Breaking Down Balance Sheet Recessions

Featuring Richard Koo

Macroeconomist Richard Koo, author of ‘The Escape from Balance Sheet Recession and the QE Trap’, has been critical of the BoJ’s inability to generate growth. The man from Nomura, uses Japan’s experience to examine how to break global economic policy impasse.

Published on
7 October, 2016
Topic
Monetary policy, Japan, Recession
Duration
71 minutes
Asset class
Equities, Bonds/Rates/Credit, Currencies
Rating
19

Comments

  • SD

    Sebastien D.

    20 5 2018 16:29

    1       0

    Not sure if somebody from RV reads comments on old videos but it would be great to have a follow-up video with M. Koo going deeper on the endgame in US, EU, China and Japan. For example with Kyle or Mike G. I know it sounds like Christmas wishlist but Milton knows magic...

  • HH

    Hussein H.

    12 11 2016 21:09

    1       0

    Exceptional insights and perspectives

  • RW

    Raymond W.

    27 10 2016 22:07

    3       0

    One of the best interviews. I really only like the macro interviews these days. The other interviews are like being on the titanic, knowing an iceberg is coming, and discussing what the chef should put on the menu for the next few weeks.

  • F

    Frederick .

    25 10 2016 11:42

    2       0

    If you follow the view that a CB should do more in a B/S recession - surely CB's need to act when the private sector is leveraging itself up (the cause of the problem) Why not cure the cause not the illness

  • rr

    roger r.

    23 10 2016 03:49

    5       0

    His breadth and depth are remarkable. Invaluable analysis.

  • DL

    Danilo L.

    19 10 2016 22:07

    2       0

    priceless interview

  • LP

    Lynn P.

    18 10 2016 22:45

    0       0

    Must add this: "QE was a silly idea." There. He said it. But, as Grant noted, " But they are trapped." Staying ahead of the curve is unlikely. Volatility ahead.

  • LP

    Lynn P.

    18 10 2016 22:39

    3       0

    Reading over the comments, many are questioning how Mr. Koo would go about restoring the sovereign balance sheet. He is clear about the necessity of restoring private sector balance sheets when there is still cash flow. One commenter mentioned rising tax revenues restoring sovereign balance sheets. Perhaps. Many commenters noticed the similarity of Mr. Koo's proposals with traditional Keynesian ideas. Other noted that the part of Keynes' that is rarely emphasized is the restoration of surplus in good economic times. Then there is Rainmaker's note about the dollar as the global unit of account, including the global need for dollar denominated collateral. This is complicated, but Mr. Koo did add some clarity to the discussion.

  • JL

    James L.

    18 10 2016 15:31

    8       1

    Koo reminds me of Richard Duncan. I agree with his diagnosis, but his remedy is a dead end. Government spending will not result in private sector balance sheet healing, as all social and political forces are arrayed in favor of more private sector borrowing (e.g., consumerism and share buy backs). Moreover, the public sector balance sheet will never, ever be healed by politicians, who favor more spending with the impulse exacerbated by low rates and debt service costs.

  • SC

    Sau C.

    18 10 2016 14:55

    3       0

    This interview alone is worth the annual sub

  • JH

    Jay H.

    18 10 2016 01:05

    3       0

    So glad to see Richard Koo on RVTV. I've read his two books, Holy Grail of Macroeconomics and The Escape From the BSR and the QE Trap. Both amazing.

  • JD

    John D.

    17 10 2016 01:33

    8       0

    Brilliant... Bring Him back for a follow up...

  • CH

    Calvin H.

    16 10 2016 17:30

    6       0

    I will need to watch this at least two more times! But Grant!?! How could you not ask about his take of Gold? Jeez! :(

  • ii

    ida i.

    16 10 2016 13:08

    11       0

    could you please send this video to Mario Draghi?? He should watch with Merkel for course, I'd say about 5 times.

  • PC

    Peter C.

    16 10 2016 04:09

    4       0

    I like the way Richard explained the balance sheet recession, China's rapid deceleration due to Yellen, a potential solution to Europe, a cause of future stock market volatility,.... all in way we can all understand. Bring back and have him tell us the investment implications. Tx.

