YouSaid · the spoken record

William White

lines on the record: 76
first: 2021-12-03
most recent: 2021-12-03
sittings or episodes: 1
sources: podcast

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“If I were you, I wouldn't start from here. I think we need to do more serious reflecting on the debt overhang and ways in which the unsustainable can be made sustainable through debt restructuring in an orderly way. And we're far from being able to do that at the moment. And there have been all sorts of studies by the IMF, the PIS, the OECD, the group of 30, all saying we need more action on this front. And I'm not sure we're getting the action that we need.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“It's very close in the autobiography to that, but it is actually a separate quotation that basically I absolutely agree with Paul Volker's comment that we've created all these side effects, that in the end will lead to the kind of crisis and deflation that he speaks about. But he makes a separate comment, I think, on the same page, where he basically says, and if you're doing all of this in the interests of controlling the CPI, it will not bear the measure itself will not bear the weight of the actions that you're taking on its behalf.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Nobody's talking. I see what you mean. The Federal Reserve has a large amount of power, but the amount of power it has pales in comparison to the huge responsibility that it has. So even though they're incredibly powerful, they feel powerless because they're unequal to the huge burden. I think I found the Volcker quote, and you perhaps alluded to, is said, ironically, the easy money striving for a little inflation as a means of forestalling deflation could in the end be what brings it about.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Bears the brunt of those mistakes. We have a world which is still duller dominated, but the problem is that the central bank that's in charge of the dollar must by its own legislation, domestic legislation, concern itself with objectives. And you can sort of, when you put it that way, you can sort of see that there's the opportunity for mischief here. We have a system in which nobody is in charge of the objectives for the system as a whole The Feds basically worried about itself and the future progress of the American economy, which it must do, given the legislation under which it operates. Yeah. Big international problem here that nobody's talking about.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Of that much policy reaction, but that's what people say, well, we're below expectations. We're below target on inflation, so therefore we have to be ultra easy. And I suspect that outside the United States, a good chunk of it is really, I don't want my exchange rate to go up, which it will do if I don't do what the Fed does. This will continue. So I think you'll have less in the limit what you will have as a world in which the exchange rate stays stable, but they do so because everybody's losing control over their own independent monetary policy. They're all doing what the Fed does. And that's why the Fed is so important. And that's why if the Fed makes mistakes, everybody bears the”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Implausible that the Europeans would have done as much as they have done by way of QE and everything else because the CPI is operating at zero or three percentage points below their target. It just strikes me as one. Implausible and Paul Volcker actually in his autobiography said that responding to small deviations of the CPI from target is I can't remember the word that he used but it verged on silly you know it just the numbers themselves are so sort of volatile and humanly constructed that they won't bear the weight”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, in these kinds of complex systems all things are possible. I mean, it's, you know, when you look at the totally nonlinear as well, so you can get very not only unexpected responses, but responses of a magnitude that you, an unexpected sign and of a magnitude that you never would have anticipated. I don't think that will happen, and in part it's because something I alluded to earlier, which is Whatever the Fed is doing something, others are aware of the implications of their own exchange rate, and if the Fed is trying to ease, as a Brazilian Minister of Finance once put it, you know, engaging in currency wars, the others are aware, and they're going to do the same thing in order to prevent their currencies from moving too much. And I've actually written a bit about this in the past too. I mean, I just find it.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Very interesting. Well, I believe in your answer earlier about financial repression, you alluded to the fact that back in the day there was strict capital controls and now we have a free capital controls. That reminded me of the impossible Trinity where you can have free capital flow, you can have control over your monetary policy, or you can have fixed and stable exchange rates, but you can't have all three. You can have two of them, but you can't have all three. So to what degree, because we have free capital now, could fiscal repression happen at the expense of just wild moves in currencies? Is that something that you're viewing as possible?”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Just through the psychological mechanism there's no problem, so therefore the rates can all stay low. And as long as that goes on while the inflation is increasing, the more the debt's getting eaten away and the more you're achieving the objectives that you want to achieve. But you can't talk about it. I don't think that's what's going on, frankly.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, as I said earlier, I don't think financial repression is possible. But you know, I mean, one doesn't want to be conspiratorial about this, but in a certain sense, the more you can generate the view everywhere that inflation is going to go away. Don't worry about it. The longer that goes on, of course, the more you are eating away at the real value of the debt, because the inflation is sort of floating everybody off. I don't want to be conspiratorial, but I mean, in a certain sense, the best thing to do is say, even if you know there's a problem, it's to say, no, there isn't a problem because you're actually achieving one of the through doing that, you're actually imposing financial repression.