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Dr. Ingo Sauer

lines on the record: 162
first: 2024-03-18
most recent: 2024-03-18
sittings or episodes: 1
sources: podcast

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“Which means something like there is no ownership to knowledge, and that's the main idea. It's a completely non-monetized YouTube channel. I'm doing even a fundraising tour too. So I give speeches and I donate that money to finance this.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“So, okay, but my YouTube channel is only film lectures in German, and the idea is not to film the complete lecture, but to separate it into small models which you can really search so the next generation, they don't expect only if they put it into Google, they don't expect only a Wikipedia article, but they expect also explanation. And at universities, so we do, I teach, for example, introduction to economics. This semester, I taught some statistics and econometrics, and usually like banking lecture. So we have this explanation from the classroom itself. So let's just bring it on Google and into searchable small pieces. Yeah, and that's the idea from the channel in German called Wissenhatkeinheigentumer.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, no, not people in Europe, all investors. That's how capitalism should work. And hopefully I really want the euro to be a stable currency. And I think the European Union was a very fortunate project. And I feel like a European, but I just see like this dismal science problem here because if the euro becomes a weak currency, we have so much problems, so many problems, and it has to do with the German economy which needs a strong currency because it has to buy patterns and so forth. And we need immigration, skilled immigration, which is only possible with a strong currency. And we're facing so many economic problems if we choose this power. So I really want to make everybody aware. That the risk is there, and it's actually it became Much worse in the last two years”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Wow. So you're not so much worried about interest rate, risk. And if you're in the, you know, people listening to this in the US, they can sleep soundly at night, but you people in Europe, you do want them to be alert and sweating during the night.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“We tend to go more for the path of monetary financing. And I don't think that the US is giving up its privilege to have the reserve currency that easily to just make the dollar a weak currency. No, probably with the Chinese are very hard competitors and once in the future you will use this privilege, but I don't think that you risk it by depriving the Federal Reserve of its financial strengths and making the dollar a weak currency. I cannot imagine. But for the euro, unfortunately, I can.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, exactly. If they have already these long term bonds. But the problem is that they left the pars of the conservative monetary policy to only at the short end, no risk, no interest rate risk whatsoever. They bought long-term bonds, which now devalued because of the change in interest rates. But these losses, they are concerning, obviously, but it's not enough to bring such a big currency like the euro or the fed under pressure. No way. Additional losses. Real losses in different magnitudes, and then the decision to buy more of these risky bonds in order to stabilize prices, that could be a matter.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Being a weak currency at the end means that foreign currencies come here to Europe being traded on the black market and so forth. And that takes time. And also it's very institutionalized. We all use Euro all the time. And if the ECB does have a negative equity of 10%, forget about, no, it's not going to be attacked. And the same obviously is true for the Federal Reserve System. So I talked about severe central bank losses, but which I can imagine in the next five years and then little by little, the euro could become a weak currency, but it's going to take time. And these losses we suffered from the interest rate risk, as you called it.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“So probably you're with zero equity, only few percent or minus a few percent, but all of that doesn't matter. Even for such a big currency, it's different for the Argentine peso and for the Turkish lira. They're small currencies first of all, so the institutional coverage is not as strong. as for such a big currency.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“You also denominate the gold in historical value, but for sure this gold in market values is much more. So there is an equity position which is not represented in the balance sheet. Yeah, exactly.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“We have exactly the same problem here in Europe because also it's true also for the bonds and they are not marked to market those are some longer term bonds so and the bonds are not marked to market they changed the it was marked to market before the this the start of these rescue facilities in 2010 then they changed it to put the historical value and they only report the losses once they occur so if a bond comes to maturity and then they have to book the losses right so but they do it little by little and this will show up little by little in all these national european central banks and we have exactly the same problem in the u.s but if it's only that and there you're completely right and probably if you do the mass for the federal reserve i'm not sure about your equity position but i guess you have some because”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“During that time, even so, prices stabilize on the forward market, they expected a further devaluation of the mark. I use this data mostly to argue against another paper we mentioned already from Web, still being like the main series or explanations for the German hyperinflation against his expectation augmented quantity serial approach like showing that the expectations until summer of 1922 On the forward markets Not on German money markets, interest rates were completely or completely stable, 5%. Even so we suffered strong inflation already. And the people you can find it in the literature, people were surprised by these inflations. And only after the summer of 22 they understand, okay, the market is going to devalue first.