  • TE

    Tim E.

    15 10 2016 04:34

    4       0

    Third "I" in my previous comment was meant to have been "Iran." RV needs a feature where people commenting can "edit" their comment for a minute or two after posting.

  • TE

    Tim E.

    15 10 2016 04:30

    13       0

    Great conversation. Why isn't Richard running a central bank? Then maybe there would be some hope of his policy prescriptions and ideas becoming reality. But I must say, this "fixation" on growth gets tiresome. What's wrong with some decades of stagnation. Debt, and borrowing, by definition bring forward future consumption.I think it's great baby boomers in the west could borrow and buy houses and cars and so on when they had the biggest need for them, in their child-rearing years. But, by definition this has reduced future consumption. Now we're seeing that. There are still plenty of places in the world, India, Indonesia, Indonesia to name just the three I's where demographics are favourable to a debt led expansion, such as the one Japan and the West, and latterly China and other advanced East Asian economies enjoyed. These economies can drive the growth engine, perhaps. Why fight demographic destiny elsewhere with idiotic, growth at all costs policies...?

  • AT

    Ainsley T.

    15 10 2016 01:12

    0       0

    Get a Koo vs Keen debate. BSR seems quite reliant on loanable funds model which I thought has already been disproven in a fiat money system?

  • SL

    Steven L.

    14 10 2016 21:34

    4       0

    I've watched twice and will watch the interview more times. Would really like to see a follow up on the QE Trap implications. Great job Grant and, of course, Richard Koo!

  • AA

    Anatoli A.

    14 10 2016 16:40

    0       0

    I like how he kept thinking Grant is from USA :)

  • AM

    A M.

    14 10 2016 10:10

    1       0

    Years ago I read The Age of Discontinuity by Peter Drucker. We have reached the ultimate discontinuity and Mr Koo defines it brilliantly.
    Beware "Step Changes"! Or, at least make sure you have the appropriate bets in place.

  • DS

    David S.

    14 10 2016 07:59

    10       0

    Most insightful interview. Mr. Koo added a new and very important piece to understanding the macro puzzle. Government and central bank policy can only try to promote a level playing field for companies and citizens to operate within. MACRO POLICY CAN DO NO MORE! Any developed economy and its place in the global economy is far too complex for anyone, think tank or computer system to predict policy outcomes. Focus on the laws and policies promoting and enforcing a level playing field and let Adam Smith work at the micro level. My hat is off to Mr. Koo for helping me to understand another piece of the macro economic puzzle.

  • ww

    will w.

    14 10 2016 03:57

    0       0

    @Coxley C
    I think Richard's 'private sector' is the CONSUMER sector, not the corporate. Certainly corp debt levels have increased greatly (for reasons you cite). But this corp borrowing binge isn't growing much of anything in the ordinary economy (excluding the obvious runup in equity prices).

    OTOH, perhaps Richard's BSR situation applies despite the corp borrowing binge - the condition of their balance sheets IS an impediment to their borrowing for normal economic growth...

  • JG

    Jeff G.

    13 10 2016 20:27

    0       0

    So good. Would like to have RK's opinion on the nature of positive fiscal stimulus, as opposed to an expansion of government program spending. Or is there a distinction from a policy perspective?

  • WE

    William E.

    13 10 2016 18:12

    8       0

    Grant & Raul - Help... Seriously, help! Great presentation; already on my second replay. However, I am a simple consultant (not an academic, though they seem stumped too) and need some help placing this in context with other presenters. Implications of his thesis, if correct, ripples across many if not most of your presentations. Not asking to be spoon fed here but an update of (as an example) your "quacks like a duck" summary with this thesis overlaid would certainly help me pull my thinking together at the 30K foot level. Many thanks!

  • WS

    Wes S.

    13 10 2016 17:36

    0       0

    MMT

  • CB

    C B.

