Marc Chandler is one of the most recognized strategists in global currency and capital markets, with more than 30 years of experience. He previously served as Global Head of Currency Strategy at HSBC NY and at Brown Brothers Harriman before joining Bannockburn Capital Markets as Managing Director and Chief Market Strategist in 2018.
Marc is also wellknown writer not only covering the currency market and regular articles about what’s driving the dollar and much more. He has written two books, “Making Sense of the Dollar” backin 2009, and “Political Economy of the World” in 2019. And today he joins me as he is launching his third, “Surplus: The History of Too Much and the End of Economic Primacy.”
I am eager to find out the theory behind this provocative title. However the trading day is well underway and central banks around the world are heading for meetings in coming weeks that could lead to rate hikes, or at the very least toward tightening their policy stance before too long if the Iran War doesn’t end soon and stop raising oil prices, driving inflation higher. So this is where we begin.
This very morning the currencies of two central banks in the Antipodes are moving in opposite directions: New Zealand’s “kiwi” is under pressure after its central bank governor cast the deciding vote to not hike its key rate now, doing a “hawkish hold.” And by contrast the Reserve Bank of Australia, which has hiked rates three times this year, decided not to do so again after seeing a weaker-than- expected CPI number released. Such is how even highly correlated pairs can diverge, he notes.
Mark next dials into the yen and why it’s going to contine to be under such pressure that a 25-bps rate hike at the BOJ’s June meeting won’t make that much difference. “I think the market is tempting, it’s sort of fishing for the Bank of Japan’s pain threshold.” With the yen down and hittig a new low for the month “I think there is presser for the BOJ to raise interest rates.”
On the other hand, with Japan’s inflation rate below target recently he says the pressure is not coming from the inflation side of things: “I think it’s coming from trying to support the JGB market where the Japanese government just sold another 40-year bond today.”
Next we take a longer view on the role of the greenback as Marc shares an article he has written on the dollar’s “special sauce”. Chandler challenges conventional wisdom about the dollar’s dominance, arguing that its status is not simply a result of oil invoicing:
“The key for the dollar’s role in the world economy is not that...oil producing countries decided to invoice in dollars...the dollar’s role as a Numeraire in the world economy, the growth of the Eurodollar market itself, was already that. That’s why they chose it.”
Mark traces the dollar’s weaponization back to the Suez Crisis. “In effect 1956. We weaponized the dollar in a very profound way...the Russians...put their dollars in British banks. And then the British banks began lending them without the interest rate cap that we had in the US.”
He thinks this may be starting to change. “I think over the past year, maybe a year and a half, more people are thinking about de-risking from the US dollar, reducing the dependency on the dollar.”
On to Marc’s book, Surplus: The History of Too Much and the End of Economic Primacy. It certainly has made me consider an idea, a different view that I had not considered as he explores the modern world’s paradox of abundance, focusing on the societal, economic, and political consequences of what he says is excess capital and production. He challenges the prevailing narrative of scarcity, arguing that surplus—and its mismanagement—lies at the heart of many global issues.
Marc opens by reframing the central economic question: “Many people think that the world is more driven by surplus than scarcity.” He traces the intellectual roots of this idea to the 19th century, highlighting how surplus has often been sidelined as a minor issue, “relegated to either individual countries or, temporary sectors from time to time,” but now deserves center stage.
A key theme is the problem of distribution rather than production. Marc notes, “There’s plenty to go around. I mean, there’s more plastic in the oceans than fish. We have plenty of food, but still many people.”
“We have cinnamon flavored floss while people are outside starving,” he says. “And that’s what I’m trying to wrestle with, that kind of paradox amidst, I’m sure, the paradox of poverty among plenty.”
Marc says this paradox also applies to capital. “How do I know we have too much capital? Because the price of it is falling.” He reminds us the price of oil fell during Covid. And it includes diamonds too. “Apparently there’s so many diamonds in the world, the price of diamonds are falling. ” The falling price of capital goods signals a systemic surplus, leading to diminishing returns and a lack of profitable investment opportunities.
