The Worst Idea in the History of Economics

Published on
March 13th, 2019
Duration
20 minutes

The Worst Idea in the History of Economics

Trade Ideas ·
Featuring Peter Boockvar

Published on: March 13th, 2019 • Duration: 20 minutes

Peter Boockvar, CIO of Bleakley Advisory Group, rejects the idea of negative interest rates — and goes so far as to call them one of the worst ideas in the history of economics. Heated and irritated by current policy-makers, Boockvar highlights how the U.S. could follow the same destructive path as Europe and Japan, in this interview with Brian Price. Filmed on March 8, 2019.

Comments

  • NR
    Nelson R.
    18 March 2019 @ 02:11
    I like Peter and appreciate his smarts, but this was 20 minutes of a trader rationalizing a bad trade. Bonds will continue to rally.
  • BM
    Beth M.
    15 March 2019 @ 22:46
    Fantastic interview with Peter. This subject matter is the "gut check" that needs to be brought to every investor. IMO We are talking about the potential realties of a major market shift Peter outlined...I absolutley love this "straight talk"! Thank you Raoul and Grant...and thank you Peter for your critical thinking. (I am done procrastinating and loading up on gold.)
  • LC
    Lloyd C.
    15 March 2019 @ 07:32
    They have to drop interest rates because otherwise the world will enter into a great depression and we'll need a new Breton woods. It does not appear the G20 are ready to contemplate a full reset. There's a few more years of debt fuelled inflation to go it would seem.
  • JL
    Johnny L.
    14 March 2019 @ 19:37
    amazing conversation and honestly expressed w/o the finTV BS
  • JC
    Joe C.
    14 March 2019 @ 16:13
    Curious to poll the RV community. Do you think we will see negative interest rates in the US (say in next 5 years)? Thumbs up yes, thumbs down no.
  • SS
    Shanthi S.
    14 March 2019 @ 03:51
    This was great! The anger is well placed.
  • DS
    David S.
    14 March 2019 @ 03:42
    Negative rates are a good indication that there are few profitable uses for capital. Negative rates are also a huge tax on wealth - private and corporate. I wonder how much money has been generated by Germany with bund rates far below former market rates especially negative rates. Negative interest rates on the German Bund are helping to pay down the German National debt each year. Not a bad deal for Germany. The Euro is keeping the price of German exports low and negative bunds rates are a great revenue source. What a deal! I wonder if the US could start to pay off its national debt with negative rates on our bonds? (Just joking.) DLS
  • WB
    William B.
    14 March 2019 @ 02:17
    Great interview! While I agree with the P.V. comment below, Peter’s point (one at least) is that bank liquidity is hurt by negative rates so we may see lots more than just a few banks going under as well as another GFC or worse for all of us.
  • PV
    P V.
    14 March 2019 @ 01:41
    IMO Peter doesn't understand how continental Europe works. The health of banks takes a backseat to the political need for fiscal expansion. As government deficits will continue to expand under pressure from populist policies, rates ought to stay low/negative. If the price to pay is the collapse of a few banks here and there, so be it. A number of countries (eg Italy) have already started stealth nationalization. Germany/France may be next. Any cognizant investor has to come to terms that we will see more and more extreme intervention. Not less. MMT is likely to be next as the global economy maybe heading toward a recession.
    • LC
      Lloyd C.
      15 March 2019 @ 07:33
      Which is why hard assets are probably going to be our best options.
    • BM
      Beth M.
      15 March 2019 @ 22:59
      Populist policies have nothing to do with driving government debt up. With all due respect that's one of the oddest comments I read on these boards...Obama doubled the debt and nothing good came out of it.
  • KS
    Karen S.
    13 March 2019 @ 23:11
    i lost 250 dollars on multiple puts FUCK lol
  • DS
    David S.
    13 March 2019 @ 20:07
    The best thing the Fed can do is nothing! The major problem is the huge debt crisis. Interest rates are not stopping business from productive investments. Buybacks need to be curtailed more each year until there is a better balance. Executives should invest in projects to generate profits not be rewarded for financial engineering. Lowering interest rates no longer has any effect on the real economy with all the debt on or off the books. The best thing the Fed can do is become irrelevant. No more QE or anything like it. No lowering of interest rates. It will take years to unwind the debt crisis. There is no easy way out. DLS
  • VS
    Victor S. | Contributor
    13 March 2019 @ 19:05
    Great interview ! Peter says what 2+2 is negative rates kills banks and does not promote lending. Thanks for the opinions.
    • BP
      Brian P. | Real Vision
      13 March 2019 @ 20:23
      Thank you, Vic! Indeed, love speaking with Peter. Looking forward to having you with us again on RV as well, Sir!
  • MM
    Mike M.
    13 March 2019 @ 18:09
    Excellent, I appreciate Peter's thoughts. It is rare indeed to have someone levle with the 99% and what is going on, how we got here, and what needs to be done.