    13 10 2016 16:19

    10       0

    Most explosive part of this interview is the last 4 minutes on the "QE Trap". Understanding the unwind of excess liquidity is key to where we go next. Let's say the Fed is forced to roll out of its bond holdings. Might be inflationary pressure. Or a dramatic ramp in bank or shadow lending. Or politics. But shrinking the liquidity in the banking system is inherently bad for stressed global banks. Less high quality collateral to go around. And it's bad for over-indebted central governments b/c interest rates have to rise as "new money" bonds are sold into existence. Catch 22! It hasn't been said enough, but the Fed's goal of increasing inflation is at cross-purposes to financial stability. Perversely, the lower inflation remains, the longer the Fed can sustain liquidity and accentuate the positive effects of QE. Once inflation picks up, the trap is sprung. We need more thought experiments on this subject in interviews and comments!

  • TY

    Tyler Y.

    13 10 2016 14:33

    5       0

    I can't stop watching this. I'm on my fourth time. This one is great!

  • RW

    Rune W.

    13 10 2016 09:50

    2       0

    Excellent!

  • PR

    Phillip R.

    13 10 2016 02:27

    4       0

    Fantastic and thought provoking interview. In the case of Japan, Richards states that despite private sector Balance sheets being largely repaired as of 2005, it is now the ‘trauma’ of the post Bubble experience that is preventing the private sector from increasing borrowing again. Is it not also largely due the the fact that the huge Public sector debts created in maintaining GDP at above peak bubble levels itself is also now constraining consumption/borrowings by the knowledge that they will need to be paid back by future cuts to public spending/increased taxes/ninja default. In fact in American, after the 1930s, where admittedly the destruction to GDP was much greater it really took a world war and more to return confidence in private sector borrowing. I sincerely hope they are reading from a different play book this time.

  • AC

    Andrew C.

    13 10 2016 02:23

    4       0

    sorry; I am confused
    B-S recession and no-one is spending but instead paying down debt. But others are saying corporate debt is increasing (used for share-buy-backs!) and at record levels (along with Gov’t Debt). So what is the truth?

  • RA

    Robert A.

    13 10 2016 00:52

    11       0

    When the "Rainmaker" says he has watched 5 times and had his wife watch it---well I sit up and pay attention. Agree or disagree, but where else can we get this independent thinking? RV rocks!

  • WH

    Wayne H.

    13 10 2016 00:33

    1       0

    Excellent!

  • HJ

    Harry J.

    13 10 2016 00:29

    2       0

    Hard to hear.
    What does the retired investor don't to generate a cash flow. Without getting crushed by Yellen policy?
    Crap what's next?

  • MH

    Martin H.

    12 10 2016 19:07

    5       4

    I'm quite surprised by the very positive reception this guy is getting. From what I can tell, he is just another neo-keynesian that has made up a new word.

    The problems in Europe are not structural, but a balance sheet problem? As a european, that is perhaps the most outrageous I have heard on this channel.

    What am I missing?

  • CJ

    Char J.

    12 10 2016 16:59

    2       0

    I agree with most of what Richard said for the short term. The only thing I didn't agree with was this concept of "escape". There is no escape from a bubble. You either write off the debt, take the losses and pain up front or you kick the can down the road for an even bigger loss or hyper-inflate away. If you take the losses up front, then kiss that savings "glut" goodbye. The only endgame to me is massive inflation as the powers that be refuse to fight the last war of "deflation". At some point, debts will continue to rise, the bubbles will continue to grow until a mistake happens to resolve the bubble one way or the other. It just seems like that is the end game. At this point rates can never go up. Since they've been so low for so long, how can any earnings and balance sheets not be propped up by them. Maybe I'm missing something, and someone can fill me in.

  • VK

    Viresh K.

    12 10 2016 13:25

    0       0

    I agree with some of his proposals on how to get growth, and the issues about restricting FP while there is a balance sheet recession, however, it all just seems to be a reason to add to the debt.

  • vt

    vadim t.

    12 10 2016 11:54

    0       1

    Sorry to say that but because of this kind of very nice guys we all end up in WW3 soon. It's been always like that.

  • KS

    Kathleen S.

