INET recently posted a short article by William White in which he stated that the failure of Lehman Brothers should not be treated as an isolated event. Its ultimate cause was a longer-term process through which a combination of monetary, regulatory and safety net policies were steadily increasing systemic risks and making significant financial crises almost inevitable.
John Plender of the Financial Times wrote an article, published on 12 August 2023, in which he referred at length to my thesis that the world is moving from an “Age of Plenty” to an “Age of Scarcity”. This was the transition referred to by Keynes and which prompted him to write “How to Pay for the War” in 1940. My use of Keynes’ words was intentional and was intended to suggest that we might be facing similar economic and financial challenges in the near future.
https://www.ft.com/content/91f39150-9abe-4257-8d52-17520d35e534
MNI Market News posted on 3 March a podcast with William White, conducted by Greg Quinn of the Ottawa bureau. White listed a variety of reasons for expecting future aggregate supply to be constrained, and for future investment needs to strengthen. This implied a sustained need for higher real and nominal interest rates, raising fears of both financial instability and fiscal unsustainability. White suggested that fiscal restraint, directed primarily to reduce consumption, could aid in the battle against inflation and would also help ensure longer run fiscal sustainability.
https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5tZWdhcGhvbmUuZm0vbW5pZmVkc3BlYWs/episode/ZGE4NGQzY2UtYjlkNy0xMWVkLWI2NDAtMGYzZGMzZWZkMDY5?sa=X&ved=0CAUQkfYCahcKEwjA6Nu8jsD9AhUAAAAAHQAAAAAQAQ
An interview given by William White to Mark Dittli of “The Market” was posted on 23 February. Faced with secular forces likely to lead to a more inflationary future, central banks should raise nominal rates to allow real rates to adjust upwards. However, high levels of both private and public debt (encouraged by earlier monetary easing) imply that higher rates bring significant risks of financial instability as well as the unsustainability of public finances. White suggests measures to help avoid these risks, but they imply pain for consumers. Political authorities might rather choose policies of “financial repression”. After World War II inflation rose, but interest rates were held down and the real burden of debtors was reduced over a number of years at the expense of savers. In todays world, the political implications of such redistributive policies could be important.
This article by William White was published on 20 December in “The Market” a Swiss financial newspaper. It suggests that the global economy faces such a transition and that there will be, as a result, persistent upward pressure on prices and on interest rates. Similar to suggestions made by Keynes in “How to pay for the war?”, governments must find ways to scale back unnecessary consumption to finance investments, both public and private, that now offer (think environmental) a very high social rate of return. Politically, this will not be easy.
https://themarket.ch/english/transitioning-from-an-era-of-plenty-to-an-era-of-shortages-ld.8077
On December 15, William White had a “Deep Dive” discussion with Danielle Martino Booth on Hedgeye TV. White suggested that central banks had used the wrong analytical framework to guide their monetary policy and that, as a result, the global economy suffered from many sources of instability – not least unexpected inflation. He added that a number of impending, negative supply shocks would worsen inflationary pressures over the medium term and make policy choices still more difficult. The discussion ended by reverting back to flawed analytical frameworks and efforts to make the economic curricula at universities more relevant to real world problems.
William White was quoted in a Bloomberg article focused on recent problems in Korea’s financial markets that eventually required forceful intervention by the authorities to restore order. White felt that many other countries might face similar problems as monetary policy tightened after many years of unusual ease which had invited leverage and imprudent behaviour.
https://mail.google.com/mail/u/0/#inbox/FMfcgzGrbRWfJNNvlfGZrlNRwSWLwFDx
A letter from William White was printed in the Financial Times on 2 December 20 2022. White wrote in support of an earlier article by Martin Wolf called “How to think about policy in a polycrisis”. A number of interacting systems, each essential for human survival and progress, are currently and simultaneously under threat. Policy solutions that focus on only one system, without thinking about the effects on other systems, could well prove counterproductive.
https://www.ft.com/content/0472dc81-2b47-46bb-9f07-fd747796e4bf
William White and Joseph Wang (“Fed guy”) were recently interviewed by Jack Farley on Blockworks Macro. Both provided an assessment of the Fed’s recent policy moves and the balance of risks looking forward. White was particularly concerned about a series of prospective, negative supply side shocks that would worsen all of the policy tradeoffs facing central banks. To complement monetary restraint, he suggested that governments in advanced economies should rely more on reducing consumption through fiscal measures. As well, better procedures to facilitate orderly debt restructuring would be required for an emerging “era of shortages”.
Alan Dunne of Top Traders Unplugged (TTU) interviewed William White on 21 October 2022. TTU is a long running podcast for investors, with more than 7 million downloads since inception. White spoke about what he perceived to be fundamental shortcomings in past monetary policy in the advanced market economies, and some of the attendant risks going forward. Recent events in the UK gilt edged market underline the risk that future inflation control could be compromised by financial dominance or fiscal dominance or both. Anticipated negative supply side shocks will aggravate existing policy tensions.
https://www.toptradersunplugged.com/podcast/william-white-global-macro-series-november-2nd-2022/