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In this episode of Bitcoin MagazineIn the âFed Watchâ podcast, Christian Keroles and I sat down to take stock of Federal Reserve news and central bank activity around the world. Topics for this episode included the people at the Federal Reserve and their positions, the Fed’s stability report, the Treasury curve update and inversions, the inflation story, updates from the Fed. European Central Bank (ECB) and Bank of Japan (BoJ), and of course, bitcoin.
Kansas City Bitcoin Day
First off, Keroles and I reported on the recent Bitcoin Day event in Kansas City where I talked about the end of the dollar system as we know it. It was a big event, with another coming to Sacramento early next year. I might try to have one in Jacksonville next year too, so watch that out.
Then we got straight into Fed news, starting with the resignation of Randy Quarles. It was a kind of surprise since he had more than 10 years left in his mandate. He has recently faced backlash from progressive members of Congress, as well as Fed Chairman Jerome Powell, as slightly more hawkish members of the Fed who ignore the crazy jobs of MMT (modern monetary theory). ).
This resignation has the aspect of chess. Lael Brainard, who recently threatened to take over as chairman from Powell, was first favored for Quarles’ post as chief oversight. With him gone, Brainard now has an easy path to simply fill that role, leaving Powell virtually unchallenged for the president’s reappointment.
These moves may seem trivial to those unaware of the rising tide within the central banking elite. Most central bankers around the world are looking to MMTs and CBDCs (central bank digital currencies) as a way out of the debt trap and deflationary environment the world finds itself in. Powell has the most important central bank position in the world. He obstructed this dangerous program. Much like a geopolitical realignment, from NATO to AUKUS, Powell appears to represent the same divide, from global concerns to national concerns, among central bank elites.
Fed Stability Report
This week, the Federal Reserve released its semi-annual stability report. This report aims to increase the transparency of the Fed, to show the public what it pays attention to and what could possibly affect its monetary policy in the future. The main highlights of the report are the Fed’s warning of growing risk to risky assets. Of course, the mainstream financial press will jump on it with their usual enthusiasm.
Another warning of interest in the report concerned Evergrande and the growing risk of contagion outside of China. We’ve been way ahead of this topic, talking about this very situation for months now. We all know the horrible shape the Chinese economy finds itself in, and it is slowly making its way into the consciousness of mainstream investors.
My prediction, based on the fact that this report came essentially around the same time as the cut was announced, is that the Fed is setting up a scapegoat for when it will eventually have to stop or reverse the course of the cut. He will blame his “political error” on China and the very power of its monetary policy. It’s funny. Its monetary policy is literally doing nothing, otherwise we would have no problem to fear.
American yield curve
Next, we talked about the yield curves. We’re no bond market experts, but we know the bond market is a lot smarter than us, and a lot smarter than the Fed. I pointed out that the 20-year and 30-year returns are always reversed, as well as the 5-year and 10-year breakevens. The latter being the most reversed in history!
This should tell us that all is not well with this recent market action. Inflation expectations going forward are mixed, signaling a severe retracement of the ârecoveryâ and the Consumer Price Index (CPI).
The inflation story becomes enraged. It’s gotten to the point where people laugh at the transitional stance despite all the signs to the contrary. It’s as if the critics haven’t looked at a chart recently. But regardless, the inflation story is a huge bonus for bitcoin in the eyes of investors, while at the same time, low-growth deflationary fundamentals are great for bitcoin as well.
The CPI is coming out today, and we expect it to be higher than last month (but still in a slowing trend) and cause even more enraged inflationary propaganda to benefit bitcoin.
World Central Bank Update
By comparison, there is little news from Europe and the ECB, or from Japan and the BoJ. First for the ECB; it appears the ECB is a few months behind the Fed and continues to stress the transient nature of this recent peak in the CPI. Note that its overall CPI was only 3% in September, while that of the United States was 5%.
The Bank of Japan has even less news to report. It is stuck with very low inflation. Its overall figure is 0.2%, and less food and energy is -0.5%. This despite the promises and irresponsibility of the QE department and the expenses. The BoJ is so failing to get inflation that it has to come out every week and reaffirm its commitment to be irresponsible and try to hit its 2% target.
“If the United States exports inflation, why are the ECB and BOJ inflation rates so much lower than the United States, especially when they have ‘printed’ more money by compared to GDP?
Why is the relationship really the opposite? The more a central bank seems to widen its balance sheet, the lower the inflation, even when the United States is supposed to export inflation with the highest trade deficit on record. The best answer wins a copy of the “Bitcoin Dictionary”.
It’s a wrap
We concluded the show by discussing bitcoin in the context of what we see in macro, how bitcoin is a source of growth for all who embrace it. We touched on a lot of big topics in this last minute rip-off, like the speed of money, bitcoin versus traditional interest rates, soaring energy prices, ESG pulling into the foot and the dynamics of Layer 2 charges with the base layer.
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