Financial Hurricanes and the Dollar's Dilemma - Fed Watch 30 - Bitcoin Magazine

This episode of Bitcoin Magazine's Fed Watch is a cosmic ride though the broad topics of money, central banks, and bitcoin.

Hosts Christian Keroles and Ansel Lindner start by extending the analogy of a financial hurricane, which Lidner spoke about in another recent podcast. Many people point to certain asset price rises as a sign of inflation, however, Lindner argues that it is a natural evolution of prices due to the malfunctioning financial system. This malfunctioning financial system acts similarly to a physical natural disaster by distorting supply and demand for goods.

During a decade-long financial hurricane, changes occur not only to asset allocations of investors but the system itself can evolve, as well. It affects the pipes and infrastructure of the financial system, favoring relatively “safer” global assets like U.S. Treasuries and U.S. stocks. The economic behavior, products and relationships that form during a financial hurricane will favor hedging against deflation rather than risk-taking or behavior aimed at expansion.

Next, the co-hosts turn to central banks and Central Bank Digital Currencies (CBDCs). They listened to comments by Fed Chairman Powell and ECB President Lagarde on CBDCs and cash from a recent ECB Forum. Of note in Powell’s remarks was his insistence on patience and his emphasis that CBDCs “must be done in a way where they do not affect [physical] cash or other private digital currencies.” Keroles made a great observation about Powell’s position being analogous to the innovator’s dilemma.

Lagarde follows Powell’s lead and reiterates a commitment to cash, but in a less convincing manner, and then gives a general timeline for a digital euro of two to four years. She sounded significantly more bullish on the idea of CBDCs than Powell did, but the offered timeline seems too slow. By the time a digital euro is ready to launch, bitcoin will be a multi-trillion-dollar network and eating the world. The central banks will find themselves in the uncomfortable predicament that they inadvertently marketed bitcoin with all of their hype about CBDCs.

Lastly, Keroles and Lindner get cosmic about the recent bitcoin rally, what we can expect from the bitcoin price in the short- to medium-term and about the long-term societal implications of bitcoin.

Overall, this made for a fast and fun episode of Fed Watch. Don’t forget to subscribe to Fed Watch so you don’t miss any great guest insights in the future.

Ansel Lindner: Economist, author, investor, and bitcoin specialist. Find more from Ansel at BitcoinDictionary.cc, BitcoinAndMarkets.com, and BTCM.co.

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