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“until they absolutely have to do something, then it'll be too late. And then you'll get the economic disruption that is a byproduct of the previous policies over the last few years, and then we'll have a big problem.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Which have got, I won't say solely, but certainly showing up in the first instance in the goods market as opposed to the services market. So what worries me to be honest is that the central banks, the Fed in particular, will basically use any excuse to say let's just stay where we are because we're so frightened of what the implications will be of changing or of tightening up. And when the tightening does have to come, and I honestly do think it will have to come, I'm increasingly of the view that these inflationary pressures will be sustained enough to feed into the labor market and the wage price spiral that if everybody is just looking for an excuse to do nothing.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“And so the bottom line again early, early days, was that it just simply reinforces the need for people to get vaccinated. And if that happens, then there will be no great sort of cause for no great cause for worry, you know, if the vaccinations proceed as they should. Which of course they're not doing in many places, including the United States, but to the degree that people are worried about. It doesn't even need to be justified worry to the extent that people are worried about it, stay home and don't spend, then in a certain sense the Fed is justified. However, having said that, if all the people do as they stay home and spend more on goods over the net. And all you're doing is intensifying the inflationary pressures that we've already got.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, I don't think any of us really know. I have been a longtime follower of a guy called Dr. John Campbell, who's a PhD in nursing, and he operates out of the UK, does a daily sort of television show. And he was on just yesterday, basically saying that the jury is definitely out, that he's actually been talking to the physicians that have identified the influence of this thing in South Africa, and the basic message that seems to come out through him is that if you've been vaccinated a double dose, this thing is extremely mild in terms of its implications. If you haven't been vaccinated or not fully vaccinated, even younger people are starting to get very sick.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“It's a public health problem. Say, okay, it's a public health problem. But now to respond to it, we've had to have lockdowns. And the lockdowns are an economic problem. Huge problem in terms of both demand and supply. And then depending on the configuration of the two, maybe on inflation. Or maybe on deflation. But the point is that there's knock-on effects. And I think we have to be increasingly aware as we try to devise our policies that anything that we do in one system will have implications for other systems, and we want to try as best we can to think through what those might be, because what we're trying to do is maximize the or prevent real disorder in any or all of those systems at the same time. And I think that's something it's starting.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Or an economic sky. I'm going to say carbon tax because the carbon tax brings in money. The governments need money. But it also provides the incentives to get rid of carbon emissions. So for the environmentalist is a good thing too. But then you start saying, but this carbon, think about the sort of the gilets in France. You know, this carbon tax is going to hit rural people who depend on their cars of no other forms of transportation, and they're not going to like it. Anyway, the central point is that I'm going to give you a hundred different examples, but all of these systems are interrelated. And the problem is that if any one of them goes under The knock on effects to the other systems could be quite substantial. So, I mean, a simple example, the pandemic”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Between the economic system and all the other complex adaptive systems that are out there. So you made reference to the ones that I've been focusing on, which is that We have economic problems We have public health problems with the pandemic. We've got climate problems, environmental problems, and we've got political problems. And they're all interrelated. and they're all affecting each other, so that increasingly as we think about solutions to problems, we really ought to be thinking about them not just in terms of is this good for my system? I'm an economist, let's suppose. I've got an economic solution. A good example might be carbon tax, okay? Maybe I'm an environmental guy”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“always break down. Complex systems always break down, and as I understand it, they break down according to a power law, which has little problems current basis, really big problems occur on a much less frequent basis, but they still occur. Now they break down, and the lesson from that is be prepared. Lesson number two, I guess, is you don't know enough about those systems and how they operate to maximize anything. Policy really ought to be directed towards ensuring that really bad things don't happen, and that they can happen in those kinds of systems. So there's lessons to be learned economics, complex adaptive system. But the point that you're raising that I'm raising, I guess, is a broader one, which is that we've got to see the interrelationships.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, I guess the thing that sort of strikes me, and again, this is by no means a new issue. I mean, this is CP Snow and the sciences versus humanities and all this stuff. Issue's been around for years. The only point that I'm making is that for years and years we just focused on the economic stuff. So if you're an economist, you've focused on economic issues. I think what's becoming increasingly clear is that it's not appropriate to do that. And it follows on from what I was saying before about even within the economics, okay, they've got it wrong in terms of their understanding of the character of the system. It's not simple and static, it's complex and adaptive, and there's a whole series of principles that can come out of that about how you should conduct policy differently in a system like that. So for example”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“And they basically said I'm just not going to pick up the phone. So it's a bit like that. So anyway, there's a lot of official attention going into this. So I dare say they'll come up with something. People are talking now about sort of, you know, having exchange centralized exchanges for US treasuries. And I've no idea how it'll all end up. But all I'm saying is that I'm not alone in suggesting that there are some problems in the functioning of the US treasury market.