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“For a month from now. And that is incredible, right? Because come on. And if you in the literature, I also double checked it. There are many sources that until the summer, people were surprised always by the inflation. So after this appreciation between 1920, and then in 1921 they suffered inflation, but they were surprised in the sense of ah, probably, but the mark is coming back. We see the next appreciation. And only in the summer of 1922, it became clear, also on this forward market in London, that the mark most likely is going to devalue. And the mark started to be sold at a discount. During the stabilization, which happened afterwards in 1923. This fake stabilization when they used up the remaining gold reserves”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“A premium on the forward market, so we had the first devaluation, the first peak, and then an appreciation of the mark. And then where it really starts to increase is in the summer of 1922. But remember, this is a logarithmic scale. So the mark already devalued for a long period of time after that peak and its initial appreciation, then it devalued, it evaluated, it evaluated, it devalued. And until the summer of 1922, the mark sold with a premium on the London forward market against the pound sterling. So you had to pay a little bit more mark, 0. something percent, a little bit more mark, to get this, the current exchange rate.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“That's also a very interesting part. It's not here in the presentation, but it's a very interesting part mostly about the German hyperinflation. When I showed you the other graph that the mark in between also appreciated. And then you could see that until the summer of 1920, let's see if I find the graph until the summer of 1922, the mark strongly in the last year devaluated. So the mark was worse, I think, in the summer of 1922, we had 50,000, no, 20,000 marks per dollar. And it's incredible, but until the summer of 1922,”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“The civil war, well, other issues were more important, but probably contributed at least to this historian the unsolved debt issue in the United States. And now you have a system like in Switzerland, for example, where each state Is more or less their transfers, obviously, but more or less he's reliable for its own debt. And that's probably a solution. But as I told you, the euro system, it's very decentralized and the voting power is distributed such that the countries which need monetary financing, they can distribute the burden also to the rest of the member states. and therefore I think we are Likely to go into the wrong direction”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Also, had problems if they default on their debt, Washington is not going to do anything for these states. And we are not even one nation here in Europe. And I think we need the American approach of individual liability for your debt, for your government debt, no rescue facilities from the central bank, such that the debtor is forced to do reforms and to thereby to minimize its default risk. And this is also interesting historically in the United States. You had the same approach as we do have right now in Europe. So to raise, you once raised the state debt from different states to the national level. And according to the historian Harold J. This ended, or this also contributed at the end to the Civil War Some the north and the south, and it was an unsolved.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Do austerity programs, other budgetary reforms in order to again receive lower interest rates. So now in my view, capitalism lives from investors, all these millionaires. I don't want them to sleep well. I want them to wake up at night, sweating and thinking about that they lose all their investment. And that only works without those guarantees without these rescue facilities either by the countries or by the central banks. And only if we come back to this, well, maybe you default on your debt. We don't have an association where one rescues the other. No, every country can't afford. Like in the US, if California defaults, California defaults, if Illinois”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“If it was right, the right or wrong thing to do could be much worse without this intervention, but probably they shouldn't because this spread in interest rates probably is necessary such that the countries which have to pay higher interest rates”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Into stabilized prices. So right now the differences are very, very low between all these European bonds. I'm just saying that all bonds can come into trouble first most likely the Southern European bonds, the crisis countries, but also Germany is right now burdened a lot. And in that situation, if we want to stabilize further those bonds, I think it's the worst of all would be to make the central banks a bigot market maker, to buy more than a circuit, to buy two-thirds of those bonds, because we need and probably we need it already back then when they rescued the southern European countries, Greece was rescued and they helped Spain and Portugal by this purchasing programs and by the other rescue facilities probably, I don't want to really judge it.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Currencies usually devalued against the German mark, and therefore, since investors demand a real compensation, they had to pay higher interest rates. And then they come together, converging of interest rates after implementing the euro and actually already before after fixing the exchange rate definitely, everybody paid the same interest rates. And then the Greek interest rates shoot up to 30%, which means their bonds only reach 30% of their value or 40% of their value. So the Greek bond price falling like a stone. And in that moment, they rescued Greece and then all these purchasing programs, we started with the SMP and later then we had 2012, Draghi, whatever it takes, and so forth, which is like an implicit pledge to or guarantee to buy up those.