The Sovereign Debt Bubble with Luke Gromen

“We know where we are in the debt cycle, we know where we are with energy. And so then it comes down to the key points: when there is tension in the market, when there’s volatility in treasuries - okay, we’ve come to a point: they either have to let the debt default, or they have to print. The chance that they’re going to let it default is like zero.”— Luke GromenLuke Gromen is the Founder and President of Forest for the Trees (FFTT). In this interview, we discuss how governments can navigate the first busting global debt bubble in 100 years. We talk about historical precedents: namely the Weimar Republic in the 1930s and Israel in the 1980s, and how governments may be forced to allow for a compressed period of triple-digit inflation.- - - - Israel in the mid-1980s faced an existential economic crisis. After a decade of stagnation and rising government expenditure fuelled by money printing, commercial banks started to buckle. Further, the inflation rate was skyrocketing. In 1979 it had reached 111%. By 1984 it had grown to 450%, with fears it could exceed 1,000% by the end of 1985. Despite the real risk that the sovereign debt bubble may soon burst leading to unprecedented levels of inflation, those in the west have become inured to a belief that very high rates of inflation only happen in developing countries. And yet, the experience of hyperinflation in an advanced democratic country was felt much more recently than most people think. It is important therefore to consider the lessons from Israel’s inflationary crisis of the 1980s.The policies enacted by Israel to mitigate the situation were socially bruising. Markets were liberalised, government spending was significantly cut, wages were controlled, the Shekel was sharply devalued, and interest rates were raised to punitive levels. The result was a recession in the 1990s with high unemployment. But inflation was tamed. And Israel did not fail as a state. Nevertheless, the taming of inflation in Israel benefited from various fortuitous factors: high levels of cheap immigrant labour, the technology boom, and the peace process opening up new markets. There aren’t any such obvious pressure-release valves for the west. Furthermore, will those in the West feel as culturally tied to their home nation to stick through such periods of pain? In essence, is Israel a useful case study, or a distracting aside? We may hope it's the former. Otherwise, we may be entering a period for which the precedent goes back to the 1920s Weimar Republic. Or, even more worryingly, we may experience a crisis for which there is no historical precedent. Prepare accordingly. - - - - This episode’s sponsors:Iris Energy - Bitcoin Mining. Done Sustainably Gemini - Buy Bitcoin instantlyLedn - Financial services for Bitcoin hodlersBitcasino - The Future of Gaming is hereLedger - State of the art Bitcoin hardware walletWasabi Wallet - Privacy by default-----WBD646 - Show Notes-----If you enjoy The What Bitcoin Did Podcast you can help support the show by doing the following:Become a Patron and get access to shows early or help contributeMake a tip:Bitcoin: 3FiC6w7eb3dkcaNHMAnj39ANTAkv8Ufi2SQR Codes: BitcoinIf you do send a tip then please email me so that I can say thank youSubscribe on iTunes | Spotify | Stitcher | SoundCloud | YouTube | Deezer | TuneIn | RSS FeedLeave a review on iTunesShare the show and episodes with your friends and familySubscribe to the newsletter on my websiteFollow me on Twitter Personal | Twitter Podcast | Instagram | Medium | YouTubeIf you are interested in sponsoring the show, you can read more about that here or please feel free to drop me an email to discuss options.