Given that our prior podcast was with Russell Napier, who has a rather radical viewpoint compared to where other folks have been, regarding inflation. So, let’s say we stay on this path, under the current system, the growth rates gonna grind down, and by the way, if you look at the inflation-adjusted securities, they’re negative, real yields are negative, which is basically a way of investors saying that they’re expecting the growth rate to deteriorate and maybe even be negative for a prolonged period of time. Well, if you’re working with a general equilibrium model, you’re not going to achieve your equilibrium. Grant Williams 1:16:20 Well, and the ECB has taken on climate change now as part of there mandate. Bill Fleckenstein 1:09:13 Well, I saw that the morning after we’d finished recording the interview, and I was stunned because that was the very thing that he said, was, you could tell, his number one concern. We’ve been kicking the can so long on so many different…. London was the centre of free enterprise. “This proposal is not going to pass this year.”. The panic hit in 1838, Van Buren is President, he had no idea. I’m in the investment management business. The lobbying effort amongst the liberals is to get the Fed to try to work on diversity. A lot of people don’t want to be concerned with the unintended consequence but what we know from the Japanese, the European and the Chinese experience, that when you undertake these actions, you swart creative destruction and moral hazard. We also have done a great deal of hypothesis testing to sort out valuable economic theory from economic theory that does not matter and I would say that there were a couple of things that were provided important guidance to us. There are people that are willing to take that risk in order to get beyond the debt problem. Grant Williams - YouTube Founder and publisher of 'Things That Make You Go Hmmm...’ and ‘The Grant Williams Podcast’. I don’t know why everybody wants to get on the hyperinflation. Learn more about Grant's Things That Make You Go Hmmm newsletter right here. Grant Williams is author of Things That Make You Go Hmmm… and co-founder of Real Vision Group. Lacy Hunt 9:39 Well, we always wring our hands, and we always do our due diligence. We got to talking about inflation and Russell’s point was that the change in the mechanism here by which the government is now essentially going to the commercial banks, getting them to lend and guaranteeing them loans and thereby making those loans contingent liabilities on the government balance sheet. Grant Williams 40:49 Yeah, it’s a great way to put it. Both of them, together, said that monetary and fiscal policy are powerful. Grant Williams, much to his dismay, is fast approaching 30 years in finance. We, first of all, built the central route, transcontinental railroad. ", "Grant is anti-hyperbole - the investable voice of reason. In the 1860s, after the Civil War, we started building the Transcontinental Railroad. Now, the one in 1838 — We don’t really have hard data, but it was very, very similar. There’s an inherent fallacy and that concept. I think, what Bill and I want to try and find out from Lacy is — Are they still there? Let’s start the Interview! We’ve said to them repeatedly that if you want us to manage from quarter to quarter, year to year, then don’t hire us. If the Fed holds the overnight rate, and the inflation rate goes negative, at that point in time, the real Treasury rates will start rising. Yes, we’re strung out on heroin and yes, we tried alcohol and yeah some Percocet but now we’re even more messed up. Lacy Hunt 20:22 The economic history is essential. Grant Williams 59:27 No, I think a nice and modest 3% or 4% will do most people just fine at this point. 11 points - added 10 years ago by dspsfarm - 1 comment . Game over for bonds, stocks, currency, our currency, I mean, not over, but real destruction. Our guest this week, as Bill just said, is Lacy hunt, who has been extraordinarily right, extraordinarily strident about his views for, to my mind, a couple of decades now. But he has seen something that has made him change his mind and started to think that this particular action, taking power away from the central banks and putting it in the hands of the government, may actually be the straw that breaks the camel’s back. When we had QE one, two and three, the Fed expanded the balance sheet, money supply went up, people said the Fed was printing money, and there was certainly a large first-round increase in money, not as large as today. So, you know, it’s funny, it was the last thing we talked about on the podcast pretty much. Also, the market does not understand that economic numbers do not come out in a vacuum and that one of the most important points for evaluating the market are initial conditions. We don’t know whether he ever met with Smith after the letter was written because of his death. There was a huge surge in the foreign currencies, huge surge in the commodities, the economic activity got a little lift but the reserves of the banks were not utilized, the velocity of money fell, the economy's growth rate fell back and so those projections at the time of QE1, QE2 and QE3 about an inflationary outcome with a weak dollar, well, where are those brave folks? First of all, the rest of the world is more over-indebted than we are and they are doing worse economically than we’re doing. Or, what would it take for you, perhaps to start thinking, okay, maybe we are going