    12 10 2016 11:31

    16       1

    The fact that the European Union knows that the public sector is not spending and that austerity is killing the economy and they do nothing - pretending they are trapped by some ridiculous Maaistricht Treaty that they made up and can make amendments to (the IMF has told them that austerity policies are killing the economy - Yanis Varoufakis had the conversation with Lagarde in regards to Greece) should signal anyone who is watching that this was their intention all along. I wish everyone would stop being amazed at the Central Bankers ignorance to the real world economy (Bernanke didn't know that housing prices could go down, and Yellen doesn't think the stock market is one huge bubble created by her and her FED policies) and see them for what they are -- criminals. I mean come on - outlawing cash because "terrorists and drug dealers use it", negative interest rates. The monetary system as we know it is going to blow up and a new one with a global central bank will be put in it's place - where Central Bankers will not have to worry about sovereign nations getting in their way. That is something that should be investigated on real vision. Bring on Bernard Connolly (an economic adviser) who wrote the "Rotten Heart of Europe" - he saw the dark side of the European Union before it was even created and he warned against it.

  • MT

    Mark T.

    11 10 2016 20:55

    1       1

    Minutes left 43 - I don't feel that economists have grasped the difference between credit creation (QE) and monetary expansion. Credit creation does not equal currency/money creation. QE creates credit (high level credit) not money/currency/money supply. Some of the credit gets monetized and a fraction of that goes into financial assets.

  • SK

    Sahar K.

    11 10 2016 16:11

    2       0

    Incredibly insightful interview

  • EK

    Emil K.

    11 10 2016 14:32

    7       0

    What a way to end the interview, "I hope I am wrong on all of this..."

  • AA

    Ali A.

    11 10 2016 10:37

    6       0

    One word, EPIC

  • SN

    Sean N.

    11 10 2016 06:46

    3       0

    Such a valuable interview.

  • JP

    James P.

    10 10 2016 23:45

    4       0

    GREAT interview. ...maybe the best one yet! Brilliant perspective!

  • JK

    Jeff K.

    10 10 2016 19:16

    5       0

    Bravo! Brilliant! I hope to see Mr. Koo back on a regular basis. How do we get policy makers to listen to him?

  • DM

    Donald M.

    10 10 2016 04:44

    0       0

    Great interview. But I disagree when Koo said to unwind QE this will cause the Treasury to issue more new money debt. The policy of the US gov't has been to almost never pay down debt. If before QE the private sector bought Treasury debt then the Treasury and th emarket had expectations that it must be refinanced when it comes due so why would Fed ownership of Treasuries that are due for repayment be any different than if those bonds had instead been owned by the private sector?
    As the EM economy grows it needs to buy more Treasuires as a form of reserves. They actually suffer when the U.S. reduces issuance of Treasuries becuase it reduces what is effectively a type of "money supply". In agrowing economy the problem of Treasury issuance withotu crowding out borrowers will not bea concern. Future gov't deficits are expected from medical expenses, so that means doctors and pharma co. willl incur more tax on their rising incomes and the government will solve its own deficit problem. As long as the defict rising in proportion to the rising GDP caused by growing use of medical expenses then the debt/GDP ratio will be steady.
    The time to wind down QE would be when economy is growing strongly and thus real natural rates would be rising thus inducing more people to save and rising prosperity would reduce government deficits as more people get into higher tax brackets.

  • js

    jacob s.

    10 10 2016 04:33

    0       0

    Awesome stuff

  • XZ

    Xriva Z.

    9 10 2016 23:20

    11       0

    It seems to me that Real Vision and its wonderful guests, such as Mr. Woo, are doing a great service to national governments and thier people.
    Ideas are shared here that might be unrealized and helpful. This knowledge transfer has the potential to do profound good.

  • B

    Bojo .

    9 10 2016 19:01

    2       0

    An excellent interview! Is there any chance to get Bernard Connolly or Yra Harris on a topic like this?

  • DR

    Daniel R.

    9 10 2016 18:59

    0       0

    Just really fantastic. Love Koo.

  • CD

    Charles D.

    9 10 2016 17:14

    9       0

    I propose a swap...Koo for Summers...

  • TM

    Thomas M.

    9 10 2016 14:42

    14       0

    This was the best talk so far on Real Vision T.V. IMHO. Mr. Koo's talk was straight forward with a simple explanation of our current situation. Like many others, I would love to hear his thoughts on investments in this environment. Hopefully we will get a chance to get an updated interview with his thoughts on this subject matter! Great Job on the interview Grant and thanks to Mr. Koo!

