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TOPIC: Episode 13 - Satyajit Das

Episode 13 - Satyajit Das 7 months 11 hours ago #1

  • NathanEgger
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One of my goals, as stated on the show this week, is to bring guests with contrasting views to MacroVoices. I know some of you were in strong disagreement with Richard Duncan's views last week, and I think that is fantastic, but I think that Mr. Das' views stand in distinct contrast to those of Mr. Duncan's, and what I feel is most important is that we all consider the many sides to any issue and come to our own conclusions after weighing all the evidence available to us.

I hope this attempt to provide contrasting opinions and analysis is working for you guys, and if it isn't, by all means let me know!

Next week we'll be back with economist Steve Keen, who should help us view the global macro picture from even more angles still.


Happy listening and thank you for all of your comments, criticisms, compliments and support.

--Nathan
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Episode 13 - Satyajit Das 7 months 10 hours ago #2

  • ErikTownsend
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Personally, I really enjoyed both this interview and last week's. As Nathan said, this is all about contrast. Das is brilliant, and I'm really glad to be bringing you his views this week. Next week we'll round it out with yet another perspective.

Erik
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Episode 13 - Satyajit Das 7 months 9 hours ago #3

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Good job gentlemen, I don't know how to thank both of you for spending your valuable time to help all of us.

God bless
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Episode 13 - Satyajit Das 7 months 8 hours ago #4

  • Arthur Itarian
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Thanks guys. Das was a thought-provoking guest.

I'm a little confused about his outlook, so I'll hold my comments until I've read through all the documents. Meanwhile, I want to commend you for the quality of your Macro Voices productions. The overall professionalism and attention to detail are impressive.

I'm not familiar with next week's guest, Steve Keen, but I see he's an Austrian economist, so that should be excellent.

Oh, wait ... AUSTRALIAN economist.

Uh-oh :unsure:

(Sorry, I'm sure he'll be delightful.)
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Episode 13 - Satyajit Das 7 months 6 hours ago #5

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Arthur - I think you'll find Australian economists to be of very high quality. Das is Australian as well.

(I may be biased as I'm also an Aussie!)
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Episode 13 - Satyajit Das 6 months 4 weeks ago #7

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Arthur Itarian wrote:
I'm not familiar with next week's guest, Steve Keen, but I see he's an Austrian economist, so that should be excellent.

Steven Keen is a Keynesian. His credit analysis is very very good but his solutions are QA for the people and other questionable government programs. Nevertheless he was one of the few economists from academia who truly understood and predicted the 2008 credit crisis.
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Episode 13 - Satyajit Das 6 months 4 weeks ago #6

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Sorry, I do like Australians, but I was hoping the guest would be from the Austrian school of economics.

This is a spillover from the episode 12 thread. Erik stresses the importance of considering diverse viewpoints, whereas I've already had my fill of Keynesians. But it's a minor quibble. I love the site, and I hope I'm not annoying anyone unduly :)
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Episode 13 - Satyajit Das 6 months 4 weeks ago #8

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This was a good interview. But I don't see why Das gives such a high likelihood to a Japanese type of outcome.
1. Japan was a very productive economy prior to 1990
2. Japanese had vast amounts of savings the government could tap into.
3. Massively declining population - no new entrants to the workforce, kept unemployment down.
4. The rest of the world was growing and they could muddle along.
5. The population is homogeneous with hardly any social unrest tendencies and it is willing to make sacrifices for the unity of the country.
6. The 1990s were probably the most peaceful times in the past 100 years.

None of these hold today for the Western World. So giving a 70% chance to such an outcome seems way too high to me. I'd rather put it around 5-10%.
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Episode 13 - Satyajit Das 6 months 4 weeks ago #9

  • ErikTownsend
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It's great to see so much activity only 14 hrs after the show with Das was released!

To the many comments about schools of thought, I too am a huge fan of Austrian economics, and in hindsight I realize it would have been a great idea to include a "pure Austrian" in this contrast-of-views series. Perhaps Nathan can line up a good Austrian in June... (we're already booked solid thru May). We welcome suggestions on names to consider.

I think the really key issue here is that a lot of us hold strong views about which economic schools of thought SHOULD drive public policy decisions. I certainly feel a lot of passion for that subject, and it seems clear that many others here do as well. But as a money manager, one of my most important rules is to remember that I can't afford to let my brain drift into what-SHOULD-happen mode, or who the hero economist is that has the vision I think is right for the world. Sure, I feel passion for those subjects in my spare time. But I already know that anyone who is a hero in MY book is unlikely to ever have much public policy influence. We're at a point in the Kondratieff wave where society is moving toward collectivism and away from my core values.

As a money manager, my job is to focus my brain cells on what's likely to actually happen, which is NEVER going to be what I think SHOULD happen if I were in charge. Personally, I find it distracting and counter-productive to spend working hours thinking about what policymakers should do according to me. I can't afford to be distracted from the far more important task of figuring out what they're actually likely to do next. I already know I won't approve!

