2020 @ 20:03
    watch this as a great overview and prediction view https://www.youtube.com/watch?v=NSGjau5YvBE
  • TT
    Thomas T.
    30 May 2020 @ 15:03
    Superb interview. Understanding economics is key. What dr Lacy Hunt says about QE seems to Go along with Richard Werner's ideas that QE is not inflationary. Of course there is not Just one kind of QE. The intricacies of monetary ppolicies vary according to legislation , the internal workings of institutions, ideas prevalent among those who run the levers of economy. So I say again this interview is superb. There should be more of that at that level. It makes imperative for those who want tô understand more of economics to study how money is created, to understand the banking system, the central banks.
  • PB
    Pieter B.
    25 May 2020 @ 17:48
    So unless the constitution is rewritten we might get deflation first? Should I sell my gold/bitcoin or would they continue going up during deflation anticipating a rewriting of the realm in which the FED can operate? Otherwise cash dollars might be the trade of the century, even now, which a high dollar
    • mw
      michael w.
      26 May 2020 @ 04:07
      Sell BTC. Gold won't fall enough to justify selling imo.
    • PB
      Pieter B.
      26 May 2020 @ 09:22
      Ok thanks for your reply! Raul also addressed this question in his video yesterday.
    • CT
      Crispim T.
      30 May 2020 @ 14:14
      Never sell BTC. But do sell the gold. It is 1) Heavily manipulated 2) Can be confiscated 3) Very expensive to secure and move 4) Hard to verify 5) Has an outstanding track record of thousands of years but has already failed multiple times (1971 for example). Gold failed before. It still has the same limitations. Won't be any different this time. BTC is the new gold. If you haven't put serious time into DYOR on Bitcoin, you really should.
  • sp
    serita p.
    26 May 2020 @ 04:06
    Could the transformative technology change that Mr Hunt discussed be Bitcoin? If gold became the transformative tech then why not Bitcoin now?
    • AR
      Andrew R.
      26 May 2020 @ 08:13
      I would love to hear people's thoughts on your question. I also thought Bitcoin might fit but wasn't overly sure what Hunt meant by technology or how he was defining technology. Good thought though!
    • PS
      Paul S.
      27 May 2020 @ 00:32
      I've also been wondering what the next transformative technology may be. I don't think it will be bitcoin, defi or even Internet 2.0. Hopefully it won't be anything as catastrophic as another world war. One candidate may be the techmology needed to try and contain and ameliorate the affects of climate change if, in the next few decades, it starts to bite.
    • SB
      Stephen B.
      29 May 2020 @ 03:52
      3D Printing
    • CT
      Crispim T.
      30 May 2020 @ 14:11
      It can only be Bitcoin (BTC). There is no alternative at this time. Nothing else can match (and surpass) gold. Bitcoin is gold, with added advantages and near zero disadvantages except the lack of a very long historical record.
  • JK
    Jake K.
    30 May 2020 @ 00:53
    Lever up and colonize space? All joking aside, this interview was fantastic. The intellectual humility and historical perspectives were world class. Would love a follow up interview exploring impact if deflationary and demographic forces on specific countries / asset classes. Any recommended resources on pending demographic shifts and how they could / will affect capital flows to specific asset classes? Those shifts at least feel structural / predictable relative to black swans currently in effect (COVID, oil shock, etc.).
  • WS
    Winthrop S.
    29 May 2020 @ 18:14
    How is applying the wrong value to collateral (say HTZ bonds) different than creating money?
  • SB
    Stewart B.
    26 May 2020 @ 15:35
    The only part that should have been highlighted is that the yield from QE assets is returned to the treasury. It is this, plus the implicit understanding that these assets will be rolled indefinitely, that means debt has been monetised. The Fed CAN create inflation without changing the Federal Reserve Act owing to these two criteria being met. Consider this example to demonstrate how the Fed and US Treasury can work together to monetise debt and outright create state money inflation: Imagine the extreme hypothetical that the treasury runs a deficit of 330 million trillion dollars. US gov sends a cheque for a million dollars to every US citizen. The Fed buys these $330 x 10^18 treasuries to fund this 'helicopter money'. Perhaps a broker dealer keeps them for a couple of weeks between. Now, these treasuries were sold with a 1% coupon. Each year, ordinarily the US treasury would have to pay $330 x 10^16 in interest coupons. However as the Fed owns them, they don't. This is now sustainable. This is the important part. The Fed is NOW essentially paying the government's interest expenses. In doing so they have funded sending a million dollars to each person. So, we now have a scenario where the US gov has sent everyone a million dollars of new money. The US gov effectively has no ongoing cost for this, assuming the Fed keeps rolling the debt in perpetuity (as they currently do with QE assets). This must be inflationary, right?
    • EO
      Elena O.
      26 May 2020 @ 16:39
      they can do it now already. have heard about zero coupon treasuries?
    • NF
      Nathaniel F.
      26 May 2020 @ 17:08
      Haven't they basically done the same thing in order to bail out the financial institutions? They just won't be it for ordinary citizens because then the whole game would be up.
    • Mv
      Martijn v.
      28 May 2020 @ 23:22
      It seems to me that the balance sheet of the FED is the issue and the quality of its assets. If the FED purchases securities which are - de facto - junk, its eq
    • Mv
      Martijn v.
      28 May 2020 @ 23:25
      It seems to me that the balance sheet of the FED is the issue and the quality of its assets. If the FED purchases securities which are - de facto - junk, its equity becomes negative and therefore the purchasing power of the currency drops accordingly. That is the reason that the FED really can't expand its purchases of junk bonds, or for that matter excessive amounts of government debt from a bankrupt government.
  • IP
    IDA P.
    28 May 2020 @ 17:46
    I believe that it all comes down to this: there cannot be bailouts of any kind because the system doesn't reset and the debts just explode. If you must intervene to save the banks, it must only be against good credit which is illiquid. Getting away from this rule in 2008 has brought us to this mess
  • MK
    Michelle K.
    27 May 2020 @ 18:32
    Could RV or anyone point me to the McKinsey report on 24 overindebted advanced economies mentioned in this interview please? Thanks!
    • AP
      Andrew P.
      28 May 2020 @ 03:40
      Think this is it: https://www.consultancy.nl/media/2010-01%20McKinsey%20-%20Consequences%20of%20Global%20Credit%20Crisis-598.pdf
    • MK
      Michelle K.
      28 May 2020 @ 08:36
      Thanks. I had seen this online as well but this study seems to have been on 32 economies (including emerging), 16 of which delevered via austerity, while the remaining did it via inflation, growth or default - vs. what was said in the interview that 24 out of 24 advanced economies came out through austerity... But yeah can't imagine many studies on this being done around the same time so this should be it, it just doesn't square up with what was said.
    • NA
      Naiem A.
      28 May 2020 @ 15:53
      It should be taken with a large pinch of salt: https://theconversation.com/the-reinhart-rogoff-error-or-how-not-to-excel-at-economics-13646
  • BT
    Brian T.
    27 May 2020 @ 21:23
    My question for Dr. Hunt: Is the Fed "credit line" to the Treasury being used to buy high yield and investment grade bonds - is that DIRECT MONETIZATION? I don't see any reserves being created here. This would be appear to be inflationary or (at a much bigger scale) hyper-inflationary. This is direct monetization buying credit. Do you agree?
  • CB
    Chris B.
    27 May 2020 @ 17:55
    My view is this was an excellent interview by Kiril and well thought out logic by Dr. Hunt. Listening to these two smart and deep thinking individuals was a real pleasure. BTW, I respect and understand that everyone wants more specific ideas but I also want to develop a framework to make my own decisions. This video helped with that. As a side benefit it triggered me to think harder about the upcoming election.
  • JS
    Justin S.
    27 May 2020 @ 15:39
    Delighted to discover Real Vision's Christopher Walken.
  • tr
    tom r.
