Will there be Hyperinflation or Deflation?
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.