  • de

    dale e.

    9 10 2016 13:18

    9       0

    I think Koo was the best interview i have seen so far. Would have enjoyed another hour. Would like to have his take on Gold. Would have been very interesting.

  • RA

    Ricardo A.

    9 10 2016 09:58

    2       0

    Excellent interview. If we want to understand the future, we must understand Japan and no one better than Richard. Thanks RV

  • SR

    Steve R.

    9 10 2016 08:29

    11       0

    Anyone can make something complicated, but it takes a genius to make it simple - and Richard Koo does just that! Great interview and just so easy to understand! If asset prices fell 87% in Japan, I can't imagine the damage even a fall of half this level would do on western economies. But to be honest we need this kind of 'global reset' to asset prices (IMHO anyway).

  • jm

    jim m.

    9 10 2016 05:20

    24       0

    koo is thoughtful. certainly agree with his position that radical monetary policy was and is ill advised.
    his thesis is classic keynesianism. offset private sector deleveraging with public sector borrowing. easy? no, not easy. government debt loads matter and government debt loads are too high. his thesis works well for lowly indebted countries. next time, ask him to paint a picture as to how the numbers would work in U.S. were he Emperor. I suspect his strategy was appropriate in 2009. Now, we have 20 T in government debt and a 4T Fed. Res. balance sheet which, as he points out, is difficult to unwind. My basic reaction is that Koo is more right than wrong. However, govt. debt levels are too high to reverse. Koo didnt seem to wish to address Grant's probe as to directionality of the yen, which would have been interesting, potentially. Thanks for a peak into an important thinker; one who was not fooled by the absurdity of radical central bank thinking and policy.

  • TB

    Tyler B.

    9 10 2016 04:52

    19       7

    As Jim Grant would say this gentleman represents the PHD-standard in central banking. Ten minutes in the interview he fails miserably at explaining where bubbles come from. He says every few decades the private sector "goes crazy" by trying to make money very quickly during the bubble. They barrow all sorts of money, asset prices collapse and essentially these people are bankrupt.

    Now let me ask a few questions. How did these people borrow so much money in the first place? How did this bubble come to be in the first place? Did it just magically appear? THE CENTRAL BANK CREATED THE CONDITIONS TO MAKE A BUBBLE BY ARTIFICIALLY SUPPRESSING INTEREST RATES! It's disappointing he doesn't understand this concept.

  • FC

    Fractal C.

    9 10 2016 03:07

    2       0

    i thought the US private sector has borrowed about a trillion dollars in ladt few years to finance those buy backs.

  • Dd

    Diego d.

    9 10 2016 00:35

    0       0

    Absolutely mindblowing!

  • SP

    Steve P.

    8 10 2016 23:48

    25       0

    Isn't Richard's approach the basiis of Kenesian economics where Government borrows to make up for the borrowing shortfall of the public in recessionary times, then pays down it's debt when the public picks up the borrowing slack again? (ie when the economy begins to recover ). If so, then can we assume that he is in effect saying that the basis of Kenesian economics is failing as most western governments appear to follow some form of the Kenesian model An obvious failing now clearly apparent is the fact that governments don't repay debt built up during recessionary periods but rather dodges that fiscal responsibility due to perceived political gains to keeping expanded government fiscal spending (often pork barrel) programmes in place. Thus government debt has tended to continuously build over cycles. This I believe is what has happened to the majority of the western world economies the past 40 years. Private sector debt had similarily risen exponentially in many economies due to the massive credit expansion foisted on the modern world when the gold standard was rescinded by Nixon from 1971 on-wards . We are now in a period of debt reconcilliation that has no easy exit. Richard's answer of even more government debt to alleviate the problem via the fiscal lever may provide jobs but adds to an extremely dangerous situation of a loss of confidence in governments ability to pay back debt in a currency that has a similar value in future. Hhhhmmm!!!

  • BG

    Bruno G.

    8 10 2016 21:40

    10       1

    If your private and public debt increases every year and your government obligation are ever increasing every year going forward (demographics). You cannot fix this deficit with government spending. They need a 20% increase in immigration. Good Luck. Koo is just a magician and we all watched the wrong hand. They have two options either crash the currency or default on the debt. THINK FOR YOURSELF PEOPLE.