    27 May 2020 @ 00:44
    I learned a few things about history but, that doesn't ring the cash register. I would suggest one thing that, I believe, every viewer would like to hear. At the end of every interview, ask what that person is buying or has invested in in the last 60 days. If these people are really as good as people say that could pay nice potential dividends. After all, isn't that why we subscribe?
    • PB
      PHILLIP B.
      27 May 2020 @ 00:56
      I don't know. Many of these interviews provide a varied perspective to help us as individuals make the decisions we need to make to thrive, nay, just survive, in the forthcoming economic and financial chaos in the years ahead. A trader in the oil markets...yes, I expect trade ideas. A historian or former central banker or geopolitical analyst, I don't have such a high expectation of their sharing their investment thesis. Many of the guests are filthy rich. But, not all are so. The intellectually savvy guests who are not filthy rich might be as shit scared as the rest of us. Good to hear what they think, and maybe they got a few hundred K, but I'm not going to follow their money. They cagey guests who speak in symbols and code are the guests whose money I want to follow. I'm not worried here on RV about what Taleb identified as "skin in the game." Perhaps I am naive about this for some guests. But, overall, I don't feel like my time is being wasted by the intellectual-oriented guests who share a geopolitical perspective, or other long arc perspective, rather than a trade idea. Another perspective on this is that there are trades for tomorrow, and there are trades for six months, a year, two years, and longer. RV tends to focus on the longer-term perspective. That's ok and that's why I'm here.
    • MH
      Martin H.
      27 May 2020 @ 04:25
      Yeah... but I doubt that RV pays for the time and opinions. You probably have to pay more for that sort of attention to detail.
    • JT
      Jayne T.
      27 May 2020 @ 14:28
      RV gives you the tools to make your own decisions.
  • JE
    J E.
    27 May 2020 @ 12:16
    Great interview, thanks. I listened twice and took notes. Hunt uses a lot of precise language and I found several points I wanted to look into and understand better. Thanks again.
  • jg
    john g.
    26 May 2020 @ 19:13
    If I were a Millennial (I’m a Boomer), I’d look at all this debt, see my life not as good as my parents, and reflect upon Student Loan debt that ballooned when loans could not be dismissed in bankruptcy. And nice things COST SO MUCH relative to income. And hell, the climate is all screwed up too. Did everything Boomers do give us headaches? And Millennials will intentionally inflate the debt away. Good for people with earnings indexing upward, tough on seniors. Clearly not an environment for easy market returns. Preparing for this event (more likely for this process) and maintaining a comfortable lifestyle is a major financial focus - and a reason I’m a RealVision subscriber. In the shorter term, I think we will experience localized inflation where there are shortages, but in an overall deflationary economy. If there is no demand, because consumers collectively don’t have disposable income, how can you maintain an inflationary environment?
    • ES
      Elizabeth S.
      26 May 2020 @ 19:27
      As a millennial I mostly agree. I think there will be some tension about inflating away the debt as some millennials and now Gen Z are rejecting debt after being personally impacted by student loans or seeing it screw over older people. I see debt forgiveness as equally likely as inflating away the debt as a way to deal with it. It may hurt savers less than just trying to inflate it away and it will rely less on people having jobs that can pay the debt off, which many of my peers have struggled to find.
    • lm
      luke m.
      27 May 2020 @ 04:49
      I think inflating the debt away is faaaaar more likely than a debt jubilee. The FEDs actions are clearly to further the wealth gap between the rich and poor and a debt jubilee seems to be too fair and equal for everyone so I doubt it'll happen.
  • VP
    Vasilios P.
    27 May 2020 @ 02:14
    EXTREMELY Interesting. He should of mentioned what he expects to happen to the stock market in the "recovery period" expected
  • SB
    Steve B.
    27 May 2020 @ 01:30
    amazing. also, can someone shoot a slow pan video of kiril's book collection?
  • PH
    Petter H.
    26 May 2020 @ 19:20
    I am really trying to understand why QE seems to decrease the velocity of money. Is it because 1) the money goes into financial system / assets, meaning that a larger % of say M2 is now stuck in financial system and hence not moving. Or is it more because 2) the banks increase lending as a result of QE, but loans are unproductive (gone to zombie companies that would not have gotten a loan otherwise) where it leads to less money moving around compared to if it had been to a healthy company? Combination of the two? Something different? Would love any help to understand this.
    • AD
      Antonio D.
      26 May 2020 @ 21:37
      My understanding is that QE is expected to increase velocity of money "ceteris paribus" (all things being equal) - if you gave easy money in a strong economy, the average person would borrow and spend supporting the velocity. However, at the point the Fed introduced QE it is exactly the opposite - all things are not equal. You are likely in a weaker economic state and they are trying to stimulate lending and spending when banks want to lend less, and individuals want to spend less. More saving. Less velocity of money. How do others understand this?
    • VL
      Vitaily L.
      27 May 2020 @ 01:21
      Velocity is just a variable in equation; GDP = MxV. Fed increases M (it actually increases Monetary Base, which then flows to M thru money multiplier), but GDP doesn't have to respond in the same direction, so V falls or at least so Dr. Hunt asserts. Fed of course hopes that V stays the same and GDP increases.... The reason V has been falling is due to non productive nature of new credit that Fed incentivizes i.e. financial speculations vs capex. As a result, GDP's growth is slower and therefore V falls.
  • MZ
    Matthew Z.
    26 May 2020 @ 19:32
    Also - my take after listening to this is our only path out of this (given savings / austerity will not happen) is we turn into Japan (low growth high debt) or Germany after WW1 (hyperinflation). Is that the crux of this?
    • PB
      PHILLIP B.
      27 May 2020 @ 01:09
      Turning into a Japan is as good as it's going to get. But, lacking the infrastructure and social cohesion. Without the U.S. losing a war and being forced to reset, it's a Japan. Would be helpful to hear further in the months ahead about the mechanics of a debt jubilee. For example, what happens to teachers' pensions if their holdings become worthless and the Fed/Treasury deposits dollars into their funds. They have to purchase something with the money to take the place of the defaulted debt. Where would those billions be directed to? My intellect is too small and is hurting...RV, we need help to work through this.
  • AW
    Andrew W.
    26 May 2020 @ 11:39
    Ray Dalio and Bridgewater have studied these long term debt cycles extensively and determined it is not just austerity that notes the resets. It is outright wealth redistribution via cancellation of debts, taxes, and monetary inflation. In every case, some form of debt jubilee is required. I fail to see the difference between Fed outright funding the Treasury's account and buying up unlimited bonds, other than the psychological effects on those who place confidence in the US dollar. I believe the UK's actions and the resultant lack of any significant move in the pound suggesting hyper-inflation will show there is in fact no difference between "debt monetization" and "creating reserves to cover deficits by B/S expansion", since the former and latter enable equivalent Treasury spending schedules when there are no bounds on what the CB can do now or in the future.
    • TM
      The-First-James M.
      27 May 2020 @ 01:05
      Regarding the Pound, give it time. It's already weakened. I say this as a Brit who's getting nervous about this.
  • BS
    Bevyn S.
    25 May 2020 @ 17:39
    I still don't understand the argument that technically speaking the Fed isn't printing money. What if the Fed continues purchasing and never drains it's balance sheet (continues to purchase t-bills / bonds)? I can't wrap my ahead around why this is different from the Fed "spending" other than they have collateral to drain the money if deemed necessary. Is it that they are crowding out the private sector because currently excess reserves are held in cash by the banks? Regardless if the Fed just "spent" wouldn't it still end up as excess reserves, since the private sector is deleveraging? Can someone explain what I'm missing? Furthermore, I wonder if QE or money printing would have a different effect if banks were forced to hold t-bills or bonds (with repo available by the fed) and thus didn't crowd out the private sector and forced the money into the real economy? I'll be honest, my brain hurts. Dr. Hunt is super smart. Thanks for this video.