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“So, right now, the difference between a German bond price and a Greek bond price is very, very low. It's already more or less marginal. So in 2010, when we had to rescue Greece, usually this is measured not by the price of the bonds itself, but by the inverse, which is the interest rate. So what happened in 2010 when we started with all these rescue facilities, what happened that the 10-year interest rates for government bonds exploded increase up to 30%, and it increased strongly in Portugal. And it increased some percentage in Italy and in Spain already. So until that moment, after we introduced the euro, everybody paid the same interest rate before Italy, Spain, and so forth, they paid higher interest rates because those”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“No, no, no, no. The devaluation follows from the central bank insolvency. First, the central bank gets insolvent. Its currency devalues speculation against the central bank, and therefore you see a devaluation on the black markets, foreign exchange markets outside the country, which you cannot control or regulate, and also the black market rate, and then afterwards follows inflation.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, and in this case raising interest rates is also a possible instrument and raising interest rate means also that the central bank has more assets afterwards, which stabilizes also its exchange rate, but it's little by little. For me, the main concern is that they start or they keep buying more government bonds, but anyway, these government bonds maybe in the next two, five years, even the German ones get into trouble on bond markets. And then if they choose to buy more to stabilize prices, we are already on the road to severe inflation, to a weak currency.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“And which is not well understood in economics if the central bank becomes insolvent. And then we have different dynamics and we don't even know the history of these central bank insolvency driven inflations because they have other political dynamics and it's once you go for that parse it's very difficult to end it because it's so it's so costly it's to recapitalize a central bank as you can see right now in Argentina it's not clear that it's going to work out probably not and yeah I just want to raise awareness for that for that different scenario”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so there are two different scenarios or two different theoretical frameworks, let's say, right? So one is the normal world. And the central bank being relatively solvent. And in this normal world, all this mainstream economic theory is more or less correct in my view. Raising interest rate leads to a slight appreciation of the exchange rate and there are nice models to explain this and inflation is caused by demand pull or cause push effects and so forth, right? So I'm not talking about this normal times when the central bank is relatively solvent and then raising interest rates is a nice easy measure to fight against inflation. I'm talking about the additional risk completely different scenario.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“The law of monetary financing, but was the German Supreme Court in this case, but the Supreme Court only reacted to what was reality already. So the central banks held almost one third of the government bonds, and then the Supreme Court decided, okay, stop it right now, not more than one third. If you had some such laws from the very beginning, For example, central banks are not allowed to buy government bonds at all or only on liquid markets or only a certain percentage of each specific bond, right? That's actually the Supreme Court decision. Then we would be more secure against this powers of monetary financing. Now it's in the debate. And that is a German Supreme Court decision. The European Supreme Court said that it's completely fine. The purchasing programs.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“There is monetary financing, defined as only if a central bank gives credit to a pub directly to a public entity, if the central bank buys bonds from the government. And it can buy on the secondary market. The problem is that, and this brings me back to all my work and all my theory, the problem is that central banking generally was not well understood and it was not well understood that the big inflations actually represent central bank insolvency. So actually in the treaties, they should have established not only you have to buy on secondary markets, but you have to buy on liquid secondary markets. You cannot buy more than a certain percentage of these government bonds. This decision from the Supreme Court now specifies”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And at first, it means, as we do right now, they bind on secondary markets. But if your market share gets bigger and bigger and if you are the only party buying, for example, newly issued government bonds on the secondary market, from commercial banks, but if those commercial banks, they can count on like let's say Italian or Italian commercial bank buying Italian government bond newly issued if they can count on the bank of Italy that it's a week later or a few days later it buys it for a certain price then it's already very close to monetary financing so legally we are on the edge like in the in the treaties for the working of the european union how the ecb should work”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“So demographics is very, very important. Japan is also a huge problem. But here in Europe, mostly in Germany, we are together with Japan one of the fastest aging without immigration, one of the fastest aging populations, or the fastest aging population. And so I don't see for the resources the US is more or less fine. You have the next generation born to pay taxes and Europe doesn't. So I think for these reasons, it's more likely that we choose this part of monetary financing, which could end in a very”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“And obviously, it represents, I don't know, Oregon and Washington state. And I don't know, eight different states. So you don't have this asymmetry. And in our case, we are more likely to vote for monetary financing because the interest of some countries to participate from this rescue facility and the burden being distributed between all members. And Europe faces other underlying problems, which the US does not. Also, the dollar could become a weak currency if you buy more risky government bonds in order to stabilize prices on the same dilemma. But I don't think so because, well, the debt is very high, but the next generation born to pay back this debt exists in the US and it does not exist here in Europe.