The Hawk and the Serpent of Finance (w/ Danielle DiMartino-Booth & Chris Cole)
CHRISTOPHER COLE: Well, what breaks that cycle? And this comes to the image in the paper of the allegory of the hawk and serpent. And I was thinking about this. Outside our offices here, we have a peregrine falcon that flies around. DANIELLE DIMARTINO BOOTH: I saw that on Twitter. You need to tweet more often, by the way. Can We. Got on "Real Vision" thumbs up on that? Thank you. CHRISTOPHER COLE: I do a lot of research and work, but I'll try. I'll try a little bit more. I'm still getting used to it, by the way. The whole retweet thing-- DANIELLE DIMARTINO BOOTH: It gets tricky. CHRISTOPHER COLE: It gets tricky a little bit. But that hawk-- I noticed the idea of hawk. And there is an old symbol of a hawk fighting a serpent. And this symbol has deep roots. It's actually on the great seal of the US. It's on the coat of arms of Mexico. It has important ramifications across different traditions ranging from Aztec to Egyptian to Indian. But this idea to me, what it represented is the serpent represents the secular growth cycle that becomes corrupted at a certain point in time, where the serpent begins devouring its own tail. It is unable to generate growth naturally and has to self-cannibalize. And the hawk comes down and represents the disruption of that cycle. But the hawk has two wings, which also work with the probability distribution. On the left wing-- DANIELLE DIMARTINO BOOTH: Wow, that's deep. OK. CHRISTOPHER COLE: So the metaphor goes deeper. On the left wing, we have debt deflation. This is what Japan has experienced. That's one way you get out of this decaying growth cycle. DANIELLE DIMARTINO BOOTH: Slowly. CHRISTOPHER COLE: Slowly. Painfully. That's what the US experienced in the '30s. But on the other end of it, you have fiat devaluation and reflation. That is where you simply devalue your currency. And that could be helicopter money, devaluation currency, money printing. That is another way that you get out of that crisis. This is as old as money itself. And one wing can occur before the other. You can have a deflationary crisis before you have a reflationary crisis. So to get back to your original question, what will cause-- what I see causing inflation. You have a scenario today where the two largest blocks of the US population are baby boomers, at about 22% of the population right now. They're rich. They have a lot of money. They've lived through one of the most incredible periods of asset price growth in history. And they want to protect that money. So they are going to-- they're going to support policies or are incentivized to, I should say. They don't need to, but they're incentivized to support policies that protect their retirement and their entitlement benefits. Now you have millennials, which are now the largest generation at 26% of the population, and Gen Z following, are likely to be the first generation in American history to be poorer than their parents. DANIELLE DIMARTINO BOOTH: Remarkable. CHRISTOPHER COLE: Remarkable, yeah. Lower household creation rates-- they have-- the average millennial has substantial student debt. DANIELLE DIMARTINO BOOTH: Low savings. CHRISTOPHER COLE: No savings, that's right. So the incentive of the average millennial, they're incentivized in essence to pursue policies that represent redistribution of wealth and seek to tax, redistribute, and cause inflation. So I think the time to look, and maybe what could cause inflation is the political sea change towards-- DANIELLE DIMARTINO BOOTH: At some point-- we're at $23 trillion now. But to your point, at some point, you're going to hit a level of debt if truly all of these social spending initiatives are financed by printing money. Theoretically, at some point, you will hit a limit. I agree with you.