    • DK
      Dennis K.
      25 May 2020 @ 23:27
      For me it is also impossible to understand the difference between Fed “creating money” to buy (direct or indirect) goverment bonds and then the goverment spends the money or if the Fed does that directly. Why is their a difference between them. As i take away from this interview that the latter is inflationary and the first not . Anybody ?
    • JH
      Jesse H.
      26 May 2020 @ 00:41
      Respectfully, I think Dr. Hunt may be wrong about this and you are understandably confused. I found his explanation pretty lacking, which is typical of orthodox economists who drown themselves (and others) in murky jargon to paper over inaccurate concepts. My read on all of this is that it IS inflationary, but not in the traditional sense — what I mean is that you have to look at where the money they are effectively printing goes. In the GFC it was in the markets. Currently...also in the markets. So in my humble opinion, for what it’s worth, current Fed money creation is bolstering various elements of the US main market indices and related sectors (eg. Junk debt from zombie corporates, CLOs, etc.). Without this backstop, the S&P would likely be closer to 2,000 (or even lower) right now. Also, remember it’s not just the Fed - there is a whole entourage of other actors (eg. BlackRock, JPM, etc.) who effectively coordinate what you could term “Ponzi purchases” and trades in the market. The whole thing is a massive house of cards, with mainly the weakness of other foreign markets and the continuing strength of the dollar helping to fuel ongoing capital inflows into the US. When that changes, it will be ugly. Gold, Silver, Bitcoin and Dollars (for now) are the best plays. Farmland not a bad idea either.
    • BS
      Bevyn S.
      26 May 2020 @ 01:56
      Yea he totally brushed off the mention of non-treasury assets LOL. Forgot about that. Yes, I agree it's a house of cards. My point though was that we are printing money, and it is NOT inflationary (for consumer goods). Inflation in my mind is caused by an inability to satisfy demand with current supply. I take the stance that demand for goods and services is infinite, and that there is no inflation because the demand cannot be realized (too much debt, too little income for most folks). If globalization really is going in reverse, THEN we will see inflation. And then the Fed cannot support the house of cards any longer. Until then, it's more of the same.
    • MH
      Mark H.
      27 May 2020 @ 00:45
      Short answer - reserves are not money. Nathan Tankus refers to them as settlement balances which is a good description as they only pass between banks/primary dealers. Read him and Jeff Snider to start to get a balanced view of money in a Financially Globalised World and stop thinking the Central Bank is Central.
  • AR
    Andrew R.
    26 May 2020 @ 08:09
    Amazing content as always. I have zero financial background which is why I feel so much of what is happening doesn't make any sense. It's like a big poker game where all the gamblers get bailed out by the house because they don't want the game to stop. At the same time, all the good players are cashing out because the "risk/reward" doesn't make sense anymore and the rules no longer apply. So are we basically standing on the sidelines waiting to see how long the house (Fed) can find new gamblers to keep the game going? Hoping things just get better. I realise it's an oversimplification but based on the content in this video it seems like we either have a greater fool market or a completely falsified market that no longer requires the economic machine to feed it?
    • RD
      Ruediger D.
      26 May 2020 @ 10:56
      I think you are completely right, Andrew, to see it as simple as it is. All these complicated explanations that are given have only the purpose to avoid that people understand that the money is mostly printed to bail out the part of the population the printers belong too. But this time there is a big difference. It's not possible to bail out only themselves as it was done in 2008 leading to an asset-inflation only. Due to the virus and the shutdown they must this time also print money for the other part of the population to prevent them from revolting which might lead to inflation or even hyperinflation as it did in the Weimar Republic from 1923 on.
    • AD
      Alejandro D.
      26 May 2020 @ 14:48
      how do you see the future?? what are you doing with your own finances?
    • AD
      Antonio D.
      26 May 2020 @ 21:53
      Alejandro - One approach are "real assets" as inflation hedges: land, gold, bitcoin.
  • RN
    Richard N.
    26 May 2020 @ 15:32
    One thing I found really interesting, was the fact deflation will cause firms to lower wages. I wonder if there is a fiscal or monetary policy that could help mitigate this risk specifically? If wages were to decrease we would be exacerbating the current wealth disparity we see and reduce the US consumer power which makes up 70% of GDP. It sounds like a major issue, interested to hear thoughts from Dr. Hunt and Kiril would say on this subject, although I know neither are politicians and don't want to be.
    • AD
      Antonio D.
      26 May 2020 @ 21:42
      Will be interesting to see the waterfall effect, if any, of the work-from-home movement on these lower wages. With Facebook voicing their opinion and explicitly stating they will pay less in lower-cost-of-living zip codes, it is the green light for all other tech companies to do the same. Indeed, in this deflationary environment and work-from-home, if it coincides with lower wages for those privileges to work and still have jobs, consumption will be hurt.
  • OM
    Owen M.
    26 May 2020 @ 21:21
    Incredible, very nice work RV.
  • IP
    IDA P.
    26 May 2020 @ 20:49
    superb!
  • JS
    JEVGENI S.
    26 May 2020 @ 20:48
    Just brill, moar plz
  • AK
    Andreas K.
    26 May 2020 @ 19:33
    This interview is so incredibly interesting. Alligns perfectly with Princes of the Yen.
  • JH
    Jesse H.
    25 May 2020 @ 21:23
    I am so impressed with Kiril, as usual. But very disappointed In the orthodox and incorrect views espoused by Dr. Lacy Hunt - almost all of his economic theory seems to ignore the true dynamics of money creation (ie. banks are NOT financial intermediaries at all), and one does NOT need savings to fund investment. These are mainstream and empirically false ideas from classical economists that have nothing to do with how the economy and our banks actually function. Please have Prof. Werner on again, ideally interviewed by Kiril. That would be an absolutely amazing interview, and would teach people about what really happens in the real and financial economies. Cheers.
    • ML
      Mary L.
      25 May 2020 @ 21:38
      With all due respect, I disagree. This is not the first time that Dr. Hunt has been a guest of Real Vision, so if you did not follow this train of thought, you should go back and listen to his older interviews. Like the one with Danielle or the most recent one on Macro Voices. Google him and you will see that your time investment in understanding what he said will be valuable for you and your investments.
    • JH
      Jesse H.
      26 May 2020 @ 00:29
      Mary - I appreciate your points, but I really don’t need an education here. I am a longtime RV subscriber and have spent hundreds if not thousands (yes, thousands) of hours watching Raoul (and Grant), Lacy, Kiril and Mike Green over the years. Respectfully, it seems you may need to look deeper at your own read on economics — Dr. Hunt’s views are simply factually incorrect when it comes to many things, but chiefly the nature of money creation, how the banking system really works and why his whole general equilibrium model doesn’t work at all. It never has, but these folks keep parroting the same orthodoxy year after year, despite others debunking their theories (eg. Steve Keen, Richard Werner, etc.).
    • JO
      Jack O.
      26 May 2020 @ 03:37
      I disagree. The fact that the credit creation process takes place in the private banking system (offshore eurodollar markets for example) does not negate what Dr. Hunt says. His views are reconcilable with those of Jeff Snider (and Warner, from what I know they have fairly similar views on credit creation, if not on motivations). At the end of the day, regardless of where or how credit is created, it has to financed eventually by real savings. No matter how complex the system becomes, it always works at it's most fundamental level like a robinson crusoe economy.
    • NA
      Naiem A.
      26 May 2020 @ 18:23
      I agree entirely with Jesse's opinion. As for the Robinson Crusoe economy, it is and has always been a fiction. you should read this: https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years Money evolved from Debt and that is the system we have been living since the dollar came off the Gold standard in 1971
  • DS
    David S.
