Scary stumbling response here.
The hero’s of this generation are the villains of the next.
— Tyler Neville (@Tyler_Neville_) December 1, 2021
The whole “strict parent” metaphor is wrong. Regardless of whether they were strict or not, a good parent would protect their children from abuse, not “disappear” them and suppress legitimate cases of abuse.
Transcript00:00another one of your publications is00:02carry with me is principles for00:04navigating the big debt crisis we follow00:06debt levels here we do debt reports debt00:08accumulation port set aside some00:10statistics this morning are you worried00:11about where we are in debt accumulation00:13at the household sovereign or global00:16level or are we near tipping points as00:20you look in debt accumulation around the00:22world are you concerned I’m I look at00:26things in a very mechanic mechanical way00:29and so what concerns me about debt we’re00:33in a new world now and what concerns me00:36about debt is the nature of the dynamic00:42in which you don’t have to service debt00:45and what I mean by that is to a larger00:48extent than ever before this debt growth00:51the maturity of the debt has been00:53extended a lot the interest rate becomes00:57negative or or near negative so the debt01:00service payments for the interest rate01:02go down a lot and it’s almost the01:06situation where there’s guaranteed debt01:09rollovers so principle does not have to01:12be rolled over in a number of cases and01:14there’s low covenants and so when you01:18start to look at this the thing you say01:20what is going to cause a debt service01:24problem in 2007 we calculated that we01:27would have the 2008 financial crisis by01:29doing those pro-forma numbers and then01:32when we’re dealing now in this seemingly01:34crazy or odd other reality in which the01:39you don’t have to pay interest and you01:42don’t have to rollover your debt and and01:45that and then you play with negative01:47interest rates you say how do how will01:50that work okay and so if we look at01:53periods of time in history and we’re01:55somewhat those types of things happen01:58maybe for example of war years one if we02:00look at the war years and we look at ya02:03let’s call year-old yield curve02:06targeting with the low interest rates02:09and the mechanics of that that produces02:11a different02:12mechanics now so when I look at what’s02:15ahead and I think about that and my02:18stretches my imagination because I I02:21know even beyond that we will have much02:24larger deficits so if we not only do we02:27have the debts that you’re referring to02:28right and their maturities but we have02:31will have larger deficits which will02:34grow and in addition we have pension02:37liabilities and healthcare liabilities02:39and other forms of liabilities that will02:42come at us02:42they’re very cashflow driven because02:45you’ll have to make those types of02:47payments and so they’re coming at us at02:49the same time and then you deal with02:51okay how will that be dealt with and02:54funded so you have to go through the02:56imagination of the fact that they will03:00probably be monetized and in other words03:03they’ll have debt03:04central banks will be in a position that03:06they’ll have to buy the debt and so as03:08we go from other countries let’s say if03:10we go from Japan which 46% of it’s very03:13large debt is owned by the Bank of Japan03:16and we keep moving that up that’s the03:19mechanics that we have in place and so03:21when I extend that and I look at that I03:23think we are in the last stages or the03:27less end of last stages of what is03:30currency what is a reserve currency how03:32does that monitor that our Fiat monetary03:34system work because let’s say currency a03:39bond is an asset that is a promise to03:43receive a lot of currency okay now how03:48do much do I want that and and because03:51I’m going to have let’s say a negative03:53interest rates are close to a negative03:55interest rate so you know then you start03:58to think of the arbitrage as do I want04:00the paper currency in the thing do I04:02want gold do I want some other04:04alternative type of currency and then04:07increasingly there will de facto be04:09taxes on owning that asset because tax a04:13negative interest rate is a form of04:14taxes and as we go more and more to04:16digital currencies the arbitrage between04:19putting cat paper in a vault will be04:23increasingly eliminated04:25so we’re at the when I talk about the04:27long-term debt cycle04:29I mean that there’s in in the history04:32you know you wipe out the debts and then04:34you don’t have debts but and then you04:37can create the stimulation and that04:40happens and you always hit it with a04:41jolt of stimulation until then you get04:45to interest rates hitting zero or close04:47to zero and then they don’t work so04:50that’s monetary policy one is interest04:53rates monetary policy two is then when04:56that doesn’t work you print money and04:57you buy it when that doesn’t work you05:00have this phenomenon that we’re in we’re05:03at the end of the long term debt cycle05:04and you have the dynamic so the classic05:08debt crisis that we’re looking at is05:12doesn’t look like the ones that I’ve05:15seen in the past it looks more like the05:18ones in the like and at one late-30s05:21what we’re at the end of that cycle05:23because in the past the way they would05:26happen would be you know do you have a05:28certain amount of debt central and the05:30economy’s overheating central bank05:32tightens monetary policy or even that05:35you run through and you say what’s the05:37debt rollover problem right so we’re not05:39going to have the classic debt rollover05:41problem we’re not going to have the05:43classic tightening of monetary policy so05:46when we think about those things and say05:48oh we’re going to have a debt problem we05:50have things to be concerned about in