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Speaker 1: Hello everyone, and welcome to the latest episode from the

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Speaker 1: midweek edition of the coin Bureau podcast. Every week, I

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Speaker 1: pick out two of my favorite videos from coin Bureau's

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Speaker 1: YouTube channel to present to you in podcast form. The

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Speaker 1: audio you're about to hear is from those videos I've

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Speaker 1: chosen this week, and I hope you enjoy listening. There

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Speaker 1: is really only one story dominating the crypto world at

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Speaker 1: the moment, and that is the collapse of the ft

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Speaker 1: X Exchange and its sister company, Alameda Research. It's no

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Speaker 1: understatement to say that crypto is facing the biggest crisis

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Speaker 1: in its history as a result of this disaster. F

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Speaker 1: t X was the second largest exchange in the world.

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Speaker 1: Its founder, Sam Bankman Freed, one of the most recognizable

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Speaker 1: and now most notorious people in the industry, and most

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Speaker 1: seriously of all, f t X held billions of dollars

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Speaker 1: in customer funds. Those funds are now stuck on the platform,

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Speaker 1: and those customers are, as things stand, unlikely to get

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Speaker 1: them back. This is a story which is developing all

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Speaker 1: the time, and it may be a while before we

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Speaker 1: know all the details. However, in the first part of

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Speaker 1: today's episode, you'll hear our initial reaction to the news

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Speaker 1: and get some vital background information on those involved and

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Speaker 1: how their actions were to shake crypto to its foundations.

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Speaker 1: Next up, you'll hear our analysis of the Federal reserves

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Speaker 1: most recent press conference, which, despite everything that's going on

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Speaker 1: with f t X at the moment, will have implications

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Speaker 1: for the crypto market in the long term. The feds

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Speaker 1: actions and intentions are affecting every asset market at the moment,

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Speaker 1: and it's continued efforts to battle inflation are going to

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Speaker 1: affect the lives of pretty much everyone on the planet.

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Speaker 1: While ft X may be taking up most people's mental

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Speaker 1: bandwidth at the moment, it's important not to take our

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Speaker 1: eyes off what's happening in the wider world. Thanks for

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Speaker 1: listening to today's episode, and there'll be more coming your

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Speaker 1: way soon. And if you want even more content from

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Speaker 1: coin Bureau, be sure to subscribe to our YouTube channel

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Speaker 1: and visit us on social media too. A few days ago,

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Speaker 1: f t X, one of the largest crypto exchanges, collapsed,

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Speaker 1: and Alameda Research, one of the largest market makers in

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Speaker 1: all of crypto, is believed to be in a similar position.

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Speaker 1: Due to its relationship to f t X. The crypto

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Speaker 1: markets have collapsed in kind due to the uncertainty around

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Speaker 1: just how much damage this could do to the entire industry,

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Speaker 1: and the resulting liquidations are taking many coins and tokens

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Speaker 1: to multi year lows. Today, I'm going to give you

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Speaker 1: a bit of history about these two peculiar crypto companies,

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Speaker 1: tell you what we know so far about their current

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Speaker 1: status is, and assess just how much this could affect

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Speaker 1: all of crypto. I'll start by saying that the situation

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Speaker 1: is changing fast, and some of the information in this

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Speaker 1: video may be out of date by the time it

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Speaker 1: hits the tube. That's why I'll be doing another in

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Speaker 1: depth update once the dust has settled. I reckon we've

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Speaker 1: only just scratched the surface of the truth about both companies.

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Speaker 1: I also want to say that I, like many others,

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Speaker 1: am utterly shocked by what has happened, and also do

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Speaker 1: have funds stuck on the exchange, albeit not bank breaking amounts,

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Speaker 1: as I keep the vast majority of my funds in

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Speaker 1: cold storage. I've always advocated for this, and this recent

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Speaker 1: blow up only illustrates how no centralized exchange can ever

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Speaker 1: be fully one trusted. Anyways, back to the video, as

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Speaker 1: many of you will know f t X and Alameda Research.

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Speaker 1: We're both founded by Sam Bankman Freed, or SPF as

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Speaker 1: he's known. SPF holds a bachelor's in physics from Mighty

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Speaker 1: and spent the first three and a half years of

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Speaker 1: his career working as a trader for Jane Street, one

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Speaker 1: of the world's largest market makers. In late seen, he

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Speaker 1: realized that there were lots of trading opportunities in cryptocurrency,

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Speaker 1: so he founded a crypto trading company called Alameda Research

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Speaker 1: with his friend Gary Wang, another m I T graduate

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Speaker 1: who was tired of working at Google and wanted something

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Speaker 1: new to do. If you watched our video about the

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Speaker 1: Richest People in Crypto, you'll know that Alamedas claim to

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Speaker 1: fame was a bitcoin trade between the United States and Japan.