The cultural implications of surplus are equally significant. Marc argues, “We used to be able to produce things, so we consume them, but now we’re consuming so we could produce more things.” This inversion of the traditional production-consumption relationship is reinforced by societal pressures to “buy, burn up, wear out, replace, and discard at ever increasing rate.” He connects this to the rise of planned obsolescence and the environmental consequences of relentless consumption.
Finally, Marc warns of the political dangers posed by unchecked surplus and inequality: “The profound sense of unfairness, the injustice, the disparity of wealth, income generates a political vacuum that’s filled by nihilism and authoritarianism. That’s my fear that and it follows from surplus capital and the lack of proper or lack of, say, equitable distribution.”
In sum, Surplus is a timely critique of the excesses of modern capitalism, urging a rethinking of how societies manage abundance to avoid social and political instability. It will be on the shelf in November.
So dive in and hear why Marc sees the Bank of Japan doing a rate hike that may not make much difference to the strength of the yen, and why it’s not high oil prices boosting the dollar - it’s the lack of a stronger currency to replace it. And to get a fresh view of the what global surplus may mean to you after you read his book.
Today in Markets 00:01:23:03
So today was very interesting. Earlier today the Reserve Bank of New Zealand and there’s it’s a seven person board committee decision. And it was a 3 to 3 tie until the governor cast the deciding vote to hold policy. I would call it a hawkish hold. You know, in this kind of like, digital world we live in, hold is not good enough.
NZ Dollar strengthens 00:01:44:17
We have to modify it with something with a hawkish hold because they indicated they’d raise rates twice this year. And the market thinks that they might be understating the, the pressure on them to raise interest rates so that today the New Zealand dollar is up almost 1%, is the strongest of the G10 currencies. The New Zealand dollar, the Australian dollar tend to be highly correlated.
Down currency, down-under 00:02:11:12
So what’s unusual today is well the New Zealand dollar we call it the kiwi is the strongest of the majors. The Aussie is the weakest. And the issue with Australia is that they’ve already hiked three times this year. Three times. And yet we had a lower than expected CPI number early today. And that dashed hopes or speculation of another near-term rate hike.
Is this a preview of Northern Europe? 00:02:38:00
And so we’ve got the Aussie being the weakest of the major currencies and the Kiwi being the strongest. So it’s a very unusual day where you got the two central banks sort of moving, seeming to move in different directions. And we have the same thing in Europe in the coming weeks, with Norway likely to raise interest rates and Sweden, likely to stay at hold, another one of these highly correlated currency pairs where monetary policy is diverging a bit, leading to different currency market reactions.
Market looking for Yen’s pain threshold 00:03:26:01
The Japanese yen is very interesting. I suspect that the reason the yen is going to be under so much pressure, a 25 basis point rate hike won’t make that much of a difference, will have a 25 basis points as an annualized change in the yield. I think that the market is, tempting. It’s sort of fishing for the Bank of Japan’s pain threshold.
Yen Intervention has been in the 159 to 160 region 00:03:47:19
When they intervened, at the end of April, it was around 160. They intervened, it looks like earlier this month, maybe closer to 159. And the two arguments they’ve given is that a one way market and, that it’s volatile. And it turns out that since the Japanese intervention, it looks like it took place at the end of April.
Pressure or test for BOJ? 00:04:11:01
We’ve had about 18, 19 trading days, and the yen is down in almost all of them, maybe not three of them, something like that. So it’s been another one-way market today in North America, the market is taking dollar yen above 159.50. So this is a new high for the month. And so I think there is pressure to BOJ to raise interest rates.
Japan pressure is not form inflation 00:04:32:16
But at the end of the day when you look at the Japanese economic data you know we’re going to get the Tokyo CPI this week. And that sort of leads the national CPI. It’s been below the 2% target of inflation for several months now. So the pressure it’s not coming from the inflation side of things. I think it’s more coming from trying to support the JGB market where the Japanese government just sold another 40 year bond today.
