PREVIEW: Russell Napier: Growing Wealth in an Inflation Avalanche (w/ Stephen Clapham)

TL;DR

Commercial banks, rather than central banks, are now the primary creators of money, leading to a significant increase in money supply growth. This has the potential to cause inflation, while central banks are forced to cap bond yields through financial repression.

Transcript

hi i'm steve clatton i'm really excited and looking forward to my discussion with russell napier russell welcome what um i would like to start off by by doing is just painting the scene russell you've explained to me in the past your views which are quite radical i think about the forthcoming the new moon of inflation how equities will develop how ... Read More

Key Insights

• 💵 The majority of money in the world is now created by commercial banks rather than central banks.
• 💵 The use of government bank guarantee schemes has facilitated this shift in money creation.
• 🤑 The significant increase in money supply growth resulting from this shift has the potential to cause inflation.
• 😘 Central banks are resorting to financial repression to keep bond yields low despite the inflation outlook.
• 🥺 Financial repression may lead to the need for government control mechanisms to force savers into certain investments.
• ☠️ The growth rates of dollars, yen, and euros have escalated during the COVID-19 pandemic.
• 🎴 Government debt plays a role in the need to keep interest rates low.

Questions & Answers

Q: Why has there been a shift in money creation from central banks to commercial banks?

The introduction of government bank guarantee schemes has allowed commercial banks to create money, leading to a significant increase in their role as money creators. The control of money creation has shifted from central banks to governments.

Q: How has this shift impacted money supply growth?

With commercial banks in control of money creation, there has been a substantial rise in money supply growth. The growth rates of dollars, yen, and euros have doubled or tripled during COVID-19, indicating a significant increase in the total amount of money in circulation.

Q: What are the implications of this increased money supply growth?

The higher level of money supply growth is likely to lead to inflation. Historically, such levels of money supply growth have resulted in inflation. This poses a challenge for central banks as they try to control inflation while keeping bond yields low.

Q: What is financial repression and how does it relate to this shift in money creation?

Financial repression refers to the state's control over bond yields to prevent them from reflecting the inflation outlook. As central banks face the challenge of managing inflation with increased money supply growth, financial repression becomes necessary. This leads to government control mechanisms to coerce savers into investing in assets they may not prefer.

Summary & Key Takeaways

• Money creation has historically been done by both central banks and commercial banks, but the majority now lies with commercial banks due to government bank guarantee schemes.

• This shift in money creation has led to a substantial increase in money supply growth, potentially leading to inflation.

• Central banks are now implementing financial repression to keep bond yields low, which may result in a need for government control mechanisms to force savers to invest in unwanted assets.