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Speaker 1: BTC was ten percent cheaper in the US than Japan,

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Speaker 1: so Alameda would buy the BTC in the US and

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Speaker 1: sell it in Japan for an instant ten percent profit.

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Speaker 1: This became known as the Kimchi premium. Alameda started this

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Speaker 1: arbitrage trade with just two hundred dollars and soon scaled

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Speaker 1: it up to the point that they were executing ten

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Speaker 1: to fifteen million dollars of cross border BTC trades per day.

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Speaker 1: Note that it seems most of alameda initial investment capital

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Speaker 1: was borrowed in case that matters. On that note, you

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Speaker 1: should know that Sam chose the name Alameda Research specifically

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Speaker 1: because he was concerned about scrutiny from banks who were

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Speaker 1: skeptical of crypto. In his own words, quote, if we

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Speaker 1: named ourselves shiit coin day traders, the banks wouldn't have

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Speaker 1: worked with us. In case that didn't give it away,

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Speaker 1: Alameda didn't just trade BTC. In presentation, Sam revealed that

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Speaker 1: Alameda was quote trading every coin on every exchange and

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Speaker 1: making mad money. In interview, the interviewer revealed that Alameda

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Speaker 1: was making four to five per month during a bear market.

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Speaker 1: Alameda's massive profits made it possible to accumulate enough coins

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Speaker 1: and tokens to become one of the largest market makers

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Speaker 1: in crypto. Alameda was soon working with every major crypto

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Speaker 1: exchange to some extent, and in the case of finance,

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Speaker 1: it was assisting with large over the counter or O

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Speaker 1: t C trades. That that's why when Binance got word

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Speaker 1: that Sam and Gary were starting a new cryptocurrency exchange

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Speaker 1: that was focused on futures trading, it made sure it

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Speaker 1: was one of the first investors. The ft X exchange

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Speaker 1: was founded in April, with Sam as CEO, Gary s

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Speaker 1: c t O and Binance as one of its biggest backers.

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Speaker 1: This is where things get interesting because it's not entirely

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Speaker 1: clear what Sam's position is or was in Alameda, nor

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Speaker 1: how much influence he has or had over the company.

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Speaker 1: His LinkedIn biography notes that he stepped down as the

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Speaker 1: CEO of Alameda in April, but the Forbes thirty under

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Speaker 1: thirty one notes Sam as Alameda CEO. Not only that,

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Speaker 1: but the LinkedIn profiles for current ALAMA CEO Caroline Ellis

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Speaker 1: and the former co CEO, Sam Trabuco suggest they only

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Speaker 1: filled Sam CEO position in the summer of one. This

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Speaker 1: is just one of many peculiarities in the ft X

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Speaker 1: Alameda relationship. I'll come back to Caroline and Sam Trabuco later. Now,

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Speaker 1: when f t X first started, there wasn't much buzz

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Speaker 1: about the exchange. Sam even admitted in an interview that

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Speaker 1: they quote didn't know the first step to get users,

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Speaker 1: but knew there was an army of twenty million futures

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Speaker 1: traders on other exchanges who are having a bad time

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Speaker 1: and wanted a better place to trade. According to Sam,

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Speaker 1: the catalyst that kick started f t x's growth was

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Speaker 1: the private sale and subsequent listing of its f t

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Speaker 1: T token in the summer of twenty nine. This attracted

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Speaker 1: the eyes of investors and traders alike, and f t

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Speaker 1: x is close relationship with Alameda and Binance led many

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Speaker 1: to believe f t X would become a big deal.

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Speaker 1: In terms of token omics, f t T started off

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Speaker 1: as an EARC twenty token on the Ethereum blockchain with

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Speaker 1: a maximum supply of three hundred and fifty million. Today's

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Speaker 1: ft T exists as an spl token on the Salana

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Speaker 1: blockchain and as a bep too token on the b

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Speaker 1: n B chain, but almost all of its supply is

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Speaker 1: still on the Ethereum blockchain. Of f t t s

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Speaker 1: initial supply was sold to investors across three private sales.

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Speaker 1: According to Massari, the list of investors in f t

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Speaker 1: t s private sales included Alameda, Finance, coin Base, multi

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Speaker 1: coin Capital, and other cryptovcs. It looks like multi coin

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Speaker 1: is the only one that's been burned so far. According

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Speaker 1: to the FTT transparency page, more than half of f

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Speaker 1: t T s initial supply was allocated to the company

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Speaker 1: and team. All this f t T finished festing in

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Speaker 1: May this year. Funny that anyhow coin desks article from

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Speaker 1: earlier this month about the relationship between Alameda and f

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Speaker 1: t X suggests that the term company and team includes alameter.