American exceptionalism/Different strokes 00:05:00:15
And that pressure coming to higher oil prices. And again, this is another way I think that American exceptionalism really stands out. Here’s what I mean by American exceptionalism. The dollar I say the dollar index is highly correlated to US interest rates, higher U.S interest rates, stronger dollar. That’s not true for the euro. For example, higher German interest rates do not signal a stronger euro. Same thing with the UK: stronger, higher UK interest rates haven’t triggered sterling’s strength. And similarly in Japan, the JGB, the Japanese dollar bond yields have risen sharply. And yet it hasn’t really supported the yen. So I think there’s another example of one is that there’s not like a cookie cutter recipe that can explain all currencies and also the relationship between currencies and interest rates.
Do not assume…00:05:51:07
We shouldn’t just assume what it is. We should really test it.
THE DOLLAR’S EXCEPTIONALISM
Dollar has special characteristics 00:06:25:07
Well, I think that we have crossed a certain line in the article. I try to suggest that the key for the dollar’s role in the world economy is not that, many years ago, an oil producing countries decided invoice in dollars, a price to oil in dollars. I think that the traditional narrative I want to say is like exactly backwards rather than OPEC oil producing countries picking the dollar and then promoting the dollar’s rule.
Petrodollar talk follows dollar’s role does not create it 00:06:53:16
I think the fact that by time we get this type of, petrodollar talk in the late 60s, early 70s, the dollar’s role as a new here in the world economy, the growth of the Eurodollar market itself, the offshore market was already that. That’s why they chose it. But I want to say that they chose the dollar rather than the dollar choosing them. And by that I mean that is a huge net where the dollar was already the numeraire think about what happens. The real history goes back to 1956 during the Suez Crisis. Remember what happened to that, Israel? France couldn’t, invade Egypt because the first thing Egypt does when it gets its independence is nationalize the Suez Canal. The U.S. did not, it does not appear, to have known about that, about what they were planning and when they when they did this, the U.S. threatened the UK, the UK at the time was going to the IMF for assistance. The US said it could veto it, and Sterling was having a tough time staying within its narrow band within the Bretton Woods system.
Some entangled dollar history 00:07:58:11
The US threatened not only not to give the UK dollars, but we threatened to sell some British pounds. In effect, in 1956 we weaponized the dollar in a very profound way. And what happened was that the Russians, who had money and deposited US banks, of course, with the Soviet Union, then money and deposit, they took that money. And it was so afraid of what we did to the British. They said they wanted to find a way that the US could not do it to them. So they put their dollars in British banks. And then the British banks began lending them without the interest rate cap that we had in the US. So bottom line here is, I think that this network of dollars, interbank lending, the offshore dollar, the Eurodollar market is really why countries like Saudi Arabia decided to invoice and price their oil in dollars.
FX trading volumes dwarf trade 00:08:50:24
So I and then like to take another big step back. Here’s what strikes me. The foreign exchange market is about, according to the bank for National Settlements, who does a survey every three years, there’s about $9.6 trillion a day. Trade. Global trade is only about $40 trillion or so. We’ve seen enough turnover to probably cover world trade for a year. We’re pretty close to that. So when I think about what moves the dollar, I typically don’t rely on trade. It’s so much smaller than than the capital markets. So for me when I think about.
Trade, yes, but intangibles, credibility, really matter 00:09:37:17
For service trade. Yeah. But what I’m really focused on when I look for explanations for currency movement, which I spend so much time doing, I tend to focus on those forces that move capital, that trade. And so that would be things that we talk about, things that you cover so well, like central bank policy, the direction of interest rates, the credibility of governments.
Dollar is still the key…but 00:09:59:24
And so I think that the dollar’s role, is still is key. No one can challenge it yet. I think that the the threat to two NATO members, the, the weaponizing of Russian reserves after they invaded Ukraine, I think has given, many participants sovereigns, a large, entity, large other pools of capital, like, hedge funds and sovereign wealth funds, a pause and that is that maybe we, you know, for the last several years, we’ve talked about de-risking that, reducing exposure to China. But I think in the past year, maybe a year and a half, more people are thinking about de-risking from the US dollar, reducing the dependency on the dollar.