Best,
Erik
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Episode 13 - Satyajit Das 6 months 4 weeks ago #13

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Erik,

I am just wondering from listening Das' comments on 70% scenario of stagflation of world/china (becoming japan). What would be commodity country doing ? are they or will they transition them selves ? or going down the drain, just because of stagflation?

However, I strongly suspect, It will be 30% scenario will played out and can even lead to war for the sake of that 0.5% (to stimulate further,as thats what history suggests).

Gold is religion, I could not agree any more on it. In India 99.99% out of 120 billion does not understand Economics, but everyone has Gold at their saviour. Sometimes Religion do work !! its live example.

Cheers... Love to hear your comments on commodities producing countries like canada on 70% scenario of stagflation.
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Episode 13 - Satyajit Das 6 months 4 weeks ago #14

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digitalnilesh wrote:
I am just wondering from listening Das' comments on 70% scenario of stagflation of world/china (becoming japan).

He seems to be predicting a disinflationary (or possibly deflationary) depression. He uses the word "stagnation" rather than "stagflation."

Presumably, commodity countries would perform poorly, although I suppose gold could perform adequately in such an environment.

The outlook appears similar to what I've seen from Bob Prechter's group at Elliott Wave International. In fact, Prechter would be an entertaining guest.
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Episode 13 - Satyajit Das 6 months 4 weeks ago #16

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Arthur Itarian wrote:
The outlook appears similar to what I've seen from Bob Prechter's group at Elliott Wave International. In fact, Prechter would be an entertaining guest.

Prechter's outlook is completely different. He predicted the Dow to go to 400 points and everything to crash relative to the USD. He stopped giving interviews a few years ago since nearly none of his predictions materialised. His major prediction from about 5 years ago was a bottom in stocks in 2016. Prechter is the only person I know who could congruently argue for a deflationary outcome. He really understands money and the banking system. But his basic assumption for that was that the electorate would choose conservative politicians and the Fed would refuse to bail out the government. As Das put it, some of the investment axioms indeed come down to religion. In the end either the inflationists or deflationists will be right as a credit bubble requires continuous credit growth that cannot continue forever. Deflation as bad as it is would be the easier and quicker solution but I just don't see the authorities standing by and letting it happen.
Last Edit: 6 months 4 weeks ago by marting.
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Episode 13 - Satyajit Das 6 months 4 weeks ago #17

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marting wrote:
Prechter's outlook is completely different.

Thanks, you've given a good summary of Prechter. Prechter's primary investment recommendation (for Americans) is cash -- including offshore holdings to protect against capital controls. Plus a small allocation to gold (which he expects to decline in price).

I'm confused about Das. When I read his stuff, I feel like I need another two or three paragraphs at the end.

On pages 7 & 8 of the "Crash Course" document, he describes the likely scenario:

- inflation remains low
- financial repression becomes a constant


Those two items seem at odds. Then he adds this:

"... asset price inflation and the growing debt burden encouraged by low rates will create dangerous financial instability."


But later on page 8, he mentions US equity weakness. So I'm not sure which assets he expects to inflate. Maybe he's referring to already-accumulated asset price inflation?
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Episode 13 - Satyajit Das 6 months 4 weeks ago #18

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Arthur Itarian wrote:
I'm confused about Das. When I read his stuff, I feel like I need another two or three paragraphs at the end.

I don't know. I don't read books. They lack emotions which are the core to every investment decision. Watch the speech Das gave at the CIS here in Sydney a few years ago. https://www.youtube.com/watch?v=RBKwmZDZvW0 That is fairly consistent. I like his macro analysis but he has very little practical investment advice. I think there are tremendous opportunities out there. At the beginning of the year gold stocks were the cheapest in a 100 years by any objective measure. This was the worst bear market both in duration and price ever. Nobody believes in this sector. This is when you want to buy. All other markets are overvalued or haven't corrected enough to find bargains. The only exception might be the Russian property market. Prices in places like Moscow fell 80-90% in USD. These are the magnitude of corrections you want combined with the most negative sentiment possible.
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Episode 13 - Satyajit Das 6 months 3 weeks ago #19

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Very good interview, amazing.

Good to hear his view about China being a big family instead of a country.

So I guess every country is the same, the ones in power is looking after themselves, not the citizens.

Did he talk about oil at all or did I miss it???
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Episode 13 - Satyajit Das 6 months 3 weeks ago #20

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tankumo wrote:
Did he talk about oil at all or did I miss it???

Good question. I don't remember. On page 12 of the "Crash Course" document, he describes the "trajectory of the impending crisis":

"A prolonged period of low oil prices will reduce petrodollar liquidity and may necessitate sales of foreign investments."

But in the 2012 presentation linked by marting, he anticipated inflation specifically (and uniquely) in food and energy.
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Episode 13 - Satyajit Das 6 months 3 weeks ago #21

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marting wrote:
Watch the speech Das gave at the CIS here in Sydney a few years ago

I skipped through it, but I think I got the highlights. It's from 2012.

