Adam Tooze: “If your currency devalues against the dollar, then you tend to get import inflation, because the goods that you buy from abroad, many of which are denominated in dollars, become more expensive. And the other reason you’d be leery about doing this, especially if you’re an emerging market or low-income country, is that many of your businesses, big businesses, will have borrowed in dollars. Why? Because your local capital markets aren’t big, deep, or sophisticated enough. And the U.S. market is there. And hitherto, borrowing on U.S. markets has been cheap, relatively speaking. And so what big corporates in the emerging market will do is issue debt with the help of investment banks in New York and in Europe onto global dollar markets and borrow there. Now, if your currency severely depreciates against the dollar — and this is a big company, which is earning revenue locally — its problem all of a sudden is that it has liabilities in dollars, which are worth more in assets or as stream of income, which is in a depreciated local currency. And that’s a recipe for financial crisis in big corporations.”
Arnold Kling: “Long ago I offered the aphorism “Markets fail. Use markets.” That is, I readily concede that the market economy is not at some theoretical optimum. The question is what will lead to improvement. I believe that government intervention will often make things worse. Meanwhile, entrepreneurial innovation and creative destruction tends to solve economic problems, including market failures…If “market fundamentalism” is the belief that markets are perfect, then I do not know anyone on the libertarian side who is a market fundamentalist. Economics professors do not have to spend a whole semester arguing against this straw man. I wish that they would spend more time discussing “government fundamentalism,” which is what you are guilty of when you assume that government intervention consists of wise, technocratic solutions.”
Russell Napier: “My structural argument is that the power to control the creation of money has moved from central banks to governments. By issuing state guarantees on bank credit during the Covid crisis, governments have effectively taken over the levers to control the creation of money. Of course, the pushback to my prediction was that this was only a temporary emergency measure to combat the effects of the pandemic. But now we have another emergency, with the war in Ukraine and the energy crisis that comes with it…[This] means governments won’t retreat from these policies. Just to give you some statistics on bank loans to corporates within the European Union since February 2020: Out of all the new loans in Germany, 40% are guaranteed by the government. In France, it’s 70% of all new loans, and in Italy it’s over 100%, because they migrate old maturing credit to new, government-guaranteed schemes. Just recently, Germany has come up with a huge new guarantee scheme to cover the effects of the energy crisis. This is the new normal. For the government, credit guarantees are like the magic money tree: the closest thing to free money. They don’t have to issue more government debt, they don’t need to raise taxes, they just issue credit guarantees to the commercial banks…We’re in for a long social and political journey. What you have learned in market economics in the past forty years will be useless in the new world. For the next twenty years, you need to get familiar with the concepts of political economy.”
Shane Parish: “Most people read the same new books that everyone else has read, not necessarily for the ideas but for the social reward of being able to talk about them with others. Reading the same thing as everyone else is only going to put the same ideas in your head that everyone else has. If you want new ideas, read old books.”