The dollar yes, but everything at a price 00:10:48:15
And the challenge here is that, as you know, the US, we have this large current account deficit, which means we have to borrow money to buy those goods and services that we’re buying from abroad. And so so what happens then is that the foreigners, because the US runs a large current account deficit, foreigners have to acquire US assets. And the real issue is which assets they acquire and at what price. Right now, for example, foreign is that the US high market then again, at what price? They’re chasing it higher. In my work, I think that we’re at the point where we’re going to need wider interest rate differentials to support the dollar. That is, foreign investors will require a higher premium to hold on to dollars because of these concerns about, de-risking and the weaponization of the dollar.
Confidence is fragile and ephemeral 00:12:14:06
Sometimes you don’t know where the line is until we cross it. And I think that, central bank reserves, who sort of regarded as like sacrosanct, they were like especially assets in the global economy and the fact that the U.S. and its allies and that includes neutral Switzerland, froze Russian assets, froze the central bank’s assets, frozen reserves, and that just want to freeze the reserves.
Russian bank asset seizure snot fait accompli but in the mix 00:12:41:10
But I think you live to a point where they might want to repurpose them. And lo and give them basically to fund in some fashion, reconstruction of Ukraine. And, and this is I think this crosses some kind of line for a lot of people, even those many of us who are critical of Russia and who oppose the war in Ukraine, we’re just not sure that that the freezing, confiscating, repurposing of central bank reserves, that it might set a dangerous precedent going forward.
Politicalization of asset holding and flows is the issue 00:13:13:03
And the concern, again, is the politicization of access to the dollar. Is there any place it won’t be weaponized? And I think we live in a world now where things have chips, rare earths, oil, things seem to be almost everybody is looking for what can they weaponize? What can they gain leverage from it? I think that we want as global investors, we want something that is safe from politicians, something that is outside of the of the of the sort of the winds that blow politically.
Gold, crypto, and stable coins…oh my! 00:13:54:00
I think that is part of the factors that have influence the purchasing of gold. I think, you know, oftentimes when people think about who’s buying gold, China comes to mind. China, been buying gold. And it’s true. But, you know, we have - the US has - a strong, trusted NATO ally. They’ve bought more gold in China, Poland. And, you know, the other thing that a lot of people, lose track of, I think, is that in this era, they were talking about crypto and stablecoins. There’s not only stablecoins that are backed by the dollar, but they’re stablecoins that are backed by gold. And that forces these issuers to keep buying gold. And so one of them in particular, has bought as much gold as any of the central banks have. And so I do think that central banks buying gold is partly a way to diversify away from the US as part looking for an alternative.
Dollar and Euro offer similar risks 00:14:45:19
And again, you know, Europe and Switzerland also participated in the freezing of Russian reserve assets. So it’s not clear that, dumping dollars and buying euros, lets you avoid this challenge. Gold seems to be a politically neutral.
Debt is a worry but how much? 00:15:35:22
I guess that the I do think that the US debt is a challenge, but I think it’s… we tend to exaggerate how urgent it is because US bonds, the ten year yield, has fallen for 6 or 7 days in a row.
No crisis point yet/markets are coping well 00:15:55:14
Right now, we’re down almost 20 basis points over this run. And I would suggest that if investors were truly concerned about the US fiscal position, US interest rates would be much higher. And even if you give me a 3.5% CPI, we’re talking about 100 basis points, maybe 120 basis point real interest rate. This is still fairly low.
A 75bp swing in interest rate expectations 00:16:17:20
And I think that most of the rise that we’ve seen, say, since the war began in the Middle East, most of the rise in the long end of the US yield curve can be explained by the swing expectations for where overnight rates are going to be, you know, before the war began, the market was pricing in two cuts, and now it’s pricing and say one hike, roughly a 75 basis point swing in the pendulum of sentiment.
Debt yes but with growth 00:16:42:06
And yet the ten year yield, our 30-year yield has not risen nearly as much. And so, generally speaking, I think that I too am concerned about the fiscal excesses in the US especially. You know, the Atlanta Fed said the US economy is tracking a little bit more than 4% growth here in Q2, and that’s after, roughly 2% growth in Q1.
Debt important but not urgent 00:17:06:17
This is above trend growth that the fact that we have such a large budget deficit is a concern to me. But, it’s sort of like you probably have on your desk, like I have on mine, two piles. One says important and the other says urgent. And I would put the U.S debt as important, but not urgent.