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“I'm just trying to remember here now that came out of the treasury, the US Treasury, talking about the problems of liquidity in the market for US treasures. And I think the general view seems to be that there's so much sort of passive trading that when things start to go bad people have to sell stuff. But the people that make the market are sort of electronic traders basically. And their algorithms too tell them that when the times are bad, it's time to get out. So now you got everybody trying to get out. Nobody trying to balance off or hold the line. So it's a bit like much earlier on when the authorized dealers, I guess it was eighty seven.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“I can't remember what it was, ETFs that had fallen angels in them. But they really became the market maker of last resort. I mean, it'd always sort of been there in the background, but they had moved very, very clearly from lender of last resort to market maker of last resort, which was a big shift. So now the markets belong to them. And we were talking about this stuff earlier on, no price discovery and whatever. There has been, I think there was a recent report.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think I had a first big bout of instability in the Treasury market. I think it's September of 2019. And then in March of 20, when the pandemic hit, you may remember that the financial markets, including the Treasury market, basically fell apart. And the US government and the Fed in particular had to come in with huge numbers of programs to bail everybody out, and there were accusations at the time that the Fed was buying up bonds that were basically junk or, you know.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“I mean, there are other issues now, you know, about crypto, but frankly, I'm not enough of an expert to feel that I have anything to say that she's from that particular domain.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“I can't remember the exact sum, but a very large sum of my money that will be issued really by the EU under its own authority. And the Germans and others have been showing increasing willingness to be flexible in the fiscal side. So what that implies is you might in fact get a European market that will be like the US Treasury market and will have the kind of liquidity that requires in order to allow it to become a reserve currency. And at the same time, as you know, the US treasury market has been having some problems, right? So anyway, this issue, I think when it comes to sort of one currency replacing another, the evidence indicates it takes a long time because it's all network effects, right? I use the dollar because everybody else uses the dollar. And as long as that continues, the regime continues.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“It's not really sort of the due process of law that we're sort of used to in the West. You never really know whether your property is yours or whether it's going to get confiscated or caught behind a wall or something like that. In Europe there have been continuing concerns about the euro and about the Viability of the European Union Recently I think the political omens have been more good than bad. I mean they've gone through some really tough times but they've managed to sort of pick up the pieces and keep the whole thing going and in fact I mean there are some indications of a growing willingness to do more borrowing at the European level. You know, the fund that they set up in the light of the pandemic think something like eight hundred”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“But then you're back to the same old stuff we've all been talking about is that the greater the imbalance is generated because you can't get out from where you are, the greater the likelihood and the greater the magnitude of the ultimate shock that will hit you. So on the one hand it's good to say we've got more rope everybody's doing it. But on the other hand it may be more rope to hang yourself. So those are the kind of worries. The US, I mean this is a perennial debate about the dollar and the alternatives to the dollar. At the moment Neither the Euro nor the Membi who were obviously top of the list in terms of the alternatives really Meet the sort of takeoff bar. In China, of course, the real problem is capital controls, the The arbitrary nature of the oversight of the system.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“And when you sort of think about the policies being followed by all the big guys, it's essentially ultra easy. It's been more or less the same since twenty ten. More of the same. Everybody's into it. Where do you run to is an interesting question. So maybe this kind of stuff with the relatively low inflation could continue for a long period of time because there's no place to exit until you have to exit from everything.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, you know, the funny thing about it, and I've been sort of wrestling with this at the intellectual level for quite some time, normally when you have an individual country that pursues a spend in print program for too long. At the end the financial markets wake up and they say I can see where this is going and I am out of here and so you get a run in the currency and that's the beginning of it. You get a run in the currency and the whole thing falls apart. The US is well let me finish with that thought If you've got one country that's got a problem There'll be a run in the currency But what happens when everybody's doing the same thing?”