the05:52way I’m describing but they’re not going05:54to be the classic ways that this has05:57come to an end if we can’t afford the06:00liabilities and I agree that if you look06:01at the net present value of the US06:02government’s entitlement programs that06:04the gap the net present value is about06:0635 trillion and add to that 20 trillion06:09and federal debt and we’re adding a06:11trillion a year so huge sums of money if06:14to your point that we end up cancelling06:16or reducing those liabilities for every06:18liability that’s an asset so someone06:20who’s holding that asset is going to be06:21poor and there could be a distributional06:23piece of that so making to your point if06:26we simply write off the debt we’re06:28destroying a tremendous amount of growth06:29so the way that it’ll be done is by06:32printing it and evaluating the currency06:35because that’s the very subtle way and06:37it’s also06:38looks it looks good because when you06:41have a currency depreciation first of06:44all it’s very hidden tax right let’s put06:46a negative interest rate it’s not like a06:47tax rate change that’s a that’s06:49controversial you just have a negative06:51interest rate and okay that’s one that06:53form of tax and when you have a currency06:55depreciation it causes one’s assets to06:58go up06:59it’ll be inclined to make the stock07:01market go up depreciate the currency Iclerking on the floor of the New YorkStock Exchange in 1971 when the August15 1971 Sunday nightNixon floated the dollar right and Iwent on the floor of the New York StockExchange that clerking and I thought wowwe have a real crisis here and the stockmarket rose the most in my lifetimebecause a currency depreciation alsotends to raise asset prices in variousways so the the if you’re in thatposition the hidden way the effectiveway to do that is to monetize the debtand have the depreciation as distinctfrom like you write it down and like yousay somebody’s assets that doesn’t workwe cover these things in that book bythe way that book if you’re interestedprinciples for navigating big debtcrisis is available free online at08:03economic principles calm but it’s so08:07these things have happened over and over08:08again08:09I think mechanistically it means that we08:12will print the money that doesn’t mean08:15necessarily inflationary okay like in08:18the 1930s we had a series of currency08:21depreciations a lot of printing of money08:23but you also had the other forces that08:26meant that and so the Dinah I think08:28it’ll be kind of seemingly hidden but08:30it’ll but we’re still right close to the08:33point where nobody that you may not want08:37to own those bonds okay and you’ll look08:40for what else and the question is what08:44else what is that else okay that’s the08:47environment I think that will be it and08:49you know there’s a08:50that gold is the only asset you can have08:52that’s not somebody else’s liability so08:55anyway I don’t know what those08:58alternatives are but I would say if more09:01gold is more likely than the
<iframe width=”560″ height=”315″ src=”https://www.youtube.com/embed/Ca9uu36w_Vo” frameborder=”0″ allow=”accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe>45:36the references you make here goes to 30sand referencing cow you know the top 1%in the 30s versus today you know youshowed this that the top 1% in the 30sversus today you know top 1% incomeshare has the same amount as the bottom90% in the last time it was like that inthe authorities are you kind ofsuggesting that we may be facing whathappened in the 30s years or no yes I’msaying you so that is why I’m sayingthere are three major divisions okaythree major forces and that force whichi think i emphasized the opportunity gapnot just the wealth gap but they bothmatter if you look at history acrosscountries across timeframesand you say when there’s a large incomeand wealth gap and you have an economicdownturn you have a dangerous fight onyour hands you have a dangerous set ofcircumstances history has taught us thatyou said in April income inequality isthe biggest crisis we have in America on60 minutes and I think in recent acouple months ago you said wealthinequality those are the two main thingsthat we ought to become I’m not sayingan even more fundamental those are theoutcomes and even more fundamental isopportunity in quality and productioninequality because at the end of the dayjust like you said we have to find how47:05
Over the last 40 years, China’s rapid economic expansion has altered the world’s geopolitical and economic landscape. Bridgewater’s Founder, Co-CIO and co-Chairman Ray Dalio joins Bridgewater’s Senior Portfolio Strategist Jim Haskel to discuss the historical arc of this growth and why the portfolio characteristics of China’s markets are attractive and diversifying despite escalating global tensions. To learn more visit: https://www.bridgewater.com/china/ To skip to specific sections in the video please find chapters marked below: The US-China Conflict – 4:38 Investing in China – 11:30 Public and Private Markets in China – 20:32 Portfolio Characteristics of Chinese Markets – 24:47 Looking Ahead – 27:53To skip to specific sections in the video please find chapters marked below: The US-China Conflict – 4:38Investing in China – 11:30Public and Private Markets in China – 20:32Portfolio Characteristics of Chinese Markets – 24:47Looking Ahead – 27:53
“If you look around the world, our risk is not inflation and it’s not overheating economies,” Dalio said.
ALEXANDRIA, VIRGINIA – In a recent Project Syndicate commentary, James K. Galbraith of the University of Texas at Austin defendsModern Monetary Theory and corrects some misunderstandings about the relationships among MMT, federal deficits, and central-bank independence. But Galbraith does not explore what is perhaps the most important issue of all: the political conditions needed to implement MMT effectively.