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“By this Supreme Court definition. So, okay, the national part, yeah, so the voting power, each country has one president from a national central bank, and they represent three-fourths of the overall voting power. And there are countries like Cyprus and so forth. So the crisis countries or the countries which are now in crisis, probably Germany joins and also wants a more like more rescue facilities and more monetary financing and so forth, but they vote for monetary financing, but the others have to take liability. And there is no such problem in the US. The Federal Reserve would never, ever buy bonds from California, when California was close to bankruptcy some years ago, the Federal Reserve of San Francisco does not buy those bonds.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Monetary financing, but on liquid markets, so it's not really needed for the US to issue bonds. And here we are already in the range of, let's say, 20-30% of monetary financing. They don't give credit directly to the government. That would be 100% monetary financing. They buy on secondary markets, but they bought already one third of all these bonds, right? They did so in order to stabilize prices of these bonds, in order to make it possible for these countries to roll over their debt. And we come closer to a more severe monetary financing. I wouldn't call it monetary financing. So now by law, we have this Supreme Court decisions, the one I mentioned in Germany. So we are on the edge of monetary financing.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Central banks, not only from Germany, but from many other countries as well, they make the same claim. It's already the monetary financing obviously it's a continuum. And there is 1% or 2% or probably 5% of monetary financing even in the US because why they buy government bonds? Normally the central bank, if we go back to a very conservative approach of central banking like what Paychot had in mind, they should only give short-term credit, well secured, bicommercial papers and so forth, but they buy government bonds, which is already like a minimum of.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Reserve only except from the mortgage back securities, but the Federal Reserve does not really buy government bonds in order to stabilize prices. Those are relatively liquid markets and it's not a rescue facility in order to stabilize prices or to enable the US government to issue bonds. In Europe we do it in order to enable Italy and Spain and so forth. The ECB or the Eurosystem works as a market maker with the purchase programs in order to stabilize prices, to make Italy and Portugal and so forth enable them to roll over that debt to low interest rates. This is officially obviously not what the ECB says, but many economists are on my side and even like former presidents of the national”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, exactly. So let me explain the differences between, let's say, the Euro system and the Federal Reserve System. So the problem here, the asymmetry, the crisis countries, they voted in favor for all these purchase programs. And the German and the Dutch and so forth, they voted against. But the majority in the governing council, it's the presidents from the national central banks plus like 25% voting power to the executive board from the ECB, Lagarde, and so forth. The crisis countries have the majority. And therefore, they want this rescue facilities, this purchasing programs, and the others have to take in that association, in that currency union liability. And there is no such asymmetry in the US because you are one nation.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“So one similarity I noticed between the European Central Bank and the Reichsbank of the 1920s, early 1920s is the increasing share of their assets, is government paper either bills, notes, or bonds wherever on the yield curve?”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Potentially could end in hyperinflation? I don't think so. The very severe hyperinflation, it's not going to happen in Europe. But something like Argentina, probably half as bad as an Argentina, yeah, that could happen also in Europe”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“The ECB or the Euro system is already a market maker for those bonds, and now if we buy up half or let's say two-thirds, we are coming in a more and more difficult position to stabilize those prices. Europe is facing a lot of underlying problems. More so right now with Germany facing deindustrialization with the energy prices, there is an economic crisis now in the economic heart of the European Union or the Euro area countries with Germany facing this deindustrialization. It actually is right now. And therefore the ECB or the Euro system can become Insolvent, if you want to use that, it's debased if it loses its financial assets, we become vulnerable and then its political decisions.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, on European bond markets. You cannot stabilize prices indefinitely. So in Europe more or less for these countries, central banks are holding, let's say, 30% of the government bonds. That was a limit, 33% was a limit set by the German Supreme Court. And actually in most countries we did buy a bit more than one third already. But as I showed you before for the Reissmank, if you buy them all, that was the ratio of treasury bills held by the market. If you buy them up all, you cannot stabilize prices indefinitely. If nobody else is willing to hold these bills or bonds, they're worthless. And so we already bought one third in order to stabilize prices.