Dollar boosted by geopolitics 00:17:54:09
Geopolitics has been really, has helped support the dollar. You can see it’s almost like a natural experiment. And days in which we get a, a social media post that makes it seem a bit optimistic that a deal is nearby or deals at hand. The dollar comes off, risk assets rise, risky assets, emerging market currencies, stocks, tend to rally.
Poly market is not optimistic on quick opening of strait 00:18:16:05
And when we get news and people are disappointed. And, you know, I was looking at this, the poly market for when, this part of the market, thinks that the Strait of Hormuz is going to open again and they don’t have an open. I mean, there’s less than a 50% chance of an opening by the end of next month.
Quick end? Buy stocks sell the dollar? 00:18:32:10
Yet the market, the financial markets tend to respond to these different headlines. So in general, though, I think that, peace is good for risky assets and World war or the escalation of the conflict tends to be good for the dollar. And so if you were to tell me that the war is going to end tomorrow, I would say, let’s buy stocks, let’s sell the dollar.
Marc’s book: SURPLUS
SURPLUS!! 00:19:31:09
So the title of the book is called surplus, and I think that the, the idea goes back. I mean, I’ve been working on this, for since graduate school. I was first exposed to these ideas, because it’s actually, you know, many people think that surplus thinking of the world is more driven by around surplus than scarcity is really goes back to the middle of the 19th century.
Not a Chinese problem…per se 00:19:54:12
And it turns out that there was a man who a banker and who was an advisor to presidents, who worked at Brown Brothers about a century before I did. And he should have brought these ideas to the United States. And the argument is something like this. You know, I say, I put it maybe like this, you know, whoever when we were kids, there was the Happy Days TV show, and there were two women characters who were sort of like secondary characters, Laverne and Shirley. And what the producers did is they spun off and gave Laverne and Shirley these, these small time, roles. They gave them their own show. And in some ways, that’s what I’m doing with this book. Surplus that up until now, surplus. Even now, when you think about surplus, most people think about, oh, it’s a Chinese problem.
Too much Vs too little 00:20:40:17
Overcapacity. Overinvestment. And what I try to do is put that surplus that has been a bit player relegated to either individual countries or, temporary sectors from time to time. And I want to give it Stargirl. I want to give it its own series, if you will. And so what I do is I trace this idea of surplus from agriculture through industry to its new form, of capital.
An issue of mal-distribution 00:21:06:18
And this is what this, this, this banker, political advisor, Charles Conant to Charles Cohn had this idea what to do with the surplus. And I think that, you know, how politics works, kind of slowly. But by the end of World War Two, his vision was codified in these postwar institutions that we think about, like the IMF, the world Bank, GATT, GATT…Think more to the rules of capital movement. And the issue really is, to me, if that’s what scarcity, it’s really and this comes out not only to your point, an international, but I think it comes out domestically. There’s a lot of people in the United States./// I think 1 in 5 American children are on some kind of supplemental food program. So you say, well, and I think the Kings talked about this earlier, the, the paradox of poverty among plenty to me. And that’s really what I want to focus on is not is really, distribution issues. There’s plenty to go around. I mean, there’s enough there’s more plastic in the oceans than fish. We have plenty of food, but still many people.
…and capital allocation...why do we make this instead of that? 00:22:25:13
I think the George Carlin had a good way to put it. He said. Yeah, in a joke. I guess once he said that we have cinnamon flavored floss while people are outside starving. And that’s what I’m trying to wrestle with, that kind of paradox amidst, I’m sure, the paradox of poverty among plenty.
Pure capitalism is scarce 00:23:16:11
Actually, I can’t think of any society that’s pure capitalist. I think about our own sort of redistribution, albeit limited in the United States, more so in Europe. You know, there’s a guy at the Council on Foreign Relations who recently proposed that we should form a new trade group and only have market economies. And I sort of asked him, like, what are those market economies which include the United States, where our housing, our housing stock is owned by government agencies?
