The Crisis Across All Markets with Peter Doyle - WBD514

Peter Doyle is the Co-Founder and MD of Horizon Kinetics. In this
interview, we discuss investment in an economic climate marked by
accelerating inflation, a debt crisis, an energy crisis, war and
the potential for Bitcoin to upend the monetary system.


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The world’s economic leaders are publicly admitting that
inflation is not the transitory phenomenon they were claiming it
to be only a few months ago. Some observers think that behind
closed doors they never really believed inflation would pass;
given the extreme levels of debt, rising inflation makes sense as
an unofficial government policy.


Irrespective, inflation has to be controlled. But taming
inflation is a delicate balancing act. The trick is to achieve a
‘soft landing’: reducing inflation without triggering a
recession. This proved impossible during the 1970s and early
1980s when inflation last ravaged the US economy. The dilemma is
the current economic and fiscal environment is much worse than
during the 1970s.


Interest rates have been at unprecedented low levels for over a
decade. These have enabled governments to take on increasingly
precarious levels of debt to shore up economies during pandemic
lockdowns. Even modest interest rate rises risk triggering both
sovereign default and recession. Whilst reducing the size of the
state is problematic given its oversized share of GDP.


At the same time, there is a limit to what governments can do to
control inflation. The conflict between Russia and Ukraine has
resulted in a spike in energy prices. However, energy costs were
already rising due to decades of underinvestment influenced by
ESG mandates. This is a systemic issue affecting global markets.
The expectation is for a prolonged period of inflation.


Investments need to now consider an environment where “cash is
trash”. However, what is becoming increasingly clear is that
investment managers are seeking more than just inflation-beating
returns. In the face of possible scenarios where inflation can’t
be controlled, Bitcoin is becoming part of portfolios designed to
protect wealth.