The Boundaries Of Debt-Fueled Economic Growth | Dr. Claudio Borio & Joseph Wang
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- เผยแพร่เมื่อ 24 ก.ค. 2024
- Today’s interview is a very special one. Dr. Claudio Borio, renowned economist and Head of the Monetary and Economic Department at the Bank For International Settlements (BIS), joins Joseph Wang of Fedguy.com and Jack Farley for a wide-ranging discussion on the nature of financial instability and the interplay of monetary policy and fiscal policy. Borio shares insight from recent BIS research on inflationary regimes, financial cycles, and the boundaries of debt-fueled growth. Borio notes that the materialization of interest rate risk has so far been seen in the banking sector, but that we have yet to credit risk. Filmed on October 17, 2023.
Some of Borio’s and the BIS’ works mentioned in this interview:
“Monetary and fiscal policy: safeguarding stability and trust,” June 2023 Presentation in Basel, Switzerland, Claudio Borio
www.bis.org/speeches/sp230625...
“The two-regime view of inflation,” March 2023, Claudio Borio, Marco Lombardi, James Yetman and Egon Zakrajšek
www.bis.org/publ/bppdf/bispap...
“International banking and financial market developments” BIS Quarterly Review, September 2023
www.bis.org/publ/qtrpdf/r_qt2...
“Does money growth help explain the recent inflation surge?” 26 January 2023, Claudio Borio, Boris Hofmann and Egon Zakrajšek
www.bis.org/publ/bisbull67.pdf
“On money, debt, trust and central banking,” January 2019, Claudio Borio
www.bis.org/publ/work763.pdf
“Navigating by r*: safe or hazardous?” November 2021, Claudio Borio
www.bis.org/publ/work982.pdf
“The financial cycle and macroeconomics: What have we learnt?” December 2012, Claudio Borio
www.bis.org/publ/work395.pdf
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Follow Bank For International Settlements on Twitter / bis_org
Follow Joseph Wang on Twitter / fedguy12
Follow Jack Farley on Twitter / jackfarley96
Follow Forward Guidance on Twitter / forwardguidance
Follow Blockworks on Twitter / blockworks_
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Timestamps
00:00 Interplay of Monetary Policy & Fiscal Policy
09:03 Risks Of Large Debt Loads
14:42 Maturity Of Debt Around The World
17:10 The Financial Cycle & Central Banks
23:30 "Twilight Zone" Between Low-Inflation and High-Inflation Regimes
36:05 Balance Sheet Policy (Quantitative Easing and Quantitative Tightening)
47:30 Risks In Banking & Non-Bank Financial Sector
50:40 Interest Rate Risk & Credit Risk
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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets. - บันเทิง
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Thanks for watching! Some of Dr. Borio’s and the BIS’ works mentioned in this interview:
“Monetary and fiscal policy: safeguarding stability and trust,” June 2023 Presentation in Basel, Switzerland, Claudio Borio
www.bis.org/speeches/sp230625...
“The two-regime view of inflation,” March 2023, Claudio Borio, Marco Lombardi, James Yetman and Egon Zakrajšek
www.bis.org/publ/bppdf/bispap...
“International banking and financial market developments” BIS Quarterly Review, September 2023
www.bis.org/publ/qtrpdf/r_qt2...
“Does money growth help explain the recent inflation surge?” 26 January 2023, Claudio Borio, Boris Hofmann and Egon Zakrajšek
www.bis.org/publ/bisbull67.pdf
“On money, debt, trust and central banking,” January 2019, Claudio Borio
www.bis.org/publ/work763.pdf
“Navigating by r*: safe or hazardous?” November 2021, Claudio Borio
www.bis.org/publ/work982.pdf
“The financial cycle and macroeconomics: What have we learnt?” December 2012, Claudio Borio
www.bis.org/publ/work395.pdf
wow just wow!
That was brilliant! thank you so much!
ALso, Thank you so much for putting this brief but very informative prelude intro to the interview and the guest, and Guest's work related reading material!
It helped to gain deeper insights from the interview!
Borio barely does interviews. After reading his research and quotes in books I've been dying to listen to him make statements given the current situation. Well done Jack, really awesome!
