Central Banks are Clueless, Inflation and Growth - FED 70

In this episode of Bitcoin Magazine’s “Fed Watch'' podcast, Christian Keroles and I sat down to give an update on Fed news and central bank activity around the world. Topics in this episode include people at the Federal Reserve and their positions, the Fed Stability Report, Treasury curve update and inversions, the inflation narrative, ECB and BoJ updates, and of course, bitcoin.

First, Christian and I debriefed the recent Bitcoin Day event in Kansas City where I spoke about the end of the dollar system as we know it. It was a great event, with another one coming up in Sacramento early next year. I might try getting one down in Jacksonville next year as well, so be watching out for that.

Next, we jump right into Fed news, starting with the resignation of Quarles. This was kind of a surprise since he had over 10 years left in his term. He has recently faced some backlash from progressive members of Congress, along with Powell, as slightly more hawkish members of the Fed who ignore MMT (modern monetary theory) nut-jobs.

Fed Stability Report
This week the Federal Reserve published their biannual Stability Report. This report is meant to increase transparency of the Fed, to show the public what they are paying attention to, and what could possibly affect their monetary policy going forward. The main highlights from the report is the Fed’s warning about a rising risk to risk assets. Of course, the mainstream financial press is going to hop on that with their usual gusto.

Next we talk about yield curves. We aren’t experts on the bond market, but we know that the bond market is much smarter than we are, and much smarter than the Fed. I highlight that the 20-year and 30-year yields are still inverted, along with the 5-year and 10-year breakevens. The latter being the most inverted in history!

This should tell us that all is not well with this recent market action. Inflation expectations in the future are mixed, signaling a severe retracement in the “recovery” and the CPI.

CPI comes out today, which we predict will be higher than last month (but still in a slowing trend) and cause even more rabid inflation propaganda benefiting bitcoin.
Global Central Bank Update

Next, I asked the audience to answer a question for this episode on twitter. You have to quote the Bitcoin Magazine tweet for the episode and tag me. “If the US is exporting inflation, why are the ECB and BOJ’s inflation rates so much lower than the US’s, especially when they have “printed” more money relative to GDP?” Why is the relationship actually inverse? The more a central bank seems to expand their balance sheet, the lower the inflation, even then the US is supposedly exporting inflation with the highest trade deficit ever. The best answer wins a copy of the Bitcoin Dictionary.

We wrap up the show by discussing bitcoin in the context of what we are seeing out there in macro. How bitcoin is a source of growth for all who adopt it. We touch on many important topics in this last minute rip, like velocity of money, bitcoin vs traditional interest rates, surging energy prices, ESG shooting itself in the foot, and layer two fee dynamics with the base layer.

Thanks for listening. If you found this episode informational, please share and give us a rating on iTunes so others can find the show!

0:00 Welcome to Fed Watch #70
1:45 Bitcoin Day Conference Kansas City
6:35 Fed Governor Randal Quarles to resign next month
9:55 Fed Financial stability Report
14:20 Inversion of the Treasury yield Curve
21:00 October CPI Numbers
23:33 How do you define Inflation?
24:36 The Fiat System is dead
27:00 THE ECB UPDATE
28:25 THE Bank Of Japan Update
30:00 The Fed Watch Challenge
32:27 Inflation on the streets
36:10 Surging Energy Prices
45:34 Bitcoin Hitting another ATH

Links
Bitcoin Day https://bitcoinday.io
Quarles resignation https://www.cnbc.com/2021/11/08/randal-quarles-to-resign-at-year-end-paving-way-for-biden-to-further-remake-the-federal-reserve.html
Predictit for Fed Chairman https://www.predictit.org/markets/detail/7398/Whom-will-the-Senate-next-confirm-as-Chair-of-the-Federal-Reserve
Yield Curve https://www.gurufocus.com/yield_curve.php
Breakevens https://fred.stlouisfed.org/series/T5YIE#0
Fed Stability Report https://www.federalreserve.gov/publications/financial-stability-report.htm
Fed warns about risk assets https://fortune.com/2021/11/08/fed-report-risky-assets-crash-stablecoin-meme-stocks/
Fed warns about Evergrande https://archive.ph/FpROj
ECB transitory inflation https://www.reuters.com/business/finance/ecb-very-unlikely-raise-rates-next-year-lagarde-says-2021-11-03/
Yardeni central bank balance sheets https://www.yardeni.com/pub/peacockfedecbassets.pdf

Written by Ansel Lindner
Economist, bitcoin specialist, and author of the Bitcoin Dictionary and the free weekly Bitcoin Fundamentals Report. Find more from Ansel at the bitcoinandmarkets.com