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“You take the wrong measures to fight inflation like they did back then in the 1920s, which is to regulate prices, which is to regulate exchange rates by capital controls and so forth. you get deeper and deeper into this problem in my paper I really explain the mechanics of these strong exchange rate driven inflations because There are other political typic points right so in order to stabilize prices you need the central bank even more or you have to use the central bank even more for monetary financing and therefore you get into different dynamics and that is a likely scenario for the euro area once let's go back to slide 80 once mostly the securities the government bonds get under pressure on foreign exchange markets”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Still fine, but like in the next five years, if the Italian or even the German bonds and the Portuguese bonds, if all of them dramatically lose in value, central banks become vulnerable and that at the end means that the euro has to devalue and then we have a like in the 1920s or like in the last 10 years in Argentina, we have a predominantly not only but a predominantly exchange rate driven devaluation driven inflation, the euro devaluating more and more against other currencies like the US dollars. I cannot imagine for the dollar becoming a weak currency in the next 10 years, also for other reasons like demographics and so forth. But in Europe we face many difficulties, the butterfly here only represents like one unfortunate event.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Foreign exchange market, the risk is that this liquidity, if not held back by the assets of the central bank, by the financial strengths of the central bank, by its solvency, if these assets vanish, or if this assets dramatically lose in value, then the central bank is vulnerable and this liquidity will attack our currency on foreign exchange markets. I did these slides for my lectures now we can go to 82 before the outbreak of the war on Ukraine. And by this butterfly, I imagined some event. But actually Putin relatively well matches such an event still our bonds, we are still more or less okay. So the balance sheet, if we really make the numbers,”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Now we give credit for like three years, which makes this position also very risky and slightly more in Southern Europe than in Northern Europe. It's another issue. So to simplify further and to bring it into some metaphor, we can go to slide 81. And here we see my metaphor for the risks of a Eurosystem's insolvencies or the ECB's insolvency, which could happen little by little in stagions in the next five to ten years and so forth. I showed the liquidity here, this water representing the money supply. And if my theory is correct for the 1920s, and for example, also in Argentina, the central bank was first attacked.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Okay, back to slide 80. And there you see the combined balance sheet of all these national central banks plus the ECB. The ECB is actually very small and not a real central bank because the money is issued mostly by the national central bank.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“There's a few sources only. That's why I took these lectures, online lectures from Perry Merling. You want to know about the European debt and the claims between the different European national banks.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“By bureaucrats, and they completely forgot about the collateralization of credit which exists between the different European national central banks. And those credits called the target imbalances, they can, if the currency union falls apart, there is no legal framework how they should be settled afterwards. So the likelihood for if our currency union falls apart that some of these, of most probably or half, let's say, of these target balances are not settled is very high and probably, okay, for the Fed intervention, was it interesting for you?”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Coined the word central bank, he had no governmental institution in mind. It was more like a let's make on a higher level like a central for all these node issuing banks and get a real lender of last resort. Well, but that was in the US. It was done by private banking associations or private banks. And therefore when there is credit right now between the federal reserve banks, this credit as it was with a clearinghouse loan certificates is collateralized. It has a certain interest rate. I think it's 6% and it secured. And it's also there is some settlement mechanism. And in Europe, we made an association of central banks, but that was done.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“At that point in time. Even so, there was no Federal Reserve System and there was different banks issuing dollars under certain circumstances and so forth. But at that time you created already something which is completely equal to a national currency in the modern sense. And the Federal Reserve System is a historically after this crisis of 1907 in order to create a real lender of last resort is an association of private bankers who had this idea, okay, we need some kind of a central bank on top of it or we make a system of banks and therefore we always have a lender of last resort. That was also Bateshot's idea for the Bank of England. When Bateshot”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“For it's issued dollars. And the liquidity problem can be solved if you create a system of banks bound together in an association. If one is a liquid, it receives credit from another money issuing bank that is before the establishment of the Federal Reserve System, those credits were called inside the association, were called clearinghouse loan certificates. And the crisis of 1907, the first time that these loan certificates, clearinghouse loan certificates, we are before the implementation of the Federal Reserve System, not only were used inside the banking system, but also circulated freely in the public in the market. And therefore, you already had a national currency.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT
“Because you are a nation back then, I think it's even like the consequences, the differences are even more severe because the Federal Reserve System, well, it's also a system of central banks and you do have 12 district banks, Federal Reserve banks. And there is also credit between those district banks called ISA balances in the US. But those credits from the very first time, actually it goes back to Was also nicely explained by Perry Merling. It goes back to the banking associations or the clearinghouse associations, the most important one being the New York Clearinghouse Associations. It was private banks which make an association in order to solve a liquidity problem. Everybody has to pay out gold or reserves at that point in time. in the US you called it lawful money, but you can imagine like gold coins or silver coins.”
2024-03-18 · Forward Guidance · Dr. Ingo Sauer on Hyperinflation, Central Bank Insolvency, and The ECB (European Central Bank) · IDENTIFIED FROM THE TRANSCRIPT