Does Consumption come first? 00:23:45:03
What about the G10 countries where the government expenditures are upwards of a third of GDP in some European countries are half of GDP. So to me, there’s this socialism, capitalism, early 19th to early 20th century challenge. I do think, though, that, how to sustain growth. You know, I have this, this idea that, that what happens is that we, we used to be able to produce things, so we consume them, but now we’re consuming so we could produce more things. I found this, this guy in the Journal of Retailing. So it’s not like an academic journal. It’s much more for, like, business people, 1955. Let me just read a short quote. It says our enormously productive economy demands that we make consumption our way of life. We require not only forced draft consumption, but expensive consumption.
Planned obsolescence- 00:24:43:08
People must buy, burn up, wear out, replace, and discard that ever increasing rate. I think that if I could sum up madman, the the Netflix show, this is what it’s about. And I think that we’re at a point now where maybe it’s like our generation and maybe for sure that the next generation to have much more concern about the environment is this kind of consumption.
Price of capital goods is falling 00:25:06:12
Is it really sustainable? And if it’s not sustainable? And this is like the big challenge too much, I think of focus too I have is too much capital. And how do I know we have too much capital? Because the price of it is falling. I begin the book with this little story about how oil prices went negative during the early days of Covid.
Excess solar in Germany 00:25:25:17
You know what’s happened in the recent weeks? Electricity prices in Germany have gone negative because they’ve created so much solar energy that they can’t store it and so drops the price. And so I think that it I think that what we’ve done is we put capital on a pedestal. And I want to say capital is like everything else.
Price of capital has fallen 00:25:43:24
It is it could be too much supply. And when it’s in too much supply, the price of it falls. And if we look at inflation adjusted interest rates over the past 100 years or 150 years, you’ll see that that real price of capital has fallen. And this to me is really the challenge.
Covid brought negative yields 00:26:04:02
We talk about the declining or diminishing marginal utility. When you have something like when I first moved to New York, I was I was broke, I’d have pizza and a Coke every day. But come Friday you could give me another piece of pizza. And I say, the same thing happens to capital, you know, during Covid, and, and the great financial crisis, we had something of the magnitude of, say, 10 to $15 trillion of negative yielding bonds. It’s just remarkable. So to me, this is a sign that capital itself has fallen victim to the diminishing marginal utility.
Falling, falling, falling 00:27:21:06
Well, I think it always happens. But to me, the big argument is that we know that capital is an oversupply because the price of it trends lower, like we would expect if we have too much supply of oil. Price of oil falls right now. Apparently there’s so many diamonds in the world, the price of diamonds are falling. And so I think we often put capital to cap.
Thought experiment 00:27:43:00
I had this privileged position, and what I want to do is treat it like everything else and see. So the laws of motion of capital and I think this has like profound consequences. Give an example. When I was teaching at NYU, I would ask my students almost every year, how would I make up a story? I say that, the government decided that it’s too many breakfast cereals. And so from now on, they’d be something that floats in milk. Somebody gets soggy milk and honey, it’s good for you. Like granola. I do ask my students, how many of you would think they’d be less free? And to me, this this era of where capital dominates people especially, I think, in the United States, view freedom as really defined as a range of consumer choices rather than the classical understanding of freedom ofequally shaping the community in which you live in.
Excess breeds confusion 00:28:31:09
So to me, I learned a lot from my students and to me, the location of freedom, confusing freedom and liberty, property rights and self-determination, I think, is what happens when capital becomes in such a privileged position.
Businesses give money back in share buybacks and higher dividends 00:28:54:07
So I’d say that how we know that we have too much capital is that, you know, the people right now, the one of the big issues is building up I and these hyperscalers, and we talk about them issuing bonds to raise capital. It turns out that they don’t have to raise bonds to, make that investment. They can do it at a cash flow. The reason they’re issuing bonds, they’re doing a borrowing for the money that the US government gives them incentives, tax incentives to have to have to basically borrow money. And so that influences the capital structure of businesses. But businesses I think, have so much money they don’t know what to do with it. That’s why they’re giving it back to investors in rising dividends, rising share buybacks.
Too few opportunities 00:29:34:10
They’re saying we don’t have a profitable place to invest this capital. You take it back and you figure it out. And so to me this is a really turning point. I mean, you know, back when Reagan was the president buying back stock was illegal. You start to be stock manipulation. And so Catalyst Capital has gotten I want to say they’ve gotten controlled governments who’ve passed laws that give them more power.