  • HC

    H C.

    8 10 2016 21:38

    0       0

    Fantastic interview. Really learned a lot.

  • MT

    MICHAEL T.

    8 10 2016 20:58

    0       0

    Fascinating!

  • WM

    William M.

    8 10 2016 19:36

    5       1

    Enjoyed Richards theories around how to tackle a balance sheet recession. It just feels impossible to me to see Europe taking Mr Koo's remedy approach. The upcoming elections look likely to tear the continent apart. The knock on effects of this will impact North and South American and the East. It all feels like its becoming very imminent.

  • DM

    Dom M.

    8 10 2016 19:26

    0       0

    If the FED normalizes the USD and rates go higher.If they fall behind the curve the USD and US equities(capital flow) goes higher but rates will fall.

  • WM

    William M.

    8 10 2016 18:59

    3       1

    I am pretty much with Martin Armstrong on the bond crash and the move to the private sector. Things have worked great for Bond holders but a reversion to the mean interest rate at a minimum, is inevitable. A 2% bump on interest rates alone will trash bonds, 4% would signal total global chaos.

  • JF

    Jonathan F.

    8 10 2016 18:58

    2       0

    Can someone please opine if I am understanding this correctly. The issue of the private sector coming back to borrow with all this cash held up in the financial system will be an issue of re-leveraging and miss-allocation of resources. ie Another commodity super cycle, focusing on the US, another oil/gas E&P disaster. Is this flawed logic?

  • MM

    Milly M.

    8 10 2016 17:37

    1       0

    Another legend, another brilliant interview! Thank you RV!

  • MM

    Milly M.

    8 10 2016 17:37

    1       0

    Another legend, another brilliant interview! Thank you RV!

  • RM

    Rainer M.

    8 10 2016 16:22

    3       0

    Great interview, but one unanswered question. Why does QE have to stop ? Some argue we could have QE forever ......

  • NK

    Nikos K.

    8 10 2016 16:05

    1       0

    excellent interview

  • HC

    H C.

    8 10 2016 15:25

    1       0

    Mr. Koo did a great interview. He provided a very clear and simple explanation of our macroeconomic environment. We are in BIG TROUBLE when the Fed/Treasury start removing the excess reserves they created thru QE.

  • DL

    Dan L.

    8 10 2016 15:11

    5       0

    Excellent interview, and I agree with his analysis except that debt financed fiscal spending (when such spending is Non-productive, in the Austrian sense) will still be a drag on the economy in the fu

  • MC

    Mike C.

    8 10 2016 15:00

    1       3

    Perplexed by the total disregard on how technology has affected this and how it will shape our NEW ECONOMY. Nobody ever talks about this.

  • MC

    Mike C.

    8 10 2016 14:58

    0       0

    Just maybe, we're amidst a revolutionary change in the system. New economy calls for new metrics.

  • MC

    Mike C.

    8 10 2016 14:55

    2       1

    If business/consumers do not believe, trust have confidence in the system....you can try to stimulate as much as you want, ain't going to happen.

  • SM

    Sam M.

    8 10 2016 14:54

    2       0

    That was pretty awesome! Part 2 would be incredible.

  • MC

    Mike C.

    8 10 2016 14:53

    2       0

    Great insight, thought the hit the nail on the head moment was in around the 37-minute mark....the problem is psychological.

  • cd

    christine d.

    8 10 2016 13:25

    1       0

    Fantastic - someone who understands at a deep level the interaction of private, public and central bank balance sheet interaction. Please get him back - would be brilliant to have some balance sheet tables to illustrate

  • RK

    Raitis K.

    8 10 2016 13:13

    0       0

    This is gold... Thanks!

  • DR

    Daniel R.

    8 10 2016 12:27

    3       1

    It's a joy to listen to such a clear, simple and compelling exposition. Can you try get Mervyn King - IMO the smartest of the central bankers alive - to RV to talk through his model? It would be a great complement to Mr Koo's interview.

  • SD

    Salvatore D.

    8 10 2016 09:44

    7       0

    Brilliant analysis by Mr. Koo. We need a part 2 for the implications of normalization on assets prices and FX.