Jack you continue to bring great guest after great guest, and you are doing a truly excellent job as a host to bring us their insights in a digestible way!
Jack you keep delivering. Never would I have expected to listen to Mr. Borio here. Let me grab my popcorn, cheers for this one.
Thank you, Jack, for bringing such informed and articulate guests to your show. It's wonderful to hear two famous book authors discuss important and timely topics!
A great example for the difference in quality of economic research between the BIS and the major central banks. Borio is careful in what he says - but you can smell his dissatisfaction with the debt based growth model and short term consumer inflation targeting without considering asset prices (= financial imbalances) all the way through. What's been left out is the longer consumer inflation impact of all this - creditors might generally have a lower propensity to consume - but once the unsustainability of debts becomes clear for everybody to see all that stored purchasing power will race back into the real economy to be the first one out. And higher interest in that case will fuel the inflationary fire.
Credit aggregates which are actually per federal reserve act supposed to grow in line with the productive capacity of the economy need to become an active target for central banks. Instead of being completely ignored beyond some macro-prudential policies. Basel should actively influence financial institutions to prioritize productive loans instead of consumption loans and loans for asset purchases. The goal should be maximum economic growth for each dollar of credit aggregate growth. We need to go beyond preventing financial instability to promoting healthy economic growth while reducing debts.
You know the discussion is exceptional when J. Wang get schooled.
No kidding. There was a lot of material here which hadn't been flogged to death elsewhere, stuff which made me hit the rewind button and ask my player to say that again. Joseph's tirade on the w.p.spiral was not among those.
The best financial show on the planet... stay awesome Jack!
So wonderful to have Mr. Wang back on the show.
Economic investigator Frank G Melbourne Australia is still watching this very informative content cheers Frank as subscriber to this channel 👍
Pleasantly surprised. Claudio Borio is 'in the know' and probably one of the, if not the most informed guest you had on the show.
You know its going to be a fire podcast when you see Joseph on the panel too. Great work Jack!
I love Joseph Wang. ❤
He entirely missed the inflation breakout...he has no alpha.
Actually I totally nailed the inflation breakout and wrote about it two years ago on my blog in a free post titled "Mechanics of a devaluation" on my blog@@michael2275
@mcnello420 thank you, so do we!
@@michael2275 you are absolutely wrong, Joseph predicted 10 year would be above 4% when it was at 2%... do you know how unlikely such a prediction is to be correct?
Over past two years, no one has a better track record than Joseph.
-Jack
@@BlockworksHQ I remember watching him in summer 2022. He was NOT calling for inflation to go over 4%...
I'll hold on tight to my bitcoin and gold. Fiat end times are near.
Fat times are already here. At the start of last year I weighed about 210lb, now I weight like 250lb. I'm basically morbidly obese.
Near? Real inflation has been Seriously devaluing the USD since 2016.
@@peterbedford2610well, by that standard you can date that back into the 19th century. Look at a graph and see the effects of the US civil war, the depression and WW2 etc and see the devaluation. That doesn't tell us that fiat is dead: more that hard assets are good shields to debt driven growth periods where QE and fiscal deficits reign supreme.
Holy shit! You got Claudio Borio? Most people don't know he predicted the housing crisis, I believe in 04'. I've read about this dude. Well done. Looking forward to watching this.
Excellent video. I the back of my mind is that while all this regulation has stabilized the regulated system, we have pushed the risk to the unregulated system. So it isn't that the risk was regulated out if existence we just don't know what it is or the magnitude. Greenspan seemed OK with shadiw system because he knew that markets needed more the the regulated system could offer but niw its out of hand and no matter how safe and controlled tge regulated system us we risk a systemic event with no visibility into the precise cause or the magnitude of the risk.
Would be good to have an academic guest that explores these issues.
FINALLY JOSEPH GOT AN ACTUAL MICROPHONE!!! YAY HE SOUNDS SO GOOD!!