Too much of a good thing is not a good thing 00:29:57:04
And now they sort of like you like you began. That’s the segment about, King Midas that’s really like my touchstone, like myth is that we think we think that everything we could touch, imagine, everything you touch turns to gold. How wonderful that would be. Especially with gold here. Like $4,500 an ounce. It worked for King Midas until he tried to drink some wine or hug his daughter.
Absorbing excess 00:30:36:19
Now we have pills that people can basically eat whatever they want or the pills to lower their appetite so they don’t eat as much, but their bodies can absorb more food without gaining weight. It’s incredible what we do to absorb this extra production. We can do.
The equilibrium interest rate is in decline 00:32:14:04
I think, many types of measures. One thing that we do is we look at R-Star, which is, this like, highly, theoretical structure, which is basically what’s the real equilibrium rate of interest. And, and I could show you a serious academic research that shows it’s been in a long-term decline. That is the real price of money is falling, as I mentioned, corporate share buybacks, dividends. And the reason they give it, the reason that they return that money to invest is clearly when you listen to these, earnings calls and they announce these things, they don’t have a place, they don’t see a profitable opportunity. And so I think that this so that this, this mismatch is between, capital that could be available for investment and the profitable opportunities that exist, of course, on a personal level.
Mad Men – teaching consumption 00:33:04:20
And that’s why I buy that quote from the retailer. The general retailing is that I think it really shows that, like Mad Men, that the Netflix series that people had to learn how to consume. And that’s why I find so fascinating right now about Japan. Real wages are going up and a sustained basis for the first time in several years, but consumption remains very weak.
Consumption is cultural 00:33:24:15
And that would seem like so un-American, right, that you could have this higher income, but you’re not spending it, you’re not consuming with it. And I think it shows that consumption is really is a cultural artifact. We have to teach people how to consume, how to prefer new things over old things. I keep an old money clip and it’s like that from the 1920s.
Consumption per se not to improve conditions 00:33:44:07
It’s old. I should I mean to be, to be true to my, my class. I should be selling it and buying another one, buying a new one and and keep replacing things. And I just think that, there’s so many examples about, the surplus of things. And I think that partly this is what the next generation is, is so, opposed to I, we get these concepts like, laying down or, or, quiet quitting; they see that their parents, our generation, are in debt. We work like dogs, and yet we owe the mortgage or house loans or a car loans or maybe even student loans if they don’t want to play the game. It’s like a this big treadmill. You work, work, work, work and you still don’t get it. It’s almost like debt peonage. And I think that’s really the challenge. And I think that, it speaks to the sense of unfairness.
What is fairness? 00:34:36:11
You know, I play this other game with my students at NYU. They were it’s called the ultimatum game, where I divide the class every, like, tear it off. And I’d give one, one person of each team, say, ten quarters. They could divide it any way they want, but if the other person doesn’t accept a division, I get my money back. When they’ve repeated this experiment over different times culture, socioeconomic status. People seem to reject anything worse than a 7 to 3 split. That is, they willing to punish a greedy person by denying themselves something. And I don’t want to push it too far, because if instead of quarters we talk about million dollars and now you split and you say, okay, I’m going to keep $700,000 in you, I’ll give you $300,000.
Laws change the environment 00:35:19:23
I might take it, given my income level, but. And what to make the experiment like practical? It does seem that it’s like a sense of fairness. I think that, you know, when in the US, the Supreme Court allows corporations to to basically invest in political campaigns because it should be covered, they say, under the freedom of speech. This has basically captured politics.
System rigged? 00:35:43:07
And I think there’s a sense of unfairness. I think that’s partly leaving aside assorted details of the Epstein, the Epstein cases. I think people sense this unfairness that these insiders we want to do things that you or I can’t do, not that we would want to do them. But the context in networking, the pulling of favors, I think it supports this idea that the system is rigged.