  • AS

    Alex S.

    8 10 2016 07:08

    2       0

    Unfortunately smart people like Koo did not get to put at the helm where it matters. By the way this guy is so smart

  • TH

    Timo H.

    8 10 2016 06:11

    2       0

    Two brilliant minds discussing about big topics. Thank you!

  • JM

    Jason M.

    8 10 2016 03:53

    18       0

    I like to think I'm a pretty astute and successful micro investor...but occasionally I'm embarrassed to learn I have been putting my money to work without fully understanding some of the critical macro issues at work. More than any other RealVision interview to date, this is the feeling I had watching this. Revelation after revelation. Bravo.

  • rp

    ross p.

    8 10 2016 01:59

    18       0

    Spectacular video. Explained so many of his views so clearly that it is hard to argue. Grant made this video even better by raising so many excellent questions. Would Love to see Mr. Koo on again soon!

  • OM

    Omar M.

    8 10 2016 01:18

    1       0

    Gr8 interview
    TY guys 👍

  • Pg

    Philip g.

    8 10 2016 00:54

    2       2

    @Fingers S. debt=savings is similar to one persons asset is another's liability. If no one in the economy saved then no one would be able to borrow since fractional banking can only multiply money not create it from nothing.

  • JM

    Jim M.

    7 10 2016 22:21

    11       0

    What a great man. Another of the very important videos we've seen here. And don't we find ourselves saying this again and again? A real tribute to The Real Vision Team. Among my takeaways are that "buy and hold" may be either dead or on life support. We're all gonna have to be Global Macro investors.

  • FG

    FundamentalAnalysis G.

    7 10 2016 21:34

    2       1

    I would have liked to know what he thinks of gold, as a result of how he sees things playing out in America, Europe and UK.

  • Nv

    Nick v.

    7 10 2016 21:06

    1       0

    A bond crash.....seems inevitable to me

  • Nv

    Nick v.

    7 10 2016 20:54

    6       0

    Excellent talk.
    One question I have is how does this all normalize? It sounds to me that we just return to growing debt again once fiscal stimulus normalizes the economy and the private sector starts borrowing again.
    It still seems unsustainable that the world keeps growing debt faster than GDP. Surely we should be deleveraging the long term debt cycle?

  • LA

    Linda A.

    7 10 2016 19:53

    3       1

    Mr. Koo should be the Fed president. He clearly gets it and is so well thought out. When the economy recovers, the Fed has no choice but to rein in the money supply. He has great solutions that should be taken into account by all central banks. Kyle Bass said qe works when 1 country is doing qe but now we have all central banks doing qe. Major pain not only for the bond mkt but I think the stock mkt too. Martin Armstrong says that the bond mkt will collapse and that the stock mkt will go up because money has to go somewhere. Any opinions on this RV members? Thank u.

  • lD

    lance D.

    7 10 2016 19:39

    4       0

    I want this bloke over mine for a sunday roast .

  • TJ

    Tay J.

    7 10 2016 17:22

    16       0

    I have been reading Richard Koo's work for years -- but now after hearing how clear and down-to-earth he is -- i am doubly impressed. We can debate his prescription for the uber-debt disease, but must acknowledge that it would have had a greater chance of being implemented than a radical, ultimately healthier, cleansing.
    It's always good--and spooky--to hear a forecaster wishing fervently to be wrong.

  • FG

    FundamentalAnalysis G.

    7 10 2016 17:00

    1       0

    This is an excellent interview, it put quite a lot of things into perspective.

  • GT

    Graham T.

    7 10 2016 16:21

    7       30

    I have never heard of him. There is absolutely no way any prominent Japanese economist would warn of an impending crisis. It is not in their culture. The nail that sticks out is hammered down. Where are his comments about allowing capitalism in Japan to find its own way, even if that might induce a recession? In a socialist society, as in Japan, that is regulated by the whole such comments are an anathema. In the BOJ we have an extreme example of a very powerful economic "independent" institution that has allowed itself to be , dare I say it, prostituted to the whim of their politicians. His analysis is flawed, shame.

  • CD

    Colin D.

