Going deep down the rabbit hole of global financial markets can be a lot of fun and Daniel Want, the CIO at Prerequisite Capital Management has spent an awful lot of time doing just that. He is easily one of the deepest thinkers I’ve come across in a long time.

After being introduced to David by Grant Williams, I communicated with Daniel and in fact mentioned his excellent work in a recent World Out of Whack article on Aussie banks as Daniel has done a lot of work on the Australian banks.

I spoke with Daniel and recorded a very long conversation – so long that I decided to break the recording into two parts.

Today I’ve got the first part for you in which we cover:

• Complex systems and how they really work.
• The recent spike in LIBOR, the lack of collateral in the system, and why what the central banks are doing is actually destroying collateral in the system.
• What components are essential in a society in order for collateral to be formed, for productivity growth to be enabled, and for subsequent liquidity to be enabled.
• Daniel explains how many of these core components are breaking down globally despite central bank policies which cannot address these issues.
• The global collective asset liability mismatch which socialism has brought upon us and the tangible evidence that this opening up across the western world causing a collapse in collateral and thus liquidity.
• Why productivity multipliers are collapsing and why velocity is so crucial as an identifier of tipping points in the system. Davids indicators are singling that the tipping point has been reached.

You can listen the first part here and next Monday I’ll publish part 2:

Direct download link (right-click and choose “Save As”)

Enjoy!

– Chris

“When you start to see a confluence of signals or key features of the system all starting to shift in their behavior, that’s when you know you’re shifting into a new system.” — Daniel Want, CIO of Prerequisite Capital Management