Episode 104 · 2021-10-23 · 36:24 · Original in Finnish
Money Tsunami and Freedoms | Tuomas Malinen | Negotiator 104
Originally published as “Rahatsunami ja vapaudet | Tuomas Malinen | Neuvottelija 104”
The GnS Economics chief executive Tuomas Malinen and the host work through three levers whose combination they consider dangerous: growth in the money supply, production bottlenecks, and state control over individual behaviour — the third added to the frame by the host. On inflation Malinen sets out a mechanism the indicators failed to see: while the service sector was shut its contribution to the consumer price index was zero or negative, at the same time as goods ordered with stimulus cheques were congesting freight markets and freight costs rose five- or tenfold. He names two historical conditions for hyperinflation — plenty of central-bank-financed money and constrained production. The Federal Reserve's balance sheet grew, as he recalls it, from about four to eight trillion dollars in two years, and in his view central banks are now trapped between inflation and markets that could not take rate rises. The second half covers China's corporate social credit system, Italy's covid pass as a condition of work and disputes between US states and Washington; the host, double-vaccinated himself, says the mechanism of sorting citizens with an app worries him. It closes on what would be worth owning, with Malinen calling crypto a risk and almost every asset a bubble.
Core theses
- The index understated inflation for a mechanical reason: a shuttered service sector contributed nothing to it while goods prices were already moving.
- Doubling a central bank balance sheet in two years is the fact; whether it constitutes a trap is the contested inference.
- The two historical conditions for hyperinflation are named, which makes the claim falsifiable rather than rhetorical.
- The covid pass argument is about precedent rather than efficacy: the host, who is vaccinated and liked the pass's convenience, still objects to an app that sorts citizens into two classes.
Watch and listen
Key moments
- 00:00 — You cannot stop and restart a world economy
- 01:38 — Handelsbanken withdraws from Finland: what that signals
- 03:56 — US CPI at 5.4 per cent and the turn in logistics
- 06:12 — Freight costs rose five- or tenfold
- 08:05 — Covid woke people up to following the economy
- 10:15 — The two conditions for hyperinflation
- 12:41 — Why central banks are trapped
- 14:10 — China's corporate social credit system
- 16:21 — The Hong Kong course that was not held
- 18:04 — The narrow corridor: civil society against state power
- 19:41 — States, the constitution and Biden's rhetoric
- 21:35 — Tesla moved from California to Texas
- 23:07 — Texas banned vaccine mandates
- 25:26 — What would be worth owning in such a world
- 27:34 — Cash, an owned home and the legal framework
- 29:32 — The Fed's balance sheet from four to eight trillion
- 31:38 — Totalitarianism has historically come from the left too
- 33:19 — China removed the miners and the property rights
- 35:40 — The pattern of the recovery package debate
- 36:11 — Closing words
Summary
The GnS Economics chief executive Tuomas Malinen and the host work through three levers whose combination they consider dangerous: growth in the money supply, production bottlenecks, and state control over individual behaviour — the third added to the frame by the host. On inflation Malinen sets out a mechanism the indicators failed to see: while the service sector was shut its contribution to the consumer price index was zero or negative, at the same time as goods ordered with stimulus cheques were congesting freight markets and freight costs rose five- or tenfold. He names two historical conditions for hyperinflation — plenty of central-bank-financed money and constrained production. The Federal Reserve’s balance sheet grew, as he recalls it, from about four to eight trillion dollars in two years, and in his view central banks are now trapped between inflation and markets that could not take rate rises. The second half covers China’s corporate social credit system, Italy’s covid pass as a condition of work and disputes between US states and Washington; the host, double-vaccinated himself, says the mechanism of sorting citizens with an app worries him. It closes on what would be worth owning, with Malinen calling crypto a risk and almost every asset a bubble.
The mechanism the index missed
This is the part that holds up. With the service sector closed, the services component of the consumer price index was flat or falling at precisely the moment goods prices were being pushed up by stimulus-funded demand hitting congested freight. The headline number therefore understated what was happening, and it did so for a reason anyone could have checked. Malinen says the IMF had flagged the measurement problem the previous November and that his firm’s March report expected inflation to jump on reopening.
Four trillion to eight
The balance sheet number is a fact. Whether it leaves central banks trapped is an inference, and it is where the episode moves from description to forecast: Malinen expects that rate rises would bring down the financial markets and talks of a “perfect economic storm” of inflation, banking, market and sovereign crises at once. The subsequent tightening cycle went further than this episode expected was possible.
Two conditions, named
Malinen does not simply invoke hyperinflation; he states the two historical conditions he thinks produce it, and cites research on Weimar Germany for the role of inflation expectations. The Venezuela example is the host’s. That is what makes the claim checkable, and checked against the following three years it did not come out.
Who said what about ownership
The practical close is split between the two. Malinen calls practically every asset class a bubble, sees forest land as a possible long-term holding and crypto as a risk on value, liquidity and legality. It is the host who explains why he never holds bank cash, why an owned home has felt like real security, and why the legal framework of ownership worries him more than the asset itself.
Watch
The recording lives on the Neuvottelija channel: Rahatsunami ja vapaudet | Tuomas Malinen | Neuvottelija 104. A Finnish edition of this episode is published at www.neuvottelija.fi.
In depth
The Neuvottelija AI editions carry a long-form write-up of this episode: English · suomeksi.
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Guests: Tuomas Malinen