Thanks guys
This discussion is not supporting the proposition of markets as self-regulating institutions. Whether rates reduced deflationary recession, or financial boom/bust cycles, it begs the question why central banks are independent of broad public policy goals. Yes, the short-term agenda of political opportunism should be fire-walled from money policy, but it sounds like the central banks end up planning the economy on the basis of economic theory, or purely utilitarian considerations. That relegates substantive long-term goals, to fiscal policy which have to operate in opposition, and have a higher threshold of consent. Like right now, one wonders if Powell notices the war footing, sovereign debt dilemma, or the ecological crisis and energy goals. His policies seem suited to Putin’s War and slowing reindustrialization, bankrupting public budgets, stimulating the wealthiest, and creating energy shortages while the planet is cooked alive. But hey, we’ll sort of have sound money
good guest. Knows his stuff
Look at Jack lookin' all dapper! 😎
I feel Jack often pushes back with the phrase „and yet the US economy has been resilient“, yet I don‘t see this at all. There is a degradation of the fundamental structure happening that will perhaps take years to fully come apart, but I don‘t find the argument that since things haven‘t completely fallen apart yet that means we‘re resilient-to be convincing at all
By historical standards, the US economy should have slumped with this massive credit constriction. But we see resilience, at least in the short term (current quarter and potentially more quarters). We don't know when tax receipts will dive and unemployment will climb but for now the economy is showing resilience despite the fastest tightening cycle ever.
@@joythought I get what you mean, but to put it in practical terms there are many storms brewing in the US economy which are at this point certain to cause great tremblings and perhaps even an erruption in it. ~$2.5t or so in CRE debt coming due over the next couple years (2024/2025), much of it collateralized by assets which only paper in low or sinking interest rate rate environments, which is the rates regime we were in during the mania of 2021/22; the end of the shale boom which has driven growth/cheap energy prices in the US; the fact that our manufacturing status and much infrastructure is severely outmoded (although that‘s also an opportunity); the fact also that US gov. debt has increased ~$600b in 1 month; and seemingly signs of real disfunction in the global currency setup (bear steepening in US Treasury market; hyperinflation/very high inflation in various localities of the world; rise of wealth inequality which now is impinging on social cohesion markedly more than in the pre-Covid era. In short though I think the CRE debt will play at least a significant part in spurring entropy of the US economic arrangement over the next couple years, although maybe I‘m wrong and the Fed somehow gets away with monetizing the problem again and everyone pretends like the global monetary regime actually makes any sense and isn‘t actively disadvantaging a certain group of people at the hands of another.
I always have to sit up and focus when Jack wears a suit and tie
Thanks Jack.....It's great to know we are in seriously incapable hands. Just one more (cited) paper and all will be fine!
wow just wow!
That was brilliant! thank you so much!
Sweet glasses, Jack. Good choice.
Part of a very important coin been talked about in the BCL
Im 20 minutes in having been encouraged by the comments but so far I feel like he says a lot without saying much
Or am I just too thick to see the greatness?
Presently we have monetary and fiscal policies when both are in explosive condition way beyond any historical comparison! Not good when we have an independent Fed which claims to ignore the fiscal!
Such contortion of facts.... Inflation is always and everywhere a monetary phenomenon (money printing) by the Central Banks. Central bank creation of money benefits those closest to the printer via the Cantillon effect while the average pleb feels it and is impacted by the ensuing high prices, months and years later.
Nobody is disputing any of that.
Recession is most likely the result of an external factor For the first time in decades , the United States is losing its clout as a federal reserve currency . They don't have any more economies to use to control inflation , and less money is being spent on stock and oil trading than in the past . They all lend support to the idea that a new multilateral world order is in the works .
Have Richard Warner on
Name’s Farley. Jack Farley!
Home prices up 50% in 4 years while mortgage interest rates are up 110% and this guy describes this as "The twilight zone" of inflation...
Didn't you watch the TV series? If you hwd, you would get the analogy. Human beings navigate between what they sense as grounded reality, and inchoate fear, especially in markets. Fear of missing out, fear of being ripped off, fear of not being seen as a winner, and many more fears motivates behaviour in the market place. And money is the mediating convention through which those fears are expressed explored and explored. As such, it shows our greatest strengths as well our greatest weaknesses as a species. The Twilight Zone TV series did the same exploration of the dark side of human motivations, and the stories hold up a mirror to us, so we can see, if we choose to look, who we really are. Then we can make an informed, rational choice of how we act.