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“But governments can have problems. And to say that this can go on forever without losing access to financial markets and effectively being frozen out of finance is just wrong. The good news is there was more fiscal room for maneuver. and perhaps people thought in twenty ten or twenty eleven. There wasn't as good a debate at that time about the primacy of monetary policy as a counter secular instrument. There wasn't much of a debate as there should have been. Well, maybe now part of the modern monetary we're seeing that there is more room for maneuver there. But as I say, the danger for me is to say Larry, this is Larry Summers, actually, sort of recanting. You know, he was saying for ages and ages me more fiscal. And now we've got more physical, and Larry's saying we've got too much for good things. So it's back to the Greeks. I mean”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“In some formal sense it is true the bankrupt governments can never go bankrupt because they can always print the money and the money is the medium of exchange. And so no, they can't go bankrupt. But having said that they can go bankrupt in a different way. We know I mean from work let's say by Carmen Reinhard and Ken Rugoff that many advanced market economies have wound up with sovereign debt crises and have been forced to either accept very high inflation or to repudiate the debts. And I guess debt repudiation was much sovereign debt repudiation was much more common prior to the war, Second World War. Since then the tendency has been to accept higher inflation. We spoke earlier about financial repression whatever.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“And as I've been trying right from the beginning of this conversation, talking about the unintended consequences, so we've had no inflation for decades, I think because of positive supply side shocks coming from China and baby boomers and whatever. But we've had no inflation. But as I've suggested, we've certainly had the buildup of an awful lot of other problems. And if modern monetary theory basically says keep interest rates very, very low as long as inflation is not a problem, then I say there's a problem with the way they're looking at it because we've had no inflation for ages and ages and yet these other problems have been emerging. The idea too that governments can sort of continue to spend Without Bankruptcy limits”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think there is as always an element of truth, but it may well be a dangerous element of truth, you know, that it'll get carried too far. And I think, in fact, perhaps it already has done. The thing about modern monetary theory for a starter is it puts all of the emphasis on inflation.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“And I can certainly see the merits of all of those measures, but it sort of ignores the fact that that kind of spending which winds up being unproductive spending on consumption might otherwise have been used for investments that would have some positive return over time, positive investments like Infrastructure in the Green Revolution, early childhood education, you know, there's so many of these things that you could think about. But if it's gone into consumption and not investment, then in a certain sense we've committed a double error. Not only have we done too much and it's inflationary, but we've given ourselves a debt burden and no way to pay for it.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“They've got it. But as Larry Summers has pointed out, they've got it absolutely in spades. The magnitude of the fiscal support has been, as Summers would put it, you know, multiples of the gap in the United States. And so now the question is sort of flipped in a way that it's become too much of a good thing, which we always refer to in ordinary life, and whether there should not be sort of some pulling back or retargeting. One of the things about the fiscal so far is that so much of it has been to support either companies who support jobs or money that's gone directly. directly to individuals to support their income.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“They didn't buy into all the arguments of use before about this policy is becoming ineffective and dangerous because of the side effects? Or did they do what they did because they totally discounted my comments or because they felt that with the government's withdrawing support the way they did, and the regulators, financial regulators getting tougher and tougher, that they were the only game in town. They really they had no choice but to do what they did. I suspect it was a combination of the I suspect it was a combination of the two. But there can be no doubt that the central bankers felt pretty lonely as the only game in town and that they wanted help to the extent help was needed. And of course this time in the pandemic”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Look at the central bankers Now I've not been part of the inner circle since two thousand eight, so you know take this as a warning what does he know? Why did the central bankers do what they did starting really I don't know maybe around 2010, 2011 I mean Mario Draghi, Janet Yellen all sorts of people were saying that monetary policy couldn't do at all that we needed fiscal policy to help out But of course we didn't get it because the mantra I guess was fiscal policy should be timely targeted and temporary meant that they had to start reversing it very quickly and a lot of central But then they just continued doing what they did. Now is it because they”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“That it won't be possible to use the same policies again and get the same results. Eventually, as Herbstein used to say at the American Enterprise Institute, if something is unsustainable, it will stop”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think it is real, and as I say, the problem is that it encourages bad behavior or unsustainable behavior, and you can get away with it for a long period of time. Indeed, we've gotten away with it now for decades, but the logic of it is that it can't go on forever. And I guess the worry that I would have is that we have been storing up for ourselves problems that have been getting sort of bigger and bigger and bigger, and each time we've had a problem, we've solved it by more of the same policies, but the policies had to become more and more extreme as the effectiveness of the policies becomes less and less, and I think the logic of that tells you at a certain point the effectiveness of it will become so limited.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“So I'm right back into it again. So you get these big declines in the stock market in particular, and then the thing comes straight back again because people say that's what the central bank wants. So there's a huge amount of moral hazard associated with what the central banks have been doing, in my judgment.