    7 10 2016 16:00

    9       0

    Excellent and insightful interview with Richard Koo. Keep up the great work Grant. It would have been fascinating to hear how he thinks you invest for what is to come in the years that follow. Sounds to me like it should be assets that benefit in an inflationary environment.

  • IZ

    Ignacio Z.

    7 10 2016 15:42

    4       0

    1) .... "from a macroeconomic point of view, debt = savings" ... is it so?, how can this be true?

    2) ... "monetary policy works beatifully" ... / look around and give me an example!!!!

  • IJ

    Ian J.

    7 10 2016 15:27

    3       0

    "1,500% inflation"... Yikes!!

  • LA

    Linda A.

    7 10 2016 15:23

    3       0

    Happy Birthday Sebastien! Mr. Koo what happens to the B/S when bankruptcies occur- it gets wiped off the b/s of the co and the lender (re-set). QE definitely pumps up assets- corps are still borrowing at record levels & buying back stock, real estate inflated with renters spending 50% of their income on rent. In my opinion, we have a wage recession which makes people save more & not want to take on more debt. The subcontracting of labor to Mexico, China, India, Vietnam etc. will help their economy depending on whether the leader uses the inflow for themselves or help their country. Countries need innovation to create jobs & further research & development. I read a business book regarding becoming an effective CEO (forgot the title) and it states that a CEO's job is to plan for the future of the co. to enable it to survive for decades. Govt.' should provide tax credits, R&D credits to companies to help their businesses. In addition, the stringent IRA rules should be changed- let people take out a certain amount of funds at 55 and enable them to work. This will help stimulate the economy.

  • IJ

    Ian J.

    7 10 2016 14:07

    20       0

    Dr Lacy Hunt has a good alternative perspective on "how to deal with the problem" of private sector deleveraging - which is really just a symptom of over-indebtedness. His recent RV interview is a great companion interview to this one.

  • ag

    amin g.

    7 10 2016 14:01

    4       0

    mindblowing! i was downloading his book from amazon half way through this interview.

  • SD

    Sebastien D.

    7 10 2016 13:59

    8       0

    I am a big fan of Mr. Koo, if I had to ask for one speaker it would have been this one. Today it's my birthday, that's a nice gift from RV!

    Very interesting interview, I'm familiar with his theory and work so I would have enjoyed more time spend on the future/endgame and effect of various asset classes (what does he think about gold, bitcoin !?), but it's important to make sure that everybody understand the current situation. You can watch another video of him here: https://youtu.be/8YTyJzmiHGk

  • KC

    Klendathu C.

    7 10 2016 13:08

    55       5

    Another great interview with another great perspective. Richard Koo is certainly a much wiser man than I but his and other economists's obsession with preserving GDP at all costs is beyond ridiculous. I understand why they continue to target it, but it's just not the right way to run an economy with such high debt levels. Just looking at Japan over the last 10 years, GDP has stagnated while debt levels have risen. Mission Accomplished? The fact is, we are in a debt super cycle because we've pushed this flawed theory that the either the public or private sector has to be borrowing at all times to the extreme. What happens when the public sector cannot borrow anymore? What happens when interest rates are artificially low because of all the excess borrowing that the capital markets cease to function? Do you borrow more just because you can and HOPE that the money goes into the right places? There are no easy answers to the problems that face society today, and simply borrowing more money to avoid a debt deflationary bust for another few years does not help. As Grant likes to say "Just because it hasn't happened yet, doesn't mean it won't." And unfortunately until we get a return of market forces, economists and central planners will continue to think they can control the outcome.

  • PB

    Pieter B.

    7 10 2016 12:24

    26       1

    Fantastic interview! It shows that personal real-life experience is far more valuable than what textbooks can provide. The one thing I would like to see answered in a possible next interview is what Richard Koo's view is on increasing debt levels on a government level because his proposition that already heavily indebted governments should basically take over the spending power of the private sector that chooses to pay off debt will obviously bring those governments into more debt right? Does Richard think that debt matters? What would his investment advice be in this perspective? Go long USD, Gold etc? Thanks a lot for the great insights and excellent discussion.

  • JS

    John S.

    7 10 2016 11:50

    18       0

    Outstanding