John Plender, on 9 January in the Financial Times (FT Money), made favourable reference to some of my earlier work. I have suggested that central bank efforts to restore the functioning of financial markets during crises, while absolutely necessary, might also sow the seeds of still bigger crises in the future. As a society, we need to think more about the longer term implications of our efforts to avoid shorter term problems.
https://www.ft.com/content/91efe8fa-857c-438a-a0f3-96dfb8e7daaa
On 7 December 2020, William White reviewed in the Wall Street Journal a book authored by Charles Goodhart and Manoj Pradham. The book documents how positive demographic developments have spurred real growth and restrained inflation over recent decades, and presents convincing evidence that these forces are now going into reverse. This will have profoundly negative effects, for which the governments of advanced countries are ill prepared. This well written book needs to be read by politicians, government officials and concerned citizens. Its message concerns us all.
https://www.wsj.com/articles/the-great-demographic-reversal-review-the-perils-of-aging-11607381251
William White was interviewed by Daniel Stelter on 13 December for a podcast called “Beyond the obvious”. A wide ranging discussion of recent and prospective central bank policy emphasized the problem of debt accumulation and different ways of dealing with it. The discussion also touched upon Modern Monetary Theory and the possible implications should many governments and central banks try to implement policies of “financial repression” like those pursued by the UK and the US after World War ll. The interview in English proceeds at minute 42 of the podcast, being preceded by Dr Stetler’s summary in German of the discussion.
https://think-beyondtheobvious.com/die-zentralbanken-loeschen-mit-benzin/
William White was interviewed on 16 November by Jim Grant, editor of “Grant’s Interest Rate Observer”. The conversation ranged widely over issues related to central banking and future economic prospects. Both the pandemic and the buildup of unintended side effects arising from ultra-easy monetary policy pose challenges going forward. Grant wondered why central bankers seemed to ignore these side effects when setting policy. White suggested that monetary policy in recent years had been captured by circumstances. With both fiscal policy and regulatory policy having restrictive effects on aggregate demand, expansionary monetary policy had been left as the “only game in town”. In response to the pandemic, it was welcome that fiscal expansion was now playing a larger role. White cautioned against too early fiscal tightening, as happened after the Great Financial Contraction, but also warned that the patience of markets towards highly indebted sovereigns would not last forever.
On November 16, The Market, a Swiss financial paper, published an interview with William White conducted by the editor, Mark Dittli. White pointed out the existence of a vicious circle that has been repeating for decades. A financial crisis elicits a necessary central bank response that eventually leads to easier monetary conditions. This encourages even more debt accumulation (and leverage) that leads to another and even more serious financial crisis and so on. This process is not sustainable. In the last part of the article, White refers to a set of commonly held beliefs that are simply not true.
“The idea that price stability is sufficient for economic stability? Wrong. That easy money always stimulates demand? Wrong. That the economy is self-adjusting, back to a full employment equilibrium? Wrong. That financial markets are efficient and bad things can’t happen? Wrong. That wealth will trickle down to all levels of society? Wrong. These are big beliefs. And false beliefs are dangerous”.
William White, along with a number of others, answered this question in the Summer Edition of The International Economy. He concluded that the agreement of member countries of the EU to allow a significant expansion in community issued debt was a remarkable and welcome development. However, it fell far short of being a “Hamiltonian Moment”. Not least, there was no assumption of state debts by some higher political order. Nor was their agreement on a dedicated source of funds to ensure the future servicing of centrally issued debt.
InternationalEconomyHamiltonianSummer2020This question was posed by the editors of The International Economy to a symposium of over thirty analysts, including William White. White responded that the world will likely languish in “an extended low growth funk” unless the problem of ever growing public and private sector debt is adequately addressed. The “headwinds” of debt were already exerting an undesirable influence on the global economy prior to the pandemic, and the policy response (however necessary, short term) has made this underlying problem worse. White suggests that, absent any credible alternative policies, cooperative agreements between debtors and creditors to restructure debts might be the least costly and least risky solution.
InternationalEconomySpring2020Japanificationpdf
In a Forbes magazine article published on 1 May, John Mauldin referred to William White as “the former chief economist at the Bank for International Settlements and my favorite central banker”. In the article, Maudlin refers to the massive and dangerous growth in global debt since 2009 (pre pandemic) and the enabling role played by monetary easing.
William White appeared on Bloomberg Television on 7 April, and then on a radio podcast with Tom Keene, Jon Ferraro and Paul Sweeney. He expressed concern about the possible ineffectiveness of still more monetary easing and the possibility of unintended and undesired consequences. He supported the greater reliance on fiscal expansion in the current pandemic crisis, noting that the market was likely to be “patient” before responding badly to sharp increases in government debt. White noted however that the market’s “patience” was not likely to be infinite and that thought should be directed to solving this problem going forward.
On 14 May 2020 William White was interviewed on radio by Mark Burgess, the Asian Chairman of OMFIF. Mr White described the state of the global economy, pre covid-19, as “an accident waiting to happen”. The global economy now faces a period of prolonged distress because of a combination of circumstances; these preconditions, aggravations arising from the pandemic itself, then the costs of the government lock-down in response to the health threats, and finally the fiscal and monetary measures taken by governments to ease the economic costs of the lock-down. Perhaps most importantly, the preexisting problem of very high global debt levels has now worsened significantly. The conversation then turned to possible outcomes ranging from lingering depression to very high inflation.
https://www.omfif.org/podcast/debt-restructuring-in-the-post-pandemic-economy/