Mapping The Fugly Future with David Collum

In the course of his info-scouting, Chris has conversations with many different thinkers. Some are well-known to you; others perhaps less so. An important objective of our podcast interview series is to expose our listeners to the variety of voices and points of view that Chris considers when developing the perspective that he brings to his reporting.

David Collum may be a new voice to many of you. Like Chris, David came to the field of macroeconomic study from a scientific background. Again like Chris, his published observations and predictions have begun to amass a readership built on respect for his emprical approach to projecting the future. For those of you unfamilar with David's work, we think you'll enjoy having this insider's ear to his recent recorded discussion with Chris, which covers a wide range of topics.

In short, David sees a world where market risk has been removed (through misguided government intervention), leading to perverse behavior. In many ways, we are repeating the sins of past empires - and he warns us that history has a much higher incident rate of soverign insolvency than we may want to believe.

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In this podcast, David and Chris discuss: 

• The odd state of seeing reality through a different lens than the majority. How does one tell when the minority opinion is actually the more accurate one?
• The unprecendented flood of global credit (which David calls "debt without borders") that, when combined with the unfunded liabilities many countries are saddled with, presents the epitome of an unsustainable financial system. Sovereign insolvency is much more common in history than we believe, and we are likely to see much more of it in the next decade than we have in the several preceeding ones.
• The inflation/deflation debate. Will things end in default (the "eat-and-dash" outcome) or massive money printing? David and Chris agree that it looks increasingly like the inflationists will win out.
• How our financial system has stopped pricing risk, creating dangerous asset bubbles and  bad incentives, and resulting in truly detrimental decision-making.
• The systemic rot than needs to be purged before a more 'healthy' recovery can emerge. Today's ills of rampant lying/fraud, magical accounting, Teflon bankers, and torpid citizenry must be dealth with. Too few (who often don't comprehend the extent of their actions) are determining the fate of too many. The lack of checks and balances as well as real leadership add to the burdens we currently face in addressing these issues head on.  We're not yet taking the rational steps to correct the system.

As with our recent interviews with Joe Saluzzi, Jim Rogers, Marc Faber, and Bill Fleckenstein, David ends the interview with a look forward: History is repeating itself, and we are approaching an inflection point that will be forced on us by economic & natural limits. Real risks are increasing; the most concerning are a bond market revolt, resource shortages. and social unrest. Rampant inflation and taxation will likely define the next decade. At our current trajectory, if we don't take great steps to change our behavior, things have a high probability of ending poorly. 

David B. Collum is a professor of Chemistry and Chemical Biology at Cornell University. In addition to his academic interests, Dan authors an annual macroeconomic assessment. He recently published his 2010 Year In Review: Fugly Gives Way To Muddling.