    25 May 2020 @ 17:13
    Love the interview so far. I beg to differ about inflation. Inflation always follows the money! The QE ends up in the markets, as banks loan to investors, not to main street. Everyone knows the markets are not reflecting the economy. The markets are reflecting trillions in the hands of investors. Certainly not a GDP productive use of funds! Common sense can pass for genius when too many economists have a convention. DLS
    • BS
      Bevyn S.
      25 May 2020 @ 17:53
      David-I think the argument is that eventually the money ends up in excess reserves held in cash, after it goes through filters through the economy / financial markets. I.e. this is not the "high power" money Bernanke and other economists think it is (not being lent back into economy after original filtration). Examination of bank balance sheet supports this, as I think Dr. Hunt is saying (and I've heard elsewhere, haven't actually investigated myself). I also think Dr. Hunt would argue it isn't lent back into the economy because the risk premium is larger than the expected return, i.e. no opportunity for ROI and thus banks don't lend. He actually talks about this at one point.
    • DS
      David S.
      25 May 2020 @ 17:54
      The Fed does not create money, except maybe in the repro market. The Fed does control the banks. QE allows the banks to create money by loaning. When the banks loan money to market investors, they use leverage to bulk up their investments. The Fed may not print money now, but they allow banks to create money with regulations. This generates hard market and asset inflation. Is there something I am missing? Profits will be down markedly. Individual savings will be up as much as possible. Many businesses will close and never reopen. The engine of the global market, the US consumer, is in trouble. Yet the market is doing well. The vast rotation into tech and biotech stocks is reasonable as the new economy unfolds. This rotation certainly is inflating the P/Es of these stocks also. I am mostly in cash as I do not know if this will end in accelerated inflation or accelerated deflation. DLS
    • BS
      Bevyn S.
      25 May 2020 @ 18:07
      Pretty sure his argument is that they are not leveraging up, in fact their leverage ratios would come down. It may help with liquidity in the short term and provide a sugar high, but this would dissipate quickly. Short term, he argues we may see some growth and the combined efforts of the fed and the gov. will help alleviate pain, but long term it will do little to increase inflation or real growth (and will most likely exacerbate it to the downside)
    • BS
      Bevyn S.
      25 May 2020 @ 18:22
      Also, I think this is a bear market rally :). Cash is probably a smart idea. Some companies are probably doing better than others due to leverage ratios, seems like P/E is irrelevant right now.
    • BS
      Bevyn S.
      25 May 2020 @ 18:26
      Also, I'm pretty sure this whole idea that banks are loaning money to speculators is not true. That's what I meant by their leverage ratios are going down (they are not lending).
    • BA
      Bruce A.
      26 May 2020 @ 03:07
      I don't think the real issue is the bank reserves. It is the fact that gov't deficit spending is supported by a growing FED balance sheet in such a way that there is no 'crowding out' of domestic private sector or international lending/borrowing. Alternatively, if there is simply no intention of domestic private sector or international lenders to take on more US treasuries, it supports growing gov't deficits without raising the interest rate required to clear the increasing issuance of US treasuries. This becomes clear when viewed from the perspective of new Treasury issuance and the recycling thereof through the secondary market and then back through Primary Dealers onto the FED balance sheet: Primary Dealer bank reserves at the Fed are removed initially as the the auctioned Treasuries go to Primary Dealers and into the secondary market. Then reserves at the Fed are returned (credited) to Primary Dealers as FED QE takes Treasuries onto the Fed balance sheet. FED BALANCE SHEET EXPANSION VIA QE while US TREASURY ISSUES tons of paper would otherwise chew through private saving and/or international creditor saving OR force the interest rate on that paper higher..........with all the obvious implications for debt markets around the world.
    • DS
      David S.
      26 May 2020 @ 07:07
      Bevyn S, and Bruce A. – I appreciate your help. Both of you may be correct and I may be wrong. My big problem is the stock market does not reflect the damage I see to the real economy caused by the COVID-19. Maybe the stock markets have rose colored glasses. Every time we have had QE the market takes off. This means large cash flow into the market. If it happened once or twice it might be a quirk. But it happens every time there is QE. Since banks are the mechanism for creating money, it must be something within the banking system. Time will tell. Maybe the next time the taxpayers bail out the banks. DLS
    • DS
      David S.
      26 May 2020 @ 18:04
      Quantitative Tightening affects the stock market in the opposite way from QE. I do not think this is just psychological. QE the stock market goes up. QT and the stock market goes down regardless of the profit projections. On average it takes additional money to drive the market up and a withdrawal of money to drive the stock market down. It is impossible for me to believe that QT and QE do not directly affect the stock market. I believe that QE provides additional capital to the market through the banks and QT withdraws capital from the market through the banks. I old and I am sticking to my story. DLS
  • NF
    Nathaniel F.
    26 May 2020 @ 17:23
    Dr Hunt talks about how the gold rush financed the western expansion and world war 2 allowed us to take the medicine of austerity. In the US, we have a massive need for infrastructure updates, strategic production capacity needs to return to the country, and decentralizing our national food supply chain. Could government investment in these type of strategically productive endeavors be our modern transformation point?
  • JL
    Johnny L.
    26 May 2020 @ 11:34
    My only disagreement is with the initial snap back in consumption to the level Lacy suggests. I am looking hard at restaurant, shops and in tourist regions we've visited the past 4 days and I promise you there is very little activity. The tourist areas are 99% shut down in Lisbon where I am at my condo. Maybe states are different right now. Those who have only a credit card for consumption now do not have a CC, wages or savings. Some snap back sure but how come there be anything meaningful or measurable?
    • NF
      Nathaniel F.
      26 May 2020 @ 17:13
      He does mention that he believes many, if not most businesses that closed are closed for good. Let the credit restructuring begin!
  • RY
    Roger Y.
    26 May 2020 @ 17:01
    Kiril did an excellent job logically leading Lacy through his (Lacy's) long standing position on debt, debt productivity, velocity, output gap and potential trend in interest rates. Lacy was equally articulate in his explanations. It was a true lesson in clearing up classic misperceptions of monetary policy and its economic impact. Roger Y.
  • PQ
    Peter Q.
    26 May 2020 @ 15:42
    What an important and rich discussion.
  • RL
    Ross L.
    26 May 2020 @ 15:41
    So good I watched it twice. It isn't every day that most of us get to listen to an absolute wizard of textbook macro who also happens to make a living in the markets. I hope Real Vision will monitor the Bank of England's new (temporary?) power to spend, and let us know if anyone sees any hints that it is creeping into the Fed's authority or if it is expanding in the UK.
  • JL
    Julian L.
    26 May 2020 @ 14:57
    Currency War
    • JL
      Julian L.
      26 May 2020 @ 15:34
      maybe gold or crypto currency is the remedy
  • JN
    Jack N.
    26 May 2020 @ 13:21
    Best interview I've seen to date. Absolutely outstanding! So thoughtful, clear and analytical.
  • RA
    Ralph A.
    26 May 2020 @ 12:58
    Great video but it ended a bit abruptly.
  • MS
    Milkey S.
    26 May 2020 @ 12:33
    Ultimately, human capacity is bound relative to influx of the money/credit supply. This antiquated system was/is predicated on pulling future demand into the current always in an effort to keep employment up & inflation stable. We're now at the intersection of too much debt & not enough demand to match coupled with the deflationary & efficiency pressure's of technology. In summary, our innovative output has rendered the system less dependent on requiring "more money" yet human's are still in the acquiring/quantity phase partly due to the ease of credit issuance & societal conditioning-the unwind decade is upon us, more for less.
  • CP
    Curt P.
    25 May 2020 @ 19:26
    i wrote a paper in 2008 about this need for some new transformative technology. That tech has not come yet. The way to tell if a tech is transformative is to gauge how much life (labor) will the average person give up to the tech. Think about indoor plumbing, or indoor heating, or indoor water, or a car, etc. Then compare that to a Fitbit, breadmaker, bitcoin, ebook, etc. Why do i say 'how much life to give up?" Because that is what a loan is - it puts you into debt servitude. The modern economy mostly functions on manipulating people into thinking they can't live without XYZ idiot product in order to get them into debt servitude.
