Smart Talk with Richard Duncan on global economic crisis
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In this episode of Smart Talk, Andrew Mazzone and Richard Duncan discuss credit creation during the World War, global economic crisis, consumer debt, history of currency, collapse of the gold standard and the current US economy and where it is headed. Richard Duncan is the author of three books on the global economic crisis. The Dollar Crisis: Causes, Consequences, Cures (John Wiley & Sons, 2003, updated 2005), The Corruption of Capitalism (CLSA,2009) and his latest book is The New Depression: The Breakdown Of The Paper Money Economy (John Wiley & Sons, 2012). He also worked as a consultant for the IMF in Thailand during the Asia Crisis. He is now chief economist at Blackhorse Asset Management in Singapore. You may check out his website at http://www.richardduncaneconomics.com/ Richard has appeared frequently on CNBC, CNN, BBC and Bloomberg Television, as well as on BBC World Service Radio. He has published articles in The Financial Times, The Far East Economic Review, FinanceAsia and CFO Asia. He is a well-known speaker whose audiences have included The World Economic Forum’s East Asia Economic Summit in Singapore, The EuroFinance Conference in Copenhagen, The Chief Financial Officers’ Roundtable in Shanghai, and The World Knowledge Forum in Seoul. Richard studied literature and economics at Vanderbilt University (1983) and international finance at Babson College (1986). In this Smart Talk video, Mr. Duncan gives us a history lesson about the US public debt as a percentage of GDP during the World War I, The Great Depression and World War II. Richard Duncan also states that the government felt it was necessary to keep economy growing by expending debt to keep the markets growing. Other reasons why there may be another great depression in the states is that many US based multinational corporations are moving jobs outside the US. Furthermore, there has been a tremendous decline of manufacturing jobs and Union Members. In 1948, there has been 31% of US workers in the Unions. However, in 2010 this number is only 11.9%. (Source: BLS) To prevent this downfall, Richard Duncan proposes that middle class and Union workers ensure there are politicians and policies in place that benefit the middle class from further downfall. Richard Duncan believes that the Fed may still continue to keep the inflated bubbles going for several more years until someone will be held accountable for all of the accumulated debt the country has created throughout the decades. Another great topic that was brought up in this discussion is will the China become the new world reserve currency and will it overthrow the mighty dollar? As Mr. Duncan explains, China has one of the biggest bubbles of the world right now with slowing economy along with nonperforming loans. In order for China to become a new global reserve currency, it needs to get its currency (yuan) out in the global economy. Due to that, it needs to have trade deficits. US dollar continues its reign as the global reserve currency because it has a massive trade deficit around the world and everyone is flooded with dollars. China has a massive global trade surplus, which needs their yuan to be more available around the world if they want to make it a reserve currency in the future. Mr. Duncan believe US dollar will remain the leader in the global financial system for many more years to come despite China buying more Gold than the world produces. At the end of this episode, Andrew Mazzone ask Mr. Duncan for some investment advice on what the type of investments he likes right now, whether to invest real estate in Asia or USA along with other great advice. Watch this episode to learn more on where you should safely invest your money right now. Henry George School of Social Science has launched Smart Talk, a series of discussions with leading economists around the world moderated by Andrew Mazzone, president of the HGS board of trustees. We invite you to watch the Smart Talk videos of discussions with some of the most talked-about economic and social thinkers of our times, please visit: http://hgsss.org/smart-talk/
Comments
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the inflation in the 70s allowed the baby boomers to pay off their college debts. Inflaiton is not a bad thing.
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Great interview about the future of the middle class in the future.
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I listened to this conversation all the way through, keeping a few notes where I found reason to disagree with the perspectives offered by Richard Duncan.
The chain of historical events and decisions he describes going back to the First World War are accurate, with the absence of any acknowledgment by him that the cyclical character of property markets was involved. The extent to which movement away from a real "gold standard," replaced by central bank issued bank notes (what I refer to as "promises to pay nothing in particular," because the notes are not redeemable in any specific quantity of precious metals or other goods) is a primary source of "economic growth" is argued over endlessly by members of the various schools of economics.
He fails to mention that by the end of the Second World War the population of the United States had accumulated a huge pool of savings. These funds helped to soften the de-escalation from a wartime to peacetime economy. Several other factors contributed, of course. The U.S. economy benefited by higher education opportunities offered to military veterans, as well as the opportunity to acquire fully amortizing mortgage loans insured by the VA and FHA. Another factor were the grants and loans provided to other countries under the Marshall Plan, which significantly stimulate the demand for capital goods manufactured in the U.S.
As young adults married and began to have children beginning in the late 1940s and well into the 1950s, land markets around every major city in the country became a major factor in the economy. Housing construction became an increasingly important part of the economy. Land prices climbed slowly at first, then began to increase at increasing rates.
Mr. Duncan's reference to the role of Fannie Mae and Freddie Mac also requires expansion and clarification. Even during the peak years of the early 2000s, the combined market share of the two GSEs never exceeded 50 percent. For most of their history, their role was minor. Many banks held mortgage loans in portfolio or sold them to investors, such as insurance companies and pension funds. What changed this was the interest rate volatility that began in the mid-1970s. As property prices (meaning land prices, primarily) climbed during the 1980s and later, Fannie and Freddie did play a significant role by annually raising their maximum loan limits, which, in effect, accommodated the credit-fueled, speculation-driven property markets.
It is also worth observing that despite the dynamics his describes causing deflation, the property markets in every country are inflation-prone. We see this in the U.S. as investors flush with cash are driving up the price of land and improved real estate (as well as other "hard assets" such a collectibles).
He makes no comment in this interview in response to the proposals put forward by economist Joseph Stiglitz to change the way government raises its revenue, to begin to collect unearned income flows (i.e.., rents from land and land-like assets) and lift the burden of taxation from wages and commerce. His reference to the Chinese economy on the edge of a major asset bubble is accurate, but, again, the problem in China is the amount of credit and cash directed into land speculation. -
This older guy is absolutely an idiot who knows nothing about currency valuation. He claims that the chinese current is under valued. What a b.s.! Once the Chinese currency is allowed to reflect the market, it depreciated because its value is lower everywhere in the world. The Chinese government artificially kept it too high. In fact, every currency in the world has depreciated against the Chinese money lately except for the US dollar. But the even against the dollar, Chinese Yuan has appreciated so much (50% in real terms) over the past 10 years.
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This man is 100% correct, major collapse is already started, only massive inflation next when fiat US dollars come back back from overseas like a title wave!
31m 49sLenght
42Rating