MMT owes its newfound relevance to the fact that deflation, rather than inflation, is becoming central banks’ main concern. For a high-debt, high-deficit economy like the United States, deflation is an especially serious threat, because it delays consumption and increases debtor anxiety. Consumers forego major purchases on the assumption that future prices will be lower. Homeowners with mortgages cut back their spending when they see home prices falling and the equity in their homes declining. These cutbacks worry the Federal Reserve, because they add to deflationary pressures and could trigger deeper spending cuts, stock-market declines, and widespread deleveraging.
The Fed’s inability so far to reach its 2% target for annual inflation suggests that it lacks the means to overcome persistent disinflationary forces in the economy. These forces include increased US market concentration, which diminishes aggregate demand by weakening employee bargaining power and increasing income inequality; population aging; inadequate investment in infrastructure and climate-change abatement; and technology-driven labor displacement. Making matters worse, US political gridlock assures continued commitment to economically exhausted strategies such as tax cuts for the rich, at the expense of investment in education and other sources of long-term growth. These conditions cry out for significant changes in US government spending and tax policies.
MMT is seen as a way to accomplish the needed changes. It holds that a government can spend as much as it wants if it borrows in its own currency and its central bank can buy as much of the government’s debt as necessary – as long as doing so doesn’t generate unacceptably high inflation. Both tax-cut advocates and supporters of public investment find little not to like.
MMT has been roundly criticized by economists across the political spectrum, from Kenneth Rogoff and Lawrence H. Summers of Harvard University to Paul Krugman of the City University of New York. All contend that it is a political argument masquerading as economic theory. But Galbraith and Ray Dalio of Bridgewater Associates see MMT differently. Dalio argues that MMT is real and, more to the point, it is an inevitable policy step in historically recurring debt-cycle downturns.
In his book Principles for Navigating Big Debt Crises, Dalio documents the steps that central banks have historically taken when faced with a booming economy that suddenly crumples under the weight of debt. The first step (Monetary Policy 1, or MP1) is
- to cut overnight official rates to stimulate credit and investment expansion. The second (MP2)
- is to buy government debt (quantitative easing) to support asset prices and prevent uncontrollable waves of deleveraging. If MP1 and MP2 are insufficient to halt a downturn, central banks take step three (MMT, which Dalio calls MP3) and
- proceed to finance the spending priorities that political leaders deem most essential. The priorities can range from financing major national projects to “helicopter money” transfers directly to consumers.
Achieving political agreement on what to finance and how is essential for implementing MP3 effectively. In a financial meltdown or other national emergency, political unity and prompt action are essential. Unity requires a strong consensus on what should be financed. Speed requires the existence of a trusted institution to direct the spending.
In the early 1940s, when the US entered World War II and winning the war became the government’s top priority, the Fed entered full MP3 mode. It not only set short- and long-term rates for Treasury bonds, but also bought as much government debt as necessary to finance the war effort. MP3 was possible because the war united the country politically and gave the Roosevelt administration near-authoritarian rule over the economy.
The core weakness of MP3/MMT advocacy is the absence of an explanation of how to achieve political unity on what to finance and how. This absence is inexcusable. Total US debt (as a share of GDP) is approaching levels associated with past financial meltdowns, and that doesn’t even account for the hidden debts associated with infrastructure maintenance, rising sea levels, and unfunded pensions. For the reasons Dalio lays out, a US debt crisis requiring some form of MP3 is all but inevitable.
The crucial question that any effort to achieve political unity must answer is what constitutes justifiable spending. Alexander Hamilton, America’s first Secretary of the Treasury, offered an answer in 1781: “A national debt,” he wrote, “if it is not excessive will be to us a national blessing.” A government’s debt is “excessive” if it cannot be repaid because its proceeds were spent in ways that did not increase national wealth enough to do so. Debt resulting from tax cuts that are spent on mega-yachts would almost certainly be excessive; debt incurred to improve educational outcomes, maintain essential infrastructure, or address climate change would probably not be. Accordingly, it will be easier to achieve political unity if MP3 proceeds are spent on priorities such as education, infrastructure, or climate.
The political test for justifying MP3-financed government spending, is clear: Will future generations judge that the borrowing was not “excessive”? Most Americans born well after WWII would say that the debt incurred to win that war was justified, as was the debt that financed the construction of the Interstate Highway System, which literally paved the way for stronger growth.
As the 1930s and 1940s show, MP3 is a natural component of government responses to major debt downturns and the political crises they trigger. We know much more about what contributes to economic growth and sustainability than we did in the first half of the twentieth century. To speed recovery from the next downturn, we need to identify now the types of spending that will contribute most to sustainable recovery and that in hindsight will be viewed as most justified by future Americans. We need also to design the institutions that will direct the spending. These are the keys to building the political unity that MMT requires. To know what to finance and how, future Americans can show us the way; we need only put ourselves in their shoes.