William White was interviewed on 15 September by Paul Buitink of “Reinventing Money”. They covered current concerns including the sustainability of sovereign debt service in a number of advanced countries. White also reflected on the dymanics of “boom bust” cycles and how debt overhang problems might be dealt with. In this latter regard, he concluded there were currently only bad options available. A fuller description of the contents is provided at the beginning of the recording.
William White and Douglas Laxton, director of the Better Policy Project, had a discussion on 3 September focussed on how money is created in a modern economy. White stressed his strong support for the school of endogenous money that recognizes that banks create money out of nothing by making loans (a bank asset) and then crediting the borrowers deposit account with an equivelant amount of money (a bank liability). This capacity underlies the recurrent observation of costly boom and bust credit cycles, and the cumulative build up of debt and other economic imbalances that now threaten economic and financial stability. Laxton then led a discussion of how AI might, or might not, lead to significant increases in productivity that might alleviate such problems.
William White recently gave an interview to Gold Republic Global, who summarized the conversation as follows. “Former top central banker at BIS William White breaks down the dangerous consequences of decades of ultra-easy money. From exploding debt and central bank paralysis to inflationary threats, financial repression, and the return of gold—this conversation reveals why the global financial system is reaching a breaking point. White breaks down the growing risks of financial and fiscal dominance, the fragility of the current debt-laden system, and the historic forces driving us from an “age of plenty” to an “age of scarcity.” From malinvestment and financial repression to the rising role of gold and the BRICS monetary pivot, this episode offers a rare insider perspective on where the global economy is heading.”
This question was adressed by a number of economists in the Summer 2024 edition of The Internationl Economy. William White (page 25) noted that the global economy is a complex, adaptive system and such systems often break down. We have had three major, global recessions since 1990 and they have all arisen from the financial sector. In each case, a sharp easing of monetary policy led to a debt buildup that then contributed to the next financial crisis as interest rates rose again. Moreover, the credit granted as a counterpart to this debt has increasingly been granted by non-regulated entities. We do not know who has lent to whom. Against this backdrop, we now seem likely to encounter a number of inflationary pressures arisisng from secular forces; demographics, deglobalisation, climate change etc. A future, global debt crisis now seems more than likely.
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In his FT article of 1 November, 2024, John Plender made favourable reference to my most recent publication “Why the monetary framework in advanced countries needs fundamental reform”. It has been published as a chapter in the book “The age of debt bubbles”, edited by Max Rangely and published by Springer. Plender concludes that we urgently need debate on excessive monetary easing and the neglect of credit and debt developments. I totally agree, and would add (see my recent AEI presentation) that central banks have essentially ignored supply side developments as well.
https://www.ft.com/content/72b48b7d-ec17-4135-aa40-98b96eec2e64
A panel of economists responded to this challenge in the Spring Edition of “The International Economy”. The panelists assessment were almost evenly divided between “A” and “F” with an equal balance of division across all the letters in between. William White aligned himself with those giving an “F” ranking. While negative rates did not lead to the catastrophic outcomes suggested by some, they constituted an extension of the ultra-easy monetary policies in place since the Great Financial Crisis. White believes these policies were fundamentally misguided, leaving us exposed to both “financial dominance” and “fiscal dominance”.
InternationalEconomyGrading the Negative Rate ExperimentJune 2024
Wiliam White was interviewed by Ed D’Agostino of Mauldin Economics on August 2, 2024. The conversation was centered around White’s view that a combination of negative supply shocks, and the need for massive expenditures to confront national security, environmental and other requirements, would in the end have to squeeze consumer expenditures. Higher interest rates would be part of the process for doing this. Transitioning to an Age of Scarcity will create formidable political challenges to the democratic order. The interview itself, and the transcript, are attached below.
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The Financial Times published a letter from William White on 28 April 2024. White quotes Keynes in Chapter 15 of the General Theory who suggests that the “neutral rate” is a fiction that can be used by central banks to escape responsibility for their own actions.
https://www.ft.com/content/218f8a6b-3f69-4d0a-b443-b3c7a0a331a1
This article was William White’s response to the question posed by the editors of The International Economy to a panel of economists. It was published in the Fall 2023 edition of the magazine. White notes (page 6) that a country endowed with natural resources is “blessed” but that poor governance can turn that blessing into a resource curse. Similarly, the whole world has been blessed until recently with ample natural resources, especially fossil fuels, but going forward very different circumstances will prevail. Adapting to climate change implies threats to production capacity, of food in particular. Mitigating climate change implies restricting the use of otherwise available energy sources and their costly replacement. Adapting to these changed circumstances poses threats to both economic and political stability.
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Chris Sheridan, host of FS Insiders Podcast, recently interviewed William White about his most recent INET Working Paper. White reviewed the various shortcomings of the current framework; not least, how it has contributed to ever bigger credit bubbles and and ever higher stocks of both public and private debt. In spite of these developments, central banks showed no willingness to reassess either the framework itself or the set of false beliefs on which it rested. White expressed the hope that the conduct of monetary policy could be improved while maintaining the current institutional structure. However, he felt that it was also appropriate to assess seriously alternative and more radical options like the introduction of a “narrow money” regime. The widespread introduction of central bank digital currencies might facilitate such a change