    • EP
      Emma P.
      26 May 2020 @ 03:35
      Curt P. To help me understand this concept was the internet new transformative technology? Could cryptocurrencies/ decentralized finance satisfy the definition?
    • JO
      Jack O.
      26 May 2020 @ 03:40
      I'm thinking we need a new energy revolution. Either commercially viable fusion reactors or some other high density energy source that is orders of magnitude more efficient than fossil fuels.
    • TN
      Tim N.
      26 May 2020 @ 06:03
      AI and robotics rather than a world war I hope.
    • CP
      Curt P.
      26 May 2020 @ 12:22
      Emma, no cryptos would not be transformative. The internet is transformative though. To test the concept in general, look at what middle-class people in middle-income countries buy. Tim & Jack - Energy revolutions can be transformative IF there is an existing energy bottleneck - which would be the case for advanced manufacturing states that are energy poor. The crux of it is that for economic activity to grow, there has to always be a new incremental borrower. Whether through domestic population increase or by imperial expansion, or by transformative tech. Now think about what the decoupling from China will mean for US corps.....
  • HS
    Harrison S.
    26 May 2020 @ 11:43
    Amazing interview. Perfect job Kiril and Lacy. Lacy is full of knowledge and spot on about everything. Please bring him on again. Would love to hear his thoughts on stocks bonds gold bitcoin etc
  • EP
    Emma P.
    26 May 2020 @ 03:27
    I have watched the RV interviews with Professor Werner and Dr. Hunt and their other interviews on Youtube. My take is that they both agree that the commercial banks are the mechanism that gets the extra money out to the economy. In the absence of the Japanese style "window guidance" forcing loan increases to relevant sectors/ uses (productive operational - good, financial assets - bad) under threat of a loss of banking license, the lending constraints on the banks appear to be the credit quality of borrowers and pricing for risk. Lending to already heavily indebted borrowers increases the insolvency risk for the borrowers and in turn the banks. The flat yield curve hurts their margins, the ability to absorb credit losses, and pricing for risk. Revenue is a key factor in determining, debt serviceability and solvency (and the austerity pathway to increased savings discussed by Dr. Hunt). Understanding the impact of recent events and policy actions on revenue will be critical. It appears that over-leverage/ over-indebtedness is the proverbial elephant in the room. If the debt problem can no longer be solved with more debt and controlled inflation can't be harnessed by the policymakers to inflate the debts away, are we forced to choose between a controlled debt jubilee or uncontrolled widespread bankruptcies and social unrest? At the conclusion of all these interviews, it would be helpful if RV could produce a summary video outlining the divergent views of the participants and how we will know, in time, if they are right or wrong. Maybe they will all be wrong.
    • PB
      PHILLIP B.
      26 May 2020 @ 04:37
      Summary video after the Recession series is a good idea.
    • MH
      Mark H.
      26 May 2020 @ 08:00
      Need to bear in mind that ‘Monetary Economists’ is not a one size fits all description. Dr Hunt is very much an ‘orthodox’ monetary economist who believes in the relevance of the monetary base, the money multiplier and velocity etc. The modern financial system has changed dramatically in recent decades as has money itself. Financial Globalisation has moved money on in all kinds of weird and wonderful ways. There are many very good economists who will give you a different way of looking at money and explain its evolution such as Perry Mehrling, Jeff Snider, Steve Ken, Richard Werner and Nathan Tankus to name a few. I would like to see RV do a money week or fortnight series in which modern views of money are discussed and debated. This is not a rally cry for MMT to be given some air by the way. How modern money works should not be confused with MMT. For example, Perry Mehrling has promoted a branch of economics known as the Money View which is not MMT. Jeff Snider is not an MMT’er but explains how largely irrelevant the Fed is in the context of global money. Nathan Tankus’ substack is very educational on money basics as well as more complex issues even though some may describe him as an MMT’er. The point is that relying only on the views of Monetary Economists such as Dr Hunt is illogical. It is akin to saying one persons opinion on an issue has to be the right one just because of who they are!
    • MH
      Mark H.
      26 May 2020 @ 08:37
      Add Professor Michael Pettis (see recent book coauthored with Matt Klein) to the list. He describes very well how ‘global Savings’ move around the world and the different effect they have on surplus and deficits countries using a different model different to those used by the names mentioned above. By the way Dr Hunt indicates that the US will be capital constrained by a lack of savings needed for investment. Professor Pettis would strongly disagree that the US can be capital constrained.
    • CP
      Curt P.
      26 May 2020 @ 11:30
      The over-indebtedness is an easy solve, but no one wants to do it. First, realize that for ever debtor, there is a creditor. Find the creditors (the holders of financial assets) and tax them very heavily. That will reverse the flow of income which currently exists from debtor to creditor. Second, force them to sell their assets to pay for their lifestyles. You will notice that most of them are old people, so you force them to pay for their medical - stop subsidizing it. And you force them to pay huge taxes to live in homes which are too big for them. And you tax them heavily on their additional homes.
  • JC
    John C.
    26 May 2020 @ 04:19
    Somewhat unclear on what this means for gold. Is he saying that the Fed is not printing money and not creating inflation? As such, he is implying that the gold price boom in 2010-2012 was unfounded (ie. concerns about inflation and unknown effects of QE were misplaced)? So this would mean that he thinks the expected gold price boom that many think is coming today is not going to happen. Perhaps someone can enlighten us.
    • JJ
      Jacob J.
      26 May 2020 @ 06:01
      Negative real and especially nominal yields can cause a massive boom in gold. That's what's driving the current bull market in gold. 0% yield and no counterparty risk looks damn good compared to risky paper that costs money to hold
    • RD
      Ruediger D.
      26 May 2020 @ 11:09
      The question is wether you think the FED will "get safe through the sharp curve ahead inspite its high speed" for another time. If so, Gold will drop as it did after his peak in 2011 when it showed up that the scare of coming inflation of goods was unneccessary and that only an inflation in assets arose. But if you think that this time the FED will not make it but instead crash with the tree on which the money is growing Gold will rise quite a lot.
  • JR
    Josh R.
    26 May 2020 @ 10:25
    If the US faces hyperinflation, will other countries also face hyperinflation?
  • AR
    Alexander R.
    25 May 2020 @ 23:19
    Can anyone PLEASE explain to me why : 1) when government runs budget deficit, sells treasury to the banks/ hedge funds , sell it in a week to Fed trough QE is deflationary. 2) Fed just gives same amount of money to Treasury to spend (bypassing banks/ hedge funds ) MMT is highly inflationary. in both cases same amount of money created out of nothing, and went to finance same probably not productive spending ? I am not trolling, just really want to understand !!!!!
    • JC
      Justin C.
      26 May 2020 @ 00:05
      It’s a good question and one I’ve sought to internally clarify as well. My understanding is the former requires an actual debt to be created and serviced, which crowds out more productive private investment and produces deflation. The latter, is merely using The Fed as a check book to create legal tender to directly pay the government’s bills. This is done without creating a corresponding obligation to pay that money plus interest back, and is therefore inflationary. When The Fed monetized the debts in QEs 1, 2 and 3, they were essentially telling the banks they would be a buyer and granted them an arbitrage profit. This profit, along with accounting rules changes, were the means to rebuild bank balance sheets. I believe they are currently doing the same for large hedge funds caught offsides in this corporate debt binge. I also believe they using their newly found powers to restructure corporate debts, but that remains to be seen. I hear a lot of “they can’t print profits”, but why can’t they restructure, write down, or forgive the debts entirely? In my opinion, it’s more bullshit voodoo trickle down economics meant to transfer more wealth to the .001%, but without destabilizing the system. Happy to entertain counter arguments to clarify these mechanisms and their economic effects, but I’m certain of the intent and conclusion - poor stays poor, middle and upper middle class gets poorer and rich get richer.