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Speaker 1: More on that, in a moment, the remaining thirty or

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Speaker 1: so percent of ft t s initial supply went towards

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Speaker 1: various initiatives and incentives related to or on the f

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Speaker 1: t X exch change. This is to be expected given

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Speaker 1: that f t t s primary use cases are as

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Speaker 1: collateral for futures trading and to lower trading fees on

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Speaker 1: the ft X exchange. Keep that part in mind. As

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Speaker 1: with all exchange tokens, f t X uses a portion

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Speaker 1: of trading fees to buy back and burn the ft

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Speaker 1: T token. If you watched our video about exchange tokens,

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Speaker 1: you'll know that f t X has the most aggressive

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Speaker 1: buy back and burn schedule of them all, burning FTT

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Speaker 1: with trading fees every Monday. Obviously, buying f t T

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Speaker 1: raises its price, whereas burning it decreases its supply, which

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Speaker 1: further increases its price. If demand stays the same, the

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Speaker 1: result is that the value of exchange tokens goes up

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Speaker 1: over time, often regardless of actual crypto market conditions. So far,

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Speaker 1: over twenty one million FTT have been burned, and I

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Speaker 1: feel obligated to tell you that a massive amount of

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Speaker 1: ft T is scheduled to be burned this coming Monday.

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Speaker 1: That's simply because all the chaos on the ft X

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Speaker 1: exchange resulted in abnormally high trading volume. Assuming f t

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Speaker 1: X still follows through with its buy back and burn

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Speaker 1: we could see a short squeeze on FTT that's similar

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Speaker 1: to the short squeeze we saw on Celsius's cell token.

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Speaker 1: Now this is a warning to anyone still going short

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Speaker 1: and those who are thinking of going long, because there's

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Speaker 1: no guarantee a buy back will occur. It's also worth

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Speaker 1: pointing out that on chained statistics suggest there are at

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Speaker 1: least four hundred thousand holders of FTT, almost all of

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Speaker 1: whom are thoroughly in the red. This means any ft

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Speaker 1: T pump is likely to be received with a lot

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Speaker 1: of cell pressure from those trying to recover their losses.

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Speaker 1: You have been warned, folks, so please just don't go there.

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Speaker 1: That is financial advice. By the way, anyways, in ft

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Speaker 1: x is popularity started to explode. This was due in

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Speaker 1: part to the unprecedented amount of stimulus that tempted many

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Speaker 1: millennials into trading with one x level John's ship coins

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Speaker 1: and yet to be listed old coins on f t X.

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Speaker 1: F t x is popularity was also due in part

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Speaker 1: to Project Serum, a defied project by f t X.

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Speaker 1: Those of you around in will know that this is

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Speaker 1: when the famous defy summer occurred. This is basically when

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Speaker 1: all the defy protocols really blew up with one thousand

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Speaker 1: percent yields and all that other defied d gen stuff.

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Speaker 1: It's also when the crypto bullmarket really started to gather steam.

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Speaker 1: What's funny is that folks like Sam weren't famous at

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Speaker 1: all back then. Sam admitted in an interview with block

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Speaker 1: Works that he didn't really know anyone in crypto until

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Speaker 1: He also admitted on many occasions that he has a

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Speaker 1: bad habit of going big, sometimes too big, when a

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Speaker 1: money making strategy is working. This bad habit helped Sam

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Speaker 1: become one of the richest people in crypto, and his

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Speaker 1: massive wealth opened many doors in Washington, d C. And

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Speaker 1: around the world. If you're a gila on crypto Twitter,

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Speaker 1: you might remember all the jokes about how crypto was

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Speaker 1: really Sam's world and we were all just living in it.

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Speaker 1: This ties into all the stuff that's happened with f

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Speaker 1: t X and Alameda over the last week, and I'll

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Speaker 1: reiterate that this is an ever changing situation. It's also

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Speaker 1: not entirely clear exactly when f t X and Alameda

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Speaker 1: started to experience issues. Believe it or not, but Alameda

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Speaker 1: was apparently hours away from insolvency due to liquidations more

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Speaker 1: than two years ago when the markets crashed in response

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Speaker 1: to the pandemic. This was implied by Sam in that

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Speaker 1: block Works interview when discussing a Twitter thread by Sam

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Speaker 1: Trabuco about the crash. This is important to mention because

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Speaker 1: it suggests that Alameda has been engaging in risky trading

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Speaker 1: activities for quite some time. It's quite possible that f

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Speaker 1: t X was involved to some extent, given that Alameda

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Speaker 1: was of course the primary market maker for its own exchange. Now,

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Speaker 1: as far as I can tell, ft x's collapse began

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Speaker 1: with a coindesk article published on the second of November,

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Speaker 1: which revealed that a significant amount of Alameter researchers assets

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Speaker 1: were held in ft T. As of the thirty June

