Assessing an essay written by Warburton in 2001, they come to the conclusion that the search for inherent value is continuing and leading to polarising ideas about investment. They talk about changes in the gold market, enormous debt levels, and new central bank measures such as quantitative easing – which aim to prevent defaults.
Central bank reflation is leading to a replacement of contracting bank credit with raw money. They also point out that market uncertainty about the sustainability of sovereign debt levels is stalling entrepreneurial activity and investment in productive capacity. Warburton states that global growth will likely slow until there is a significant event such as a 50% rise in the price level, which would wipe out some of our debt burden. He explains that the velocity of money can increase by both returning confidence and accelerating fear.
They also talk about the crisis in the eurozone. Warburton thinks that the euro is becoming a structurally weak currency. Warburton expects a dramatic increase in the ECB’s balance sheet in the coming years in order to hold the currency union together. They also discuss the role of Germany in this union, and the huge burden that is being put on the back of German taxpayers.
This podcast was recorded on 23 October 2012.