to see the end of this deflationary trend and we are going to move towards a more inflationary impulse. I think the discussion in here is misplaced right now. Please enter your username or email address. You could eliminate the debt held by the BOJ, since the BOJ is a subsidiary of the government, but you cannot eliminate the debt in the hands of the private sector, you would bankrupt them. I remember your firm, back in the 80s and 90s, when Van first started making his calls. Things That Make You Go Hmmm (Wikipedia): The Hippocratic Oath is an oath historically taken by physicians and other healthcare professionals swearing to practice medicine honestly. ... To continue reading this article from Things That Make You Go Hmmm… – a free weekly newsletter by Grant Williams, a highly respected financial expert and current portfolio and strategy advisor at Vulpes Investment … Moreover, it’s coming in at a time when our demographics are deteriorating. As investors see that happening, the growth rates coming down, they’re willing to accept a lower real rate. In the 70s, Van was at Texas Commerce, I was at Fidelity in Philadelphia, which was the largest bank in Philadelphia and I was running the commingled Fixed Income Fund in the trust department, and he was doing the same at Texas Commerce. I mean, look at the GDP numbers for Europe versus the United States. Well, in my view, this is really no different, the first-round increase in money supply is greater, but I think it will be more than compensated for by a decline in the velocity of money. Can you comment on those two kinds of opposing forces, please? “If you do not control public credit, it will control you”. People hail that as an accomplishment but we’ve seen maybe two dozen of these instances in Japan. Zach is joined by Grant Williams, author of Things That Make You Go Hmmm and co-founder of Real Vision. Grant Williams 0:00 Before we get going, here’s the bit where I remind you that nothing we discussed during the End Game should be considered as investment advice. Remember that the Fisher equation has a counterpart for the corporate yields and the private yields and that is the private yields are equal to the real yield plus inflationary expectation plus the risk premium. Lacy Hunt 4:52 Many people don’t realize that there was a 14-month bear market — mini mini bear market — in the late 80s and we sidestepped that as well. For example, money in Europe is not even turning over one time in a year, it’s down to 0.9 times and the velocity of money in Japan and China are both around 0.5 times per year and so we’ve operated on those two propositions. The Fisher equation does not have a zero bound. Lacy Hunt 2:52 I went into the Federal Reserve with my brand new PhD when I was 26 in 1969 and Arthur Burns was chairman of the Fed, I was at the Dallas Fed. All of the various other Fed proposals, some equally extreme, would get thrown into the hopper. If the Fed wishes to tighten conditions, the monetary policy still works, but in this circumstance, such as we have today, where the economy is extremely over-indebted, the debt is highly unproductive and we can have objective verification of that, the velocity of money falls, and so, since 1997, velocity peaked at $2.20 and today it’s around $1 to $1.30 and a fraction, it hadn’t declined every quarter certainly and hadn’t declined every year but it’s been in a major secular downturn. Clavin’s wisdom would regularly make those around him go “Hmmm....” as he laid out his views on a variety of topics ranging from genetic engineering...: You see, the roots of physical aggression in the male of the species is found right here, in the old DNA molecule itself. One of the things that I get really leery of was when somebody starts lecturing me on what they learned in econ 45 years ago, because there are certain things, particularly in microeconomics at whole, but macroeconomics, a lot of the propositions there that are taught in the schools are simply not valid and haven’t been valid for a long time. We realized that economics is a social science. Découvrez des références, des avis, des tracklist, des recommandations, et bien plus encore à propos de C + C Music Factory Featuring Freedom Williams - Things That Make You Go Hmmmm... sur Discogs. Lacy Hunt 4:13 I want to tell you all something you may not know. For 35 years, I’ve lived and breathed finance in a series of major cities from New York to London, to Tokyo, Hong Kong, Singapore and Sydney. Russell, like you, has been on the disinflationary/deflation train for over a decade now. Welcome, everybody to another edition of the End Game. If we stay under the current system of monetary rules of the Federal Reserve Act, then we have a standard to go by from a very outstanding research project, that was done by McKinsey Global Institute in 2010. Grant Williams is portfolio and strategy advisor for Vulpes Investment Management in Singapore−a hedge fund running $200 million of largely partners' capital across multiple strategies. You definitely want to read & listen to everything he produces. The tools available to us, the availability of data, people have recreated historical data in a more complete framework. We had felt, and you can see this in our writings, that we had rejected the notion of a Keynesian multiplier on government activity. It’s part of the view that financial transactions create income and wealth, not hard work, creativity and saving out of income. The weight of the crowd believing