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This episode of Bitcoin Magazine’s Fed Watch is a cosmic ride through the broad topics of money, central banking and bitcoin.
My co-host Christian Keroles and I began expanding on the analogy of a financial hurricane, which I discussed in another recent podcast. Many people point to certain asset price increases as a sign of inflation, but I stated that it is a natural price evolution due to the malfunctioning financial system. This malfunctioning financial system acts in the same way as a physical natural disaster by disrupting the supply and demand for goods.
During a ten-year financial hurricane, not only do changes in investors’ asset allocation take place, but the system itself can evolve. It affects the pipes and infrastructure of the financial system and favors relatively ‘safer’ global assets such as US Treasuries and US equities. The economic behavior, products, and relationships that form during a financial hurricane will favor deflation hedging rather than risk-taking or expansion-oriented behavior.
Then we turned to Central Banks and Central Bank Digital Currencies (CBDCs). We listened to comments from Fed Chairman Powell and ECB President Lagarde about CBDCs and cash from a recent ECB forum. Notable in Powell’s comments was his insistence on patience and his insistence that CBDCs “should be done in such a way that they do not affect [physical] cash or other private digital currency. ”
Keroles made a great comment about Powell’s position analogous to the innovator dilemma. Following Powell’s lead, Lagarde reiterates his commitment to cash, but in a less convincing way, then provides an overall timeline for a two to four year digital euro. She sounded significantly more optimistic about the idea of CBDCs than Powell, but the timeline on offer seems too slow.
By the time a digital euro is ready to launch, bitcoin will be a multi-trillion-dollar network and eat the world. The central banks will be in the uncomfortable situation of accidentally marketing bitcoin with all their hype about CBDCs.
Finally, Keroles and I are getting cosmic about the recent bitcoin rally, what we can expect from bitcoin price in the short to medium term, and about bitcoin’s long-term societal implications.
This is a guest post from Ansel Lindner. The views expressed are entirely its own views and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.