    • JL
      Jordan L.
      26 May 2020 @ 01:02
      1. Inflation requires monetary circulation - money being pumped in is moving at the slowest rate in decades (M2 Velocity) 2. Most importantly, the liquidity gap is likely still much larger than stimulus. Global economy is largely denominated in dollars and the shut downs have left multi-trillion dollar holes even larger than current stimulus. 3. Dollar strength leaves everything else weaker - global dollar shortage still an issue due to dollar debt. 4. Bankruptcies are highly deflationary and waves of them are still coming. As a though experiment, take Hertz or J.C. Penny, or others - they have to liquidate assets as part of bankruptcy which means selling into a market that cannot bear the additional supply which forces prices lower. This through this same process with 25-50% of commercial real estate missing lease payments. What does adding that supply to the market do to prices? Highly deflationary. If you're talking stocks, it's a much tougher question because direct intervention has the potential to maintain a certain level of inflationary bias.
    • SM
      Sam M.
      26 May 2020 @ 01:19
      There is no difference and Lacy is making an error of logic. If you read the transcript on page 10 he says "when the Fed does QE, the government liabilities don't change, just the average maturity changes from seven years to one day. The banks still have an overnight obligation from the US government, which they're being paid a miniscule rate of interest on". The error he makes is that he is missing the fact that when the bonds are issued they are bought by the bank or its customers and when that happened they lost reserves. When the CB comes along immediately after and does QE they are simply getting the reserves back (plus a few bps of profit) that they lost when the bonds were issued. In both circumstances you end up in exactly the same place (excluding the profit paid to the bank dealers). The Govt + CB consolidated balance sheet eliminates the debt that was issued (Govt is paying interest to itself).
    • TN
      Tim N.
      26 May 2020 @ 05:04
      I think the way this works is that there is a private intermediary between the Treasury and the Fed which can control the flow of newly created money. Without an intermediary the temptation would be for newly created money to flow from the Fed to the Treasury at every increasing velocity resulting in hyperinflation. With an intermediary if the risk of hyperinflation increased, the private intermediary would not buy the government bond unless the Fed promised to buy back at face value + inflation + profit margin,
    • CI
      Chayot I.
      26 May 2020 @ 06:01
      Agree with Tim N
    • SM
      Sam M.
      26 May 2020 @ 09:23
      I agree with me. I spent about an hour writing up the logic. Let me know my errors. https://www.dropbox.com/s/khkm5nzhz28md4x/Money%20Printing%20Version%201.3.pdf?dl=0
    • SM
      Sam M.
      26 May 2020 @ 09:46
      "I think the way this works is that there is a private intermediary between the Treasury and the Fed which can control the flow of newly created money. Without an intermediary the temptation would be for newly created money to flow from the Fed to the Treasury at every increasing velocity resulting in hyperinflation." This isn't a "thing" and it's not right. Lacy made the mistake of commenting on what happens when the Central Bank buys the bonds today - it buys the bonds and the banks get that amount of additional money in their account. This is what he was talking about around page 10 re the liabilities not changing. He is forgetting that when the bonds were originally purchased by the banks (or their customers) they lost their reserves when they settled the bond purchase. There is no practical difference between selling the bond to the public and then buying it back; versus the CB buying it in the primary market from the Govt. You end up in the same position less any profit to the banks from buying the bond prior to re-selling it. The other comment about not buying the bond ... c'mon. The bank can buy the bond and sell futures and hedge it for interest rate risk (or be running an arbitrage book if bonds are cheap and oversupplied).
  • og
    owen g.
    26 May 2020 @ 08:58
    at 38 minutes i was screaming blockchain!!
  • MH
    Mark H.
    26 May 2020 @ 07:59
    Need to bear in mind that ‘Monetary Economists’ is not a one size fits all description. Dr Hunt is very much an ‘orthodox’ monetary economist who believes in the relevance of the monetary base, the money multiplier and velocity etc. The modern financial system has changed dramatically in recent decades as has money itself. Financial Globalisation has moved money on in all kinds of weird and wonderful ways. There are many very good economists who will give you a different way of looking at money and explain its evolution such as Perry Mehrling, Jeff Snider, Steve Ken, Richard Werner and Nathan Tankus to name a few. I would like to see RV do a money week or fortnight series in which modern views of money are discussed and debated. This is not a rally cry for MMT to be given some air by the way. How modern money works should not be confused with MMT. For example, Perry Mehrling has promoted a branch of economics known as the Money View which is not MMT. Jeff Snider is not an MMT’er but explains how largely irrelevant the Fed is in the context of global money. Nathan Tankus’ substack is very educational on money basics as well as more complex issues even though some may describe him as an MMT’er. The point is that relying only on the views of Monetary Economists such as Dr Hunt is illogical. It is akin to saying one persons opinion on an issue has to be the right one just because of who they are!
    • MH
      Mark H.
      26 May 2020 @ 08:17
      Add Professor Michael Pettis (see recent book coauthored with Matt Klein) to the list. He describes very well how ‘global Savings’ move around the world and the different effect they have on surplus and deficits countries using a different model/economic rationale to those used by the names mentioned above. For example Dr Hunt indicates that the US will be capital constrained by a lack of savings needed for investment. Professor Pettis would strongly disagree that the US is in any way capital constrained.
  • RL
    Ruben L.
    25 May 2020 @ 07:49
    Rainy day? how? The US is transitioning from a democracy (perpetual deficits) to a communist dictatorship (the concept of deficit disappear). The economists always talk about the FED, etc, but never address the real root of the problem: democracy and government rising regulations which means perpetual defitics year after year until democracy ends. and ended will be in the West soon... For example, when they talk about Venezuela they imply that their hyperinflation is a monetary thing depending on the central banks (LOL). It is not. It depends on respect of private property in the nation. No respect of private property = capital flight > hyperinflation. That is why communist countries are in "perpetual hyperinflation"
    • DB
      David B.
      25 May 2020 @ 18:04
      *sigh*
    • CC
      Christopher C.
      25 May 2020 @ 20:35
      Where would the U.S. capital flee to? I would point towards the Dollar Milkshake theory on this one. The U.S. is relative to other countries, and U.S. is more capitalistic than many countries in Europe. There's risky markets everywhere. This is a global event not a U.S. only thing. I agree that the breakdown in property rights in Venezuela contributed to their collapse. No one wants to invest in a factory or farm if it's just going to be nationalized by the government. No one wants to build an apartment building if they're just going to allow squatters to stay rent free.
    • TN
      Tim N.
      26 May 2020 @ 07:19
      US capital can flee to gold, bitcoin and overseas assets. The current power of the US government will restrict such flows until they cannot.
  • AM
    Alastair M.
    25 May 2020 @ 10:35
    could crypto be the transformative event as gold was in the 1840's?
    • NJ
      Nimitt J.
      25 May 2020 @ 12:05
      No i think it will be land.
    • TN
      Tim N.
      26 May 2020 @ 07:11
      No AI and robotics
  • MS
    Martin S.
    25 May 2020 @ 13:00
    The trouble is that Lacy does not offer any other solution than austerity. I see very little chance the young generation will accept that. We already had austerity for 10 or even 20 years with diminishing investment in common good and only a skeleton of public services left, whether at the federal or state level. All this while essential things such as healthcare and education are privatized and unaffordable. So is more austerity really tolerable? As Kiril says, we have to be better prepared for the future. And that includes coming up with something better than the good old idea of austerity.
    • mm
      michael m.
      25 May 2020 @ 14:38
      how else are you going cure the sins of past overindulgence? Every solution has its unique set of negative consequences. As Thomas Sowell said, there are only trade-offs. There is no utopian solution, only trade-offs.
    • LK
      Lauri K.
      25 May 2020 @ 16:05
      I know it#s extremely unlikely, but global debt forgiveness would be the most efficient solution.