the same thing that already happened in extrapolation and when you look at the depth of the knowledge and understanding that he brings to the table, it’s a totally different picture, than most, I mean, obviously, there are other economists in the world that are good at what they do. 11 points - added 10 years ago by dspsfarm - 1 comment . This has been extremely educational for me. We actually put forth a theorem that received quite a bit of recognition, in which we said, the government debt acceleration ultimately leads to lower, not higher interest rates, and we have shown people the empirical evidence, not only for the United States but for the other major economies of the world. ", "Grant Williams is one of the keenest observers of markets and politics I've ever had the pleasure to know, and he is my indispensable navigator for these troubled times. Is that the most sensible period to look at, or if not, which periods are you guys looking at as a potential clue to what might happen from here? Grant Williams 1:13:36 But you pay on your credit card. After being educated at the church school, Ivan Petrovich Pavlov … Grant Williams 1:13:50 We’ll get into that another time. There is a growing risk, that the whole nature of the Federal Reserve Act will be changed and that it will not be the same act that we have operated when the Federal Reserve Act had to be rewritten after we left the gold standard in 1934. Resources have to be allocated to the up and coming ones that are going, that have the new ideas and new concepts and have the ability to grow rapidly. Because we’re going to make our people miserable. That’s what’s happened in Japan, that’s what happened during the Great Depression. In only 5 months, these interviews have been downloaded over 1 million times, placing this content squarely in the top 0.1% of podcasts offered in the vast marketplace. The peak 2008/2009 was the third secular peak since 1871, one occurred in the early 1870s, then 1929/30 in 2008/2009. It was definitely worth having this little bit of the podcast. Lacy Hunt 58:07 We have had several of these episodes. The Hypocritic Oath. The banks, to be able to put reserves to work, they have to have the capital base to take the risk that the loans will not be repaid. "Answers we have aplenty - most of them wrong, of course. Alongside my own interviews, I added three additional streams, each with a fantastic co-host: The End Game (with Bill Fleckenstein), The Super Terrific Happy Hour (with Stephanie Pomboy), and The Narrative Game (with Dr. Ben Hunt). Therefore, firms that would not have been able to stay in business are able to stay in business. The perfect counterpoint to Russell Napier’s appearance in Episode 5 of The End Game, Lacy uses his encyclopedic knowledge of econometric analysis, financial history and regulatory frameworks to explain why he remains resolute in the face a rising number of calls for the return of inflation. If you ate pasta and antipasta, would you still be hungry? That’s what worries me, they’ll talk about the collapse of the system and the end of America as we know it, and when, what they’re trying to get through, to Lacy’s point, is arguably the end of America. Roughly 30,000 people live in the territory, whose sole distinguishing feature is… The bank lending process is very complex. The single features Freedom Williams and he is also seen in the song's music video. Our money in the bank is basically digital now and this would just be a faster way to move it around, but we wouldn’t go to the store necessarily and pay in Fed coin, as opposed to green paper. Lacy Hunt 1:06:20 Do you know anybody that has any trip scheduled this year or next year? When the government debt ratio rises above 65%, it becomes very serious and increasingly so. That job mainly fell to Senator Carter Glass of Virginia, who was a pretty smart fellow and he went to the two leading monetary economists of the time, Irving Fisher at Yale University and Charles Whittlesey at the University of Pennsylvania, by the way, Whittlesey gave me my macroeconomic orals, I was getting my MBA at Penn. There’s no political will to go to austerity. I think it was interesting that several times he mentioned the potential for the Fed, to have its charter changed or said differently, turn liabilities into money and he mentioned it enough times that it’s it sounds to me like that’s one worry that’s out there on his radar, for sure. The advanced economies outside the United States were at multi-decade lows. One of the things which we did was to test our hypothesis from 1870 forward and the view was, my view was, that if a proposition is valid, then it should hold up, regardless of whether you have an income tax or you don’t, whether you have a central bank, or whether you don’t, whether you’re on the gold standard, or whether you’re not on the gold standard, or whether you’re on a fixed exchange rate standard or floating rates. If you’re able to capture the trends and real economic growth over time and the inflationary environment, you’re going to be on the right side. Europe weathered this much worse than we did and they’re far more indebted. He knows everyone and thus has access to all the right people. Bill Fleckenstein 1:05:59 Well, more importantly, thank you for your great and in-depth answers. I think that the current steps are relatively unimportant, but they could lay the foundation ultimately, but not immediately.
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