Das summarizes his outlook during the Q&A beginning at about 1:22:00. The major economies (India, China, Europe, and USA) will "circle the wagons," focusing on self-sufficiency (autarky), as global trade diminishes. Financial repression will take the form of extensive capital controls.

According to Das, the authorities will print, but without inflationary effect:

"I think people who assume, and who fear, hyperinflation are wrong, because I don't think we are going to get inflation, we're going to get deflation, or disinflation."

He explains that inflation requires: excessive monetary accommodation (which may not happen); transmission mechanism to create a multiplier effect (difficult because the banking system is broken); demand, and supply constraints.

Das envisions inflation only in food and energy, which have different dynamics. He notes that this is especially bad for emerging markets.

When questioned about the limitations of his Japan analogy, he explains that the key characteristic is low growth.

At about 1:08:00, Das presents lagged charts showing how economies are following Japan's path. The S&P stock index, for example, should follow the Nikkei generally lower:



He explains that the recent spike was generated by a flood of money.

He expects lackluster performance from real estate:



That's inflation-adjusted.

Here's (core) inflation:

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Episode 13 - Satyajit Das 6 months 3 weeks ago #22

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Gentlemen, I am not sure why I cannot see the crash course link on the site, can anyone provide a link to Das' crash course?

Thanks.
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Episode 13 - Satyajit Das 6 months 3 weeks ago #23

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Episode 13 - Satyajit Das 6 months 3 weeks ago #24

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Thanks. You are an angel.
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Episode 13 - Satyajit Das 6 months 4 weeks ago #10

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I couldn't get it to download or play here or itunes. Have had no problem with prior podcasts..tried it on another PC with same result
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Episode 13 - Satyajit Das 6 months 4 weeks ago #11

  • ErikTownsend
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We have just learned of a technical outage with the podcast. Our team is hot on the case. We hope to have it back working again very shortly.

Erik
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Episode 13 - Satyajit Das 6 months 4 weeks ago #12

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That worked. Thanks ET
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Episode 13 - Satyajit Das 6 months 4 weeks ago #15

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Erik, I can't argue with any of your comments above.

I prefer Austrians as guests because they're more likely to be useful IMO. Their philosophy is grounded in reality rather than wishful thinking, and they have an independent/contrarian identity compatible with investing success.

I should probably take my guest suggestions to the other thread, but Jim Grant would be awesome :cheer:
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Episode 13 - Satyajit Das 6 months 3 weeks ago #25

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You're welcome, tankumo :)

For anyone wanting to fully immerse themselves in Das, the book ("The Age of Stagnation") is available on Amazon with many free preview pages, so you can decide whether to purchase.
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Episode 13 - Satyajit Das 6 months 3 weeks ago #26

  • ErikTownsend
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It's fantastic to see all this excellent conversation here guys! Thanks for bringing the conversation, interesting links, etc. to our forum!

As I'll explain in more detail on this week's show, the whole goal of MacroVoices has always been to inspire exactly this kind of thoughtful, informed intellectual discourse. The podcast was never meant to be an end unto itself. Its purpose is to get the conversations started, so that they can be continued here in the forums.

Our goal is to inspire the formation of a global community of sophisticated private investors, family offices, and finance professionals who share ideas and research with one another online. You guys are perfectly fulfilling that vision right here in this thread, and the show is still <3 months old! We expected it to take much longer (at least a year) to reach critical mass where the forums become more interesting than the podcast itself. But you guys are already off and running. Awesome!

I'll have quite a bit more to say on this subject after the Steve Keen interview on this week's show.

Best,
Erik
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Episode 13 - Satyajit Das 6 months 3 weeks ago #27

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I think Das has done an excellent job of touching on the permissive role of excess debt in the global system. However insufficient attention has been paid to how past GDP has been inflated by the change in debt levels and the need to recast GDP growth as Consumption + Investment+ Government + Net Exports + Delta Debt. I think Das is spot on when he says that debt is simply consuming from the future and I would also point that despite what central banks say it is the growth in debt that has been a very large driver of increasing economic inequality. The trouble is that you have people in government or those like Thomas Picketty who believe the solution to inequality is more taxes or asset transfers (when you could argue that in large measure the very policies of government and central banks have exacerbated this situation). Certainly doesn't augur well and I think the shift out on the risk curve will definitely end badly as Grant Williams and others have commented on.

Well done to Macrovoices for raising the debate and having been a close observer of financial markets I think Erik's comments on how investors are actively sought to be confused into buying excessively risky assets by self serving firms is spot on.
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Episode 13 - Satyajit Das 6 months 3 weeks ago #28

  • ErikTownsend
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@Terra Australis, thanks for the kind words and welcome to our forums!

Erik
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Episode 13 - Satyajit Das 6 months 3 weeks ago #29

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Erik, your guest posted an interesting article!!!!!!


www.safehaven.com/article/41426/too-big-to-jail
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