    • TN
      Tim N.
      26 May 2020 @ 07:07
      Those who incurred the debt and those who need to pay it back are not the same, hence the moral hazard. Some form of debt jubilee is inevitable
  • EA
    Emil A.
    25 May 2020 @ 16:43
    Does bitcoin fall into the category of transformative technology?
    • DT
      Don T.
      25 May 2020 @ 18:58
      That crossed my mind when he mentioned the Gold Rush as being transformative Emil.
    • TN
      Tim N.
      26 May 2020 @ 06:24
      no Bitcoin only protect the wealth of those with the money and foresight to invest - AI and robotics will hopefully rescue the rest of society before WW3
  • GB
    Gary B.
    25 May 2020 @ 21:31
    Need some help RV community. I don't see the difference between Fed spending and QE that covers the fiscal deficit. I get there is an intermediary in QE, the primary dealers, but if the primary dealers know they can immediately resell to Fed all the debt issuance I have trouble seeing the distinction that Lacy Hunt is making about the Federal Reserve not having spending powers. Thanks in advance if anyone can help me understand. This interview was amazing
    • RE
      Ramy E.
      25 May 2020 @ 21:34
      See Hugh Hendry interview with Prof Werner.
    • TN
      Tim N.
      26 May 2020 @ 05:51
      I think the way this works is that there is a private intermediary between the Treasury and the Fed which can control the flow of newly created money. Without an intermediary the temptation would be for newly created money to flow from the Fed to the Treasury at every increasing velocity resulting in hyperinflation. With an intermediary if the risk of hyperinflation increased, the private intermediary would not buy the government bond unless the Fed promised to buy back at face value + inflation + profit margin,
  • ML
    Mary L.
    25 May 2020 @ 16:51
    I have great respect for Dr. Lacy Hunt and always enjoy interviews with him. However, I want to compliment Kiril for the way the interview was conducted. I appreciate Kiril letting Dr. Lacy Hunt speak. In a number of other RV interviews, the guests are interrupted and prevented from clearly conveying their wealth of expertise. Please don't use ADD people to conduct these interviews for many reasons, including the incredible headache that they cause. The guest of the Prince of Yen interview was interrupted and directed in so many different directions that it gave me a huge migraine. Printing out the transcript only reiterated how ADD the process was. It is a shame that the knowledge of the guest was prevented from being communicated.
    • JK
      Juan K.
      25 May 2020 @ 17:06
      I'm not disagreeing and people certainly have stylistic preference but perhaps thinking of these videos less like interviews for an audience and more like dialogues we get to listen in on will better frame an appreciation for the content. As far as the Princes of Yen dialogue, there was enough from Richard to wet an appetite for better understanding of his work but Hugh's line of thinking was also on display (from his prompts and redirects) giving us visibility into how he is operating - ie where do we possibly go from here given Richard's framing.
    • MH
      Michael H.
      25 May 2020 @ 17:13
      Mary, I share your frustrations - however, I have slowly come to realize that the people who do the interruption-laden style of interviewing are doing it on purpose. They believe they are being provocative... and maybe they are, but obviously at the expense of the audience.
    • WM
      Will M.
      25 May 2020 @ 18:18
      I somewhat agree with Mary here. There is a fine line between an interview and a debate. Kiril did a great job of interviewing to pull info from the interviewee. The Princes of the Yen segment was more of a discussion. I largely understood what the guest was saying in the "Princes" discussion, but I did think Hugh Hendry was not easy to follow as his thoughts appear random and very occasionally incoherent.
    • GF
      Gordon F.
      25 May 2020 @ 18:46
      I did not see the Princes of the Yen conversation as an interview, but more as a conversation between a couple of very knowledgeable people that I was privileged to listen in on. As noted by Raoul above, Hugh commented before the recording that he was so nervous about talking to one of his heroes that he was not sure how it might go. I was also frustrated at some of the lines that were terminated or diverted, but I see it as inevitable in this type of conversation, and at least we have Raoul's promise that they will try to get Richard on again soon, perhaps with a different interlocutor. When that happens, I will set aside whatever else I'm doing to listen to it.
    • CC
      Christopher C.
      25 May 2020 @ 20:21
      I'd be interested to see Hunt and Werner have a conversation. I also think debate and counter points are probably useful in the current situation as there is no precedent. The situation will not play out precisely like 1929 nor 2008. I'd be interested in seeing someone like Hunt debate with someone who thinks differently. It would be very educational.
    • ML
      Mary L.
      25 May 2020 @ 21:35
      If you pay attention, you will notice that Kiril did push back. I last listened to Dr. Lacy Hunt on Macro Voices this month and noticed that Kiril tried to clarify many of the points that Dr. Hunt has been making, including what he said on Macro Voices. Kiril clearly did his homework, but he let Dr. Hunt make all his points, summarized these points (with Dr. Hunt nodding in agreement), and then, asked the clarification (push back) questions. IMO, an interviewer's job isn't to constantly interrupt and inject his own thoughts. It is fine to clarify and even push back, but let the guest at least make a single point. Let me be clear when I say that I am very familiar with Princes of Yen, but the interview confused me. I can't imagine how someone not familiar with this book could have not been confused. No one is that familiar with the Bank of Japan and its practices. So, doesn't it make sense to let the guest at least explain it before interrupting and pushing back? There is a time and place for everything.
    • JC
      Justin C.
      26 May 2020 @ 00:12
      Kiril, whether he realizes it or not, has a masterful command of interviewing. The best interviews allow the subject to express their views, but requires them to clarify and resolve and inconsistencies, fallacies, etc. that the audience is likely to notice. This keeps the viewer engaged and allows the subject to build an honest case for their positions/opinions. Well done Kiril!
    • JH
      Jesse H.
      26 May 2020 @ 00:48
      Agreed, Mary. The interview (or discussion) with Prof. Werner and HH drove me nuts because of all the constant interruptions. It made it very hard to gain as much value from Werner’s brilliance because he was barely allowed to get a word in edgewise. It’s alright though - I think RV will have him back, and a second interview is hopefully forthcoming. We shall see.
    • PB
      PHILLIP B.
      26 May 2020 @ 04:42
      There is also the pressure of time management and wanting to cover a wide range of content in 60 minutes.
  • JW
    John W.
    26 May 2020 @ 04:33
    Lacy is good. I think Lyn Alden is as good as anyone out there today. Would love to see her on RV
  • TS
    Thomas S.
    26 May 2020 @ 03:20
    It is these great interviews that bring so much value to real vision. Lacy Hunt is one of the best!
  • PP
    Patrick P.
    26 May 2020 @ 03:01
    Raoul.... Instead of one guest and one interviewer ... Why not a panel of economist (equal statue) debating what they see coming next? Easy now to do on Zoom.
  • RD
    Ruediger D.
    26 May 2020 @ 03:00
    Having slept not to good over all these issues (see "hot debated below" to understand what I'm talking about) for one night it looks to me that the FED is in fact printing money and that all these complicated explanantions why it is not doing it are only given to hide this fact and to make it uncomprehencable for the puclic for one only purpose: Bailing out the more rich on the company and bank level and prevent their assets from deflating and to give just the amount of money to the less rich to prevent them from revolting. In the end it comes all back to what Henry Ford noticed already so many years ago when he said "If the public would understand the Banking System/Financial System we would have a revolution the next day" (if I remember this well). And that's the reason why Dr. Hunt says "I#m not in the mind changing business!" Just my two cents.
  • RD
    Ruediger D.
    25 May 2020 @ 10:04
    Great interview! Thank's for the excellent lesson. I guess I learned a lot. But there's one thing I did not get. What makes the difference between the goverment spending the money (producing more depts - as Powell was kind of begging last week - the FED buying these dept-bonds on the open market) and the FED paying the bills directly. Why is the second way producing inflation while the first is not if I understood this well as the money is spend to pay the same bills? Thank you for your explanations and please excuse my insufficinet English.
