Not Your Grandfather’s Response to the Next Economic Downturn

Chief Economist for Gluskin Sheff & Associates, David Rosenberg, laid out an articulate case on BNN Bloomberg TV for how central planners may radically respond to the next global economic downturn, which he presumes is likely to occur in the back half of 2019.

The scenario painted by Rosenberg is somewhat analogous to that provided by Assist FX since 2016. Namely, that a deterioration in developed economy sovereign debt sustainability paired with a relentless “devalue and inflate” policy preference from this era’s central planning cabal of Keynesian magicians leads us to an inflationary debt monetization rather than a deflationary Great Depression II scenario.

Approximately two minutes into the video clip, Rosenberg discusses his outlook:

“So how do policymakers get out of this? They’ll stop tightening. Then they’ll start cutting rates. They’ll take rates back to zero. They will embark on more quantitative easing. A lot of this is not going to work because they’ve already done it. And I think the way we get out of this in a couple of years is going to be something very radical. It will be G4 central banks getting together with G4 financial authorities to embark on what will be called the debt jubilee.”

Rosenberg then goes on to discuss the perception normalization of a highly abnormal developed market “debt jubilee.”

“Before 2008 nobody knew what quantitative easing was. Now it is in the common vernacular. High school students know what QE is. People will come to grips with what is called debt monetization. And that’s different from QE. That will reset the button for inflation, nominal demand growth, beyond, say, 2020.”

I highly recommend a full viewing of the roughly 9-minute video.

See the video here.