Fairness is important 00:36:03:22
And I think that should be the danger. And I try to do this in the book, try to link three fingers besides this guy who worked at the bank, Charles Cohn, it, I try to link, Haynes who wrote an essay, called The End of Laissez Faire. And right around that same time, Peter Drucker, you remember from, management. Business management. He was in Germany as a young man watching the rise of fascism. He talked about the unfairness of the old system, the collapse of it without anything to replace it. And I’m afraid that that sort of I end the book on this sort of very somber note that if we don’t do something, we might be heading that same direction with a sense of unfairness. The profound sense of unfairness, the injustice, the disparity of wealth, income generates a political vacuum that’s filled by nihilism and authoritarianism. That’s my fear that and it follows from surplus capital and the lack of proper or lack of, say, equitable distribution.
The book is done- not yet in distribution… but soon 00:37:30:06
Because the book is done, but it takes several months to manufacture the book. And I’m told that part of the reason is some of the important ingredients in manufacturing the book itself, like the binding and the glue comes from China.
MARK CHANDLER
Marc Chandler is one of the most recognized strategists in global currency and capital markets, with more than 30 years of experience. He previously served as Global Head of Currency Strategy at HSBC NY and at Brown Brothers Harriman before joining Bannockburn Capital Markets as Managing Director and Chief Market Strategist in 2018.
Chandler is a frequent contributor to the financial press, with commentary appearing regularly in the Financial Times, The Wall Street Journal, Barron’s, and Bloomberg. He has often appeared on CNBC, Bloomberg TV, CNN, and Fox Business.
Chandler holds an associate professorship at NYU’s Center for Global Affairs and teaches at Fordham’s Gabelli School of Business. He is an Honorary Visiting Professor at UVA’s Darden School of Business, an Honorary Fellow of the Foreign Policy Association, and has been recognized as a Business Visionary by Forbes.
A Chicago native and lifelong Cubs fan, he and his wife live outside New York City.
In 2009, his first book, Making Sense of the Dollar, was published by Bloomberg Press and received a Bronze Award from Independent Publishers.
Chandler’s second book was published in February 2017. In some ways, it is the back story of his first book. What is the worldview that informs the myth-busting thrust Making Sense of the Dollar? In Political Economy of Tomorrow, Chandler retells the post-WWII history through the eyes of Charles Conant, an influential journalist and policy wonk in the late 19th century and early 20 century. Conant was introduced in Making Sense of the Dollar, but he plays a central role in the first half of Political Economy of Tomorrow.
Surplus is the central concept of the new book. Social relationships have to change to accommodate the surplus. That is the focus of the second half of Political Economy of Tomorrow. Three relationships are explored, women and men, employee and employers, and citizens and the state. It is not so much that relationships have to change. They already are changing. Chandler tries to map out the direction of those changes.
He develops the concepts in this third book, Surplus: The History of Too Much and the End of Economic Primacy, is forthcoming from Prometheus Books on November 3, 2026. He offers a general theory of surplus which offers different view that the convention view that sees it contained in space (mostly to China) and sectors and usually a result of government “interference.”
Chandler insists that capital is subject to the same law of diminishing margin utility as every thing else. This sounds obvious once stated, but it cuts against decades of received wisdom that treated capital as categorically different — as the engine of growth, always productive, always in demand.
That surplus of capital has not been neutral. In capitalism, power emanates from the ownership and control of property. And when capital accumulates without limit, so does power. Liberty, in the American political tradition, has been progressively redefined as the freedom of property rather than the freedom of self-governance. Money in politics, defended as free speech, has made a particular mockery of democratic equality. Congress members and federal judges trade equities freely.
“Surplus” can be read as the extension of the insight of Charles Conant, who was among the first to recognize the significance of “capital congestion” and offered a combination of exporting US savings and anticipated Keynesian insight to bolster domestic demand through the construction of a social safety net.
Chandler’s Surplus build on Keynes’s End of Laissez Faire, but also insists that the reader come to grips with Peter Drucker’s insight in The End of Economic Man, written as authoritarianism was taking hold in Europe in the late 1920. Chandler wants to celebrate the End of Economic Primacy, but is particularly wary of the old breaking down before the new is built, leaving again the opportunity for authoritarianism and nihilism to fill the void.