    • PH
      Peter H.
      25 May 2020 @ 13:54
      I had the same question. My guess is it would be off-balance sheet, e.g. the debt of US Treasury would not increase. But also hope Raoul, Roger Hirst, etc could find an answer. Great interview!!
    • SS
      Stan S.
      25 May 2020 @ 14:10
      The government's debt issuance transfers money from the buyer to the US government but does not result in new money creation. The FED spending would not entail a transfer of money but the genuine creation of new money unless they issues some new type of debt to do it. I think...
    • XM
      Xiaoyu M.
      25 May 2020 @ 14:22
      I think it is the speed at which money flows through the system that causes inflation. When fed buy bonds; it has a maturity date and you can even out the inflation. If they spend the money right away, you squeezed all that inflation into a single instance and it causes hyperinflation.
    • RD
      Ruediger D.
      25 May 2020 @ 15:02
      Thanks for your reply, Peter. Unfortunately I cannot answer you directly, so, I hope you will read this. I felt same you that the difference is only in accounting. And if so, accounting does not produce inflation. And as the goverment and the FED kind of merged allready and the depts won't be payed back anyway.....Where's the beef? Maybe the real difference is that all the money would reach the less rich who would spend it on not enough supplyable real goods causing inflation while through the banks nearly all of the money gets in the hands of the more rich bailing them out on the one hand and only infllating the asset prices (what they love) on the other as one can see in the stock market right now again? It's not me but Dr. Hunt who said "I'm not in the mind changing market!"...smile...
    • JV
      Jan V.
      25 May 2020 @ 15:25
      Currently the FED creates bank reserves via these swaps. The banks are not required to lend this money to productive business investment (which would create inflation). Past experience shows they will lend it to companies to buy back stock (asset price inflation). Or they choose to park these reserves back at the FED (excess reserves). That's why the velocity of money remains low. On the other hand, if the FED immediately buys government bonds from the treasury you will see inflation. Government won't buy stocks with this money, they will target the real economy. For example they will use it to fund big infrastructure projects. This will boost demand for commodities, increase wages, etc. This will be inflationary.
    • RD
      Ruediger D.
      25 May 2020 @ 15:27
      I also think that Dr. Hunt was not quite right on what caused the hyperinflation in the Weimar Republik. Moderate inflation speeded up when the central bank was printing money to pay the workers who went on strike when Germany could not fullfill the treaty of Versaille, the French therefore tried to put their hands on the german industrie and the strike was judged as beeing of "National Interest".
    • DK
      Dennis K.
      25 May 2020 @ 20:01
      Good question. I missed the interviewer asking to elaborate on this one. For me it is also absolutly unclear why there is a difference between CB printing money and give to its goverment directly or printing money and buying the goverments bond with almost zero interest. No bond has ever been “paid back” (or paid back and asking for a bigger loan at the same time). While this is a mayor issue to understand this interview Real Vision should go back and provide an answer this this one.
    • RD
      Ruediger D.
      26 May 2020 @ 02:57
      Having slept not to good over all these issues for one night it looks to me that the FED is in fact printing money and that all these complicated explanantions why it is not doing it are only given to hide this fact and to make it uncomprehencable for the puclic for one only purpose: Bailing out the more rich on the company and bank level and prevent their assets from deflating giving just the amount of money to the less rich to prevent revolting. Itn the end it comes all back to what Henry Ford noticed already so many years ago when he said "If the public would understand the Banking System/Financial System we would have a revolution the next day" (if I remember this well).
  • WM
    William M.
    26 May 2020 @ 02:48
    So good. Kiril and Lacy are two of the best. Always love hearing their viewpoints.
  • CL
    Chuck L.
    26 May 2020 @ 00:13
    Thanks for another informative conversation about the problems facing the US and global economies. Although Dr Hunt prefers to stick to his own job rather than say what he would do if he were at the Fed, the Fed does have over 400 PhD economists who should be able to understand his points, and figure out the best way to resolve the problem, together with the Legislative and Executive branches of government whose mandate is to protect the citizens' "life, liberty and pursuit of happiness."
    • PP
      Patrick P.
      26 May 2020 @ 02:47
      Chuck .... the sole job of our Legislative and Executive branch is to get reelected and keep their power. The job of the Fed is to provide the the cash to buy the power they desire and also to protect the Bankers at all cost. Nothing nobile ...those days are long gone.
  • RD
    Riki D.
    26 May 2020 @ 02:29
    Brillant. Clear, concise, articulate, evidence based. Now to formulate and/or consolidate investment decisions for the next 5-7 years. Gold, Silver and qualtiy digital assets (online shopping, etc) appear to be no brainers in a well balanced portfolio. Thanks team!
  • TK
    Tom K.
    26 May 2020 @ 02:28
    That was incredible, thank you RV!!
  • WB
    William B.
    26 May 2020 @ 02:06
    How can we determine if there is inflation or deflation? Is there a formula? If so, what is it? Dr. Hunt's prediction of deflation should be testable. If we suddenly go into inflation, can Dr. Hunt detect it and change his prediction? Or will we be stuck with a theory that suddenly stops working? Where is the exit door for his theory?
  • PP
    Peter P.
    26 May 2020 @ 02:04
    https://www.congress.gov/bill/116th-congress/senate-bill/3550/text?q=%7B%22search%22%3A%5B%22federal+reserve%22%5D%7D&r=13&s=2 Introduced March 20th 2020 SECTION 1. SHORT TITLE. This Act may be cited as the “Municipal Bonds Emergency Relief Act”. SEC. 2. OPEN MARKET OPERATIONS. Section 14(b) of the Federal Reserve Act (12 U.S.C. 355) is amended by adding at the end the following: “(3) In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not fewer than 5 members, may authorize any Federal reserve bank, during such periods as the Board may determine, to buy and sell, at home or abroad, bills, notes, revenue bonds, and warrants of any maturity, by any State, county, district, political subdivision, instrumentality of a political subdivision, territory, possession, or municipality in the United States, including irrigation, drainage and reclamation districts. All such actions shall be subject to such limitations, restrictions, and regulations as the Board may prescribe.”.
  • YF
    Yuriy F.
    26 May 2020 @ 01:57
    This. Is. Gold. Thank you very much!
  • VG
    Vincenzo G.
    25 May 2020 @ 14:32
    Three things: 1) Have to acknowledge that early prediction on non-inflationary effect of US QE is remarkable 2) According to Prof. Richard Werner the drop in the velocity of money is an illusion, chapter 14 in "New Paradigm in Macroeconomics". If you cannot afford the book, here his slides: https://www.oenb.at/dam/jcr:63a2b07f-1ef8-48cb-8e28-ef36698a8d19/werner_richard.pdf 3) According to Michael Pettis, Kenneth Austin and others, austerity should be read according to the proper historical context, and trade identities should be stating the right assumptions and non linear relationship between variables to be useful. Here you can find why for these authors it makes no sense right now to talk about austerity without major changes in the economic world order: https://carnegieendowment.org/chinafinancialmarkets/81871 https://national-economists.org/event/explaining-american-trade-deficits-the-unidirectionality-error-kenneth-austin-us-department-of-treasury-retired/
    • BS
      Bevyn S.
      25 May 2020 @ 18:14
      Looks like you're already down the rabbit hole I'm about to go down. Just ordered two of each of Pettis and Werners' books. How is his claim QE is not inflationary remarkable? If the private sector is not borrowing, it just ends up on the banks balance sheet as excess reserves, at a time when aggregate demand has fallen off a cliff.
    • VG
      Vincenzo G.
      25 May 2020 @ 22:00
      Bevyn S. I had to start from a positive note :-P Anyway many well known pros in the investment space were screaming about inflation at the time. It is never easy to be humble and keep a scientific mindset
    • BS
      Bevyn