The problems described in this video have been around since the dawn of civlisation. Economic Historian Michael Hudson is tracking the historical evidence for debt driven economies in antiquity, and his conclusion is that we have not learned the lessons our early ancestors left us. Debt farming in an economy leads to both economic and political instability, and the erosion of its productive capacity. This process inevitably erides the ability of the economy to defend itself, and is followed by regime failure. And the irony is that we in the West lionise two empires that died because of such economics: Greece and Rome, whilst ignoring the solutions that precluded them. The truth is that economies primarily driven by debt are essentially unstable and inefficient in distributing resources. Debt, whether public or private, is like a scapel - dangerous in the hands of people who like just cutting, and don't care where or how they deploy their tool. And we entertain that risk too much, and it will damage us, and those connected to us. And the sad thing is, it's just an idea. It could be changed or forgotten, but instead, it's akin to a religion. We need to wake up from our reverie, and tske a long hard look at our priorities, because were heading towards danger because of the convenient lies we tell ourselves, mostly about who we are.
The wisest thing that should be on everyone mind currently should be to invest in different streams of income that doesn't depend on the govt. Especially with the current economic crisis around the world. This is still a good time to invest in Gold, silver and digital currencies(BTC, ETH..).
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Debt Boundaries....having to borrow more just to sustain the payments. Higher for longer?? Yeah, if "longer" is not more than a year.
13:30 LOOKOUT! Guest says the world has become increasingly dependent on debt for its growth, he calls it a "debt dependent growth model". That sounds right and not is much talked about even as there is more and more concern about fiscal, I don't hear much about mid to long term growth, sure earnings growth but not real economy growth. Take it from the man.
My portfolio is in a menstrual super cycle
Red all over the dam place
US is near fiscal dominance and cannot afford 'higher for longer'
Joe Biden is asleep, didn't get the memo, determined to ruin USA.
Debt is used as a weapon.
#Bitcoin is out shield.
Many AI sector stocks avoiding Debt and Issue new shares instead. Strong Revenue from New customers helps keep the Gains coming. * SOUN.. SoundHound...has 42 % revenue growth and 79 % gross margins. The Future looking profitable. Thumbs Up Video / Comments.. Thanks.
these banker types are always so sure of their thinking. half of what he says is actually quite uncertain. and what's with this wanting to regulate everything? he doesn't get the question on interest rate risks and Basel 3. it's actually proof that what these people do is useless. they don't see risks even when they are obvious. buying 10-year bonds at 1% yield (or -1%) was obviously not a good idea!!! none of them saw that. fools!
Hes so happy about the Recession coming in, like hes super excited to be witnessing it.
Here comes the crook titan!😂
Slicked back hair, glasses, tie, jacket. What's happening? Lol
Powell is as confused as we are and Yellen loves getting high on mushrooms before talking to delegates and China’s Prime Minister, nothing can save the US dollar.
Go look at the DXY and explain how the US dollar is failing. 😂😂😂
I'm nominating Jack as the new Central Banker of 'somewhere land'. Or to be decided..
If he or for that matter anyone wants the job...
You lost me at three minutes. Central Bank Independence? What a joke. How many Fed facilities do we have? How many GSE's do we have?
Let me improve what you said: "I don't need to learn so I don't listen to things I don't understand or don't fit my bias". Honest statement. Well done. 😂
Great insight into how these guys think they can control things like a machine and how completely out of touch they are about reality.
How incredibly arrogant is this bureaucrat. He is just oozing hubris. It is easy to see how we get so much over regulation from guys like this. I’d like to see him actually be a productive member of the economy like install plumbing in a house or lay a brick wall. Central planners sicken me to my stomach.
I'm sure he doesn't understand your job either. That doesn't mean you aren't both critical for the work you do. Perhaps go read some of his papers.
Sorry yes, how dare I question the brilliance of centrally planned banking or call into question those who facilitate it and have benefited greatly from it. Just how blindly he and his peers believe in the system is what I am referring to here when I say arrogance and hubris. I can guarantee that I am further from the money creation spigot than he is.
And just for clarity, from the BIS website: “Our mission is to support central banks' pursuit of monetary and financial stability through international cooperation, and to act as a bank for central banks.”
Individually Borio is no doubt a great person, nothing personal against Brio, of course.