MB Fund Podcast: Maybe more debt isn’t the answer? With Jonathan Rochford (edited & updated w/ podcast audio)

Over the past few months we have looked several times at debt crises and how they are likely to be resolved. We had Dr Hail on to talk about MMT, we featured Ray Dalio’s solutions to debt crises and this week we hear the third option: Austrian economics.
Jonathan Rochford will take to the podcast to support this view, driven by the thought that maybe more debt isn’t the answer to every problem.

Join MB Fund’s Head of Investments Damien Klassen, Head of Operations Tim Fuller and Jonathan Rochford of Narrow Road Capital discuss the idea that “Maybe more debt isn’t the answer?” Let us know if you left feeling convinced of this after the discussion

Topics include: Description of the 3 schools of economic thought, and what each do in a financial crisis
How Austrians deal with Zombie companies
14 reasons QE is terrible economic policy
QE’s biggest problem being who the money goes to, not it happening
Wealth inequality Who will default on debt

View the webinar slides here

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Tim Fuller is Head of Operations at the Macrobusiness Fund, which is powered by Nucleus Wealth.

 

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Tim Fuller is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.

Comments

  1. Tim FullerMEMBER

    Let us know if you left feeling convinced that more debt isn’t the answer after listening to this discussion

  2. Stewie GriffinMEMBER

    “Please sir, my chains are weakening and the walls to my prison crumbling – please issue more debt to breath new life into them!”

    More debt is not the answer, letting EXISTING debt fail is the key to our freedom.

    • Jim's Central Banking

      Agreed. The only way out of this is for creditors to take a bath, and by that I don’t mean the average working class pleb with a little bit of savings in a term deposit, I mean the bond holders.

  3. Slightly of topic but I would like to know if Damien, Tim and Johnathan feel about Capital Economics view that there is no problem with the rally on Wall Street and the prices dont reflect excessive optimism and in there view equities can rise further.

  4. “Can’t ignore international trade”? I think this is most of the problem – we rely too much on the above especially since we could be self sufficient. MMT covers the cracks around wealth inequality. Without extra “money” to reduce the credit to actual money ratio there’s no way for the private sector to get out of debt cycle issues we are in.

    Austrian economics is a prevention method; but the sad fact is we need a cure not a vaccine. We are past the point where Austrian could help in my view sadly. Without fixing the long term debt problem mostly accumulated onto households (corporates and governments in Australia don’t have as much debt) I see households going through a great depression. MMT to households is probably the only way to balance out the sectors that I can actually see working. The problem isn’t “zombie” companies – its households and that makes it an entirely different problem in “letting them go bust”.

    Most people are happy to “break economic theory” if it means a functioning society where people aren’t going bankrupt, relationships aren’t being destroyed, people go hungry, etc. Also disagree with the “Saving is good” aspect in a fiat system; for you to save someone else must go into debt – without debt there can be no savings; this to me is older economics training that makes sense in a pre-fiat world. We need to understand money if we are to fix the issue.

  5. Other point to note is what’s been happening in the last few years; local businesses haven’t seen the need to invest because there’s no “aggregate demand” to justify the investment because the household sector is “tapped out”. This has been a theme on MB for years; where household’s are mainly increasing credit growth to drive spending. Households are the only sector in the economy that are happy to accept a negative return on expenditure on the whole (consumption) – which allows other sectors predominately business to achieve positive return expenditure (investment) given the same supply of money stock. At very low interest rates it isn’t saving that’s the constraint; its the lack of good investment opportunities that deliver a good return.

    It’s interesting that as soon as the poor are given “stimulus” business start recovering their investment plans; seen it happen in my workplace directly. Trickle up is a much better theory than trickle down.