  • MP
    Máté P.
    13 March 2019 @ 17:55
    Peter is right and I share his concerns - like many of the investors who understand what's going on. I used to think that central bankers are clueless academics and they do not understand the damage they are doing to the economy - like you see with most of the fintwit community. But I do not believe it anymore. I think they completely understand what they are doing. We've passed the point of no return many years ago. Any serious attempt of normalisation would have crashed the global economy in a blink of an eye, no matter at what point of the cycle they would have started. Don't be delusional. Most of my family and friends have no clue what QE, operation twist or TLTRO is, but they very much remember the crisis - guess it's the same case with the majority of the population. Arguably, any serious attempt of normalising rates would result in an even deeper and longer crisis. So go on hawks, give them the crisis they deserve. Sounds good right? Finally we would normalise and we finance-savvy guys could say that we always knew this would happen. The prophets.... No-one at the helm of the ECB/FED/BOJ is willing to do this. Would it be better if they did? Would you do it? Would you be allowed to do it? These are the questions you have to ask yourself. Sounds easy on paper, but I guess most of you never had to make decisions that affect the life of millions. We've made the choice of kicking the can down the road a long ago. And now we are going to double-down. How long can this go on? For a very long time imo...take your bets accordingly.
  • PD
    Peter D.
    13 March 2019 @ 17:42
    Great analysis, which leads to the following reflection: Central bankers - as a group - are likely not overly concerned that Europe's and other nations' banks might go bust.. Most are academics and believe that economies need Government's enlightened hand in managing the economy. A bankrupt banking sector would provide central banks with a window to get the authority to create money and make loans directly to big businesses and governments - as the ECB has already been doing for some time with its corporate bond purchases. Boockvar ought to calm down - because he ain't seen nothin yet......
    • JV
      Javier V.
      13 March 2019 @ 17:59
      Good point, DB just released a report on how to save European banks, and how European banks are underperforming in relation to US banks
  • FA
    Frank A.
    13 March 2019 @ 17:20
    Agree with him. Milton Friedman said this in 1967 These subsequent effects explain why every attempt to keep interest rates at a low level has forced the monetary authority to engage in successively larger and larger open market purchases. They explain why, historically, high and rising nominal interest rates have been associated with rapid growth in the quantity of money, as in Brazil or Chile or in the United States in recent years [early part of the Great Inflation], and why low and falling interest rates have been associated with slow growth in the quantity of money, as in Switzerland now or in the United States from 1929 to 1933. As an empirical matter, low interest rates are a sign that monetary policy has been tight-in the sense that the quantity of money has grown slowly; high interest rates are a sign that monetary policy has been easy-in the sense that the quantity of money has grown rapidly. The broadest facts of experience run in precisely the opposite direction from that which the financial community and academic economists have all generally taken for granted. There has been NO MONEY in monetary policy. Either the FED doesn't believe Friedman or they're very afraid of something we haven't really seen and that would be "real" economic growth.
  • dn
    david n.
    13 March 2019 @ 17:04
    I like Peter Boockvar a great deal but I suspect Alex Gurevich will be correct as US rates eventually head to zero.
  • CC
    Casey C.
    13 March 2019 @ 16:14
    Peter is spot on with respect to the idiocy of today's central bank policy. Wish more money managers would look at the bigger (societal) picture around this issue as opposed to just how it affects their portfolios (so far positively). This reflects a moral lapse in my opinion. Much respect to Peter for not just acquiescing and playing along.
  • GH
    Gary H.
    13 March 2019 @ 13:58
    Sadly, I don't have much hope that the Fed will do anything different than the clowns at the BOJ and ECB. Enjoyed the interview.
  • BT
    Brian T.
    13 March 2019 @ 13:21
    I sure do hope that he is correct, but ........I think the fed will engage in easing policy before too much pain occurs and then restart QE when it sees fit- unfortunately....
  • HO
    H2 O.
    13 March 2019 @ 13:00
    Best segment on RV in some time.
  • JL
    J L.
    13 March 2019 @ 12:55
    we're way past the point of volckerizing, pain threshold just much lower in current democracies
  • BD
    Bruce D.
    13 March 2019 @ 12:32
    Superb analysis Peter, IMO you are 100% correct!
    • oo
      olga o.
      13 March 2019 @ 16:41
      I share Peter's frustration with ECB and Draghi...I had no interest listening to the end of the Q&A last Thursday after D. said QE and NIR worked well... just infuriating bunch lies.