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“are totally subordinated to the price determined by central bank liquidity, then it's just a different world. And not only Is it possible that the central banks will, through their liquidity infusions generate Unsustainable asset prices, but the very fact that they're doing what they do gets in the way of the normal process of price discovery in the market and perhaps leads or contributes to these various moments where we have these flash crashes where all of a sudden people recognize that the price is crazy back to my one two three four people recognize the price is crazy and they say oh I'm out of here And then they get out and then they turn around and they say but the central bank's got my back.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“So the simplest way to simplest way to explain it is that central bank liquidity drives everything. So you've got the liquidity and looking for a home. It goes into the equity market and drives the prices up. And it goes into the bond market and drives the prices up. But the higher price of the bonds is just a statement that the interest rate is going down. So it's the liquidity that's driving everything. So we tend to think in terms of, well, equities will gain when times are good and bonds will gain when times are bad. And, you know, people have for generations sort of fallen to sixty, forty portfolio allocation on the basis of that's the way it works. But if you get into a world where the prospects for inflation, real growth, whatever”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Certainly not. Bill, another question I have about inflation is its impact on asset prices. Conventional wisdom has it that inflation is something like Kryptonite to bonds because bonds pay a fixed coupon in fiat currency and that fiat currency is being inflated away. And yet one thing that's really struck out this year is that despite the very high levels of inflation as measured by the Consumer Price Index in the US bond yields have just continued to go down. It's like the higher inflation goes, the more bonds are valued rather than the less. How can you explain that phenomenon and then more broadly how do you think inflation impacts the long end of the bond curve as well as the stocks?”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“It does on paper, but when you sort of think about a house, for example, whether your house is worth a million or two million, in terms of the services that you get from that house, nothing has changed. It's still got four bedrooms, it still handles so many people, it's still got a crowded kitchen, nothing has changed. The only thing that has changed is your capacity because of the collateral in the paper wealth, is your capacity to borrow against the value of the house. So in a certain sense, there's a kind of double whammy because some people are getting the advantage, or at least seeming to get the advantage, which makes other people angry. But then when it turns out that the wealth that they've spent was never there in the first place, then even the people have done better off are angry. So not a good recipe for”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, this is all part of the sort of the debt thing and the debt trap that I was talking about before because the reality is that a lot of people will have done their spending on the basis of Increases in their paper wealth. But the reality is that their wealth hasn't really increased. You know, it doesn't go up because the discount rate goes down.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“And what role do central banks play in inequality, income inequality, but also wealth inequality? There's this theory in economics called the wealth effect, which is that if someone owns stocks and their assets goes up, the price of their house goes up, they will spend more money because they feel richer, because they are richer on paper. So by making people richer on paper and increasing the value of assets, well, who has assets wealthier people, quantitative easing can tend to exacerbate wealth inequality, to what degree do you... They say, oh, the central bankers would say, hey, we can't crash the stock market because then there would be the wealth effect in reverse where people would stop spending and that would actually be very bad for the economy. So what roles do central banks play in here?”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“So, you know, this sense somehow of it isn't fair that it's not right, I feel excluded, others are insiders, I'm an outsider. This creates a degree of political polarization, which is not very helpful, and I must say in finding solutions, and I must say that the political process down that particular path seems as far advanced in the US as it is anywhere, which is very sort of worrying because the US is still the most important country in the world in many, many respects. And if it doesn't lead in the right direction, it's very hard for others to take up that leadership.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“What that said in the end they can't really afford to service at higher rates. So it's a macro problem. But in addition, inequality is clearly a political problem because it's that wonderful line by Kindleberger. He said something to the effect that there's nothing that's more infuriating than watching. I've not got it quite right, but there's nothing more infuriating than watching your neighbor get rich.”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Allowed things to drift and I think now let me bring some politics into the psychology philosophy whatever the power that is now being exercised in legislatures and not just in the US but in other places as well by lobbyists and groups that represent particular interests. I think there are good grounds for belief that we should be paying much more attention to this distribution matters for all sorts of reasons. I mean one is that if workers are not sort of earning enough to keep up with the Joneses they'll borrow the money to keep up with the Joneses and this creates a sort of a process in which this is all part of a debt accumulation thing I talked about earlier so you wind up with all sorts of people”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT
“Trend towards monopoly oligopoly an absence of competition great book written a number of years ago by a guy called Barry Lynn, whom perhaps you know, who runs the open market institute now, I think. His book was called Cornered, and it was really all about how it sort of looks on the surface as if there's a lot of competition, but when you dig down you find out there's much less than you might imagine. And so I think some of these questions, you know, the antitrust laws and the way in which we've”
2021-12-03 · Forward Guidance · The Unintended Consequences of Central Banks' Easy Money | William White · IDENTIFIED FROM THE TRANSCRIPT