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Speaker 1: this year, more than a third of alameters fourteen billion

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Speaker 1: dollar balance sheet was held in FTT. In the days

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Speaker 1: that followed, lots of speculation started to spread on social

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Speaker 1: media about the nature of the relationship between Alameda and

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Speaker 1: f t X. Most of this speculation related to the

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Speaker 1: possibility that user funds on f t X were finding

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Speaker 1: their way to Alameter behind the scenes. This evolved into

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Speaker 1: concerns that f t X didn't have enough crypto on

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Speaker 1: hand to honor all user withdrawals. Given the recent collapse

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Speaker 1: of crypto platforms like Celsius, which had engaged in similar

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Speaker 1: shenanigans with customer funds behind the scenes, crypto holders slowly

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Speaker 1: started to withdraw from f t X out of caution.

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Speaker 1: The bank run on f t X accelerated when on

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Speaker 1: chain Sleuth's discovered that f t x is reserves of

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Speaker 1: stable coins and other cryptocurrencies were rapidly decreasing. It didn't

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Speaker 1: help that Alameda started withdrawing stable coins and other cryptocurrencies

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Speaker 1: from other exchanges to send to ft X. This effectively

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Speaker 1: confirmed that f t X was facing stress from user withdrawals,

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Speaker 1: something that Sam was denying on Twitter the entire time. Meanwhile,

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Speaker 1: Caroline took to Twitter to tacitly confirm that the Alameda

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Speaker 1: balance sheet reported by coin Desk was correct, but that

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Speaker 1: it was much larger than reported. When Binance got word

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Speaker 1: of what was going on at f t X, it

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Speaker 1: announced that it would be selling it's f t T now.

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Speaker 1: If you watched yesterday's video on coin Bureau clips, you'll

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Speaker 1: know that in one Sam brought back the f t

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Speaker 1: X shares Binance had purchased in for roughly one point

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Speaker 1: five billion dollars in b U s D and five

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Speaker 1: and eighty million in f t t For context, Binance

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Speaker 1: and f t X had a falling out sometime in

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Speaker 1: one This is believed to be because of former Binance

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Speaker 1: US CEO Brian Brooks, who was allegedly leaking sensitive information

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Speaker 1: about Binance to f t X. Brian was only the

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Speaker 1: CEO of Binance US for four months and attended multiple

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Speaker 1: ft X events after leaving. There was speculation that f

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Speaker 1: t X could have been involved in the league of

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Speaker 1: this information to the mainstream media such that they could

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Speaker 1: run hit pieces on Binance. The purpose of these hit

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Speaker 1: pieces was to point regulators in Binance's direction, so naturally

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Speaker 1: c Z wasn't to impress with ft X is shenanigans

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Speaker 1: and decided to de risk from Binances f t T stake.

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Speaker 1: The news that Binance would be selling such a massive

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Speaker 1: amount of ft T resulted in speculation that f t

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Speaker 1: X would dump or delist Binance's BnB coin in retaliation.

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Speaker 1: The conflict caused both tokens to plummet, and all the

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Speaker 1: uncertainty add to their volatility. It was at this point

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Speaker 1: that Caroline made the incredibly suspicious decision to publicly offer

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Speaker 1: to buy Binance's entire ft T stake at twenty two

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Speaker 1: dollars a pop over the counter. This supercharged further speculation

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Speaker 1: that a Lameter and f t X were using f

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Speaker 1: t T as collateral for crypto loans and feared getting liquidated. Now,

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Speaker 1: while I have yet to see any on chain evidence

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Speaker 1: of this, it's more than likely that f t T

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Speaker 1: was being used as collateral for a lot of futures

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Speaker 1: trading on f t X. Your recall that this was

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Speaker 1: one of the primary use cases for FTT, and it's

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Speaker 1: likely that f t X and Alameda weren't the only

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Speaker 1: whales using large amounts of it as collateral. Even though

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Speaker 1: f t T had a fully diluted market cap in

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Speaker 1: the billions, that token had low liquidity, meaning that it

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Speaker 1: didn't take much money to push its price up or down.

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Speaker 1: This means it's possible the fears that Binance was going

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Speaker 1: to sell t T were enough to crash its price

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Speaker 1: before Binance even sold a single token. I imagine that

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Speaker 1: this resulted in hundreds of millions of dollars of ft

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Speaker 1: T liquidations on f t X, which, due to the

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Speaker 1: tokens low liquidity, caused its price to fall further even faster.

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Speaker 1: I suspect that f t X and Alameda started selling

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Speaker 1: off the other cryptos they held to prevent f t

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Speaker 1: X from collapsing, causing other cryptos to crash. Around this time,

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Speaker 1: rumors started to circulate that f t X had started

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Speaker 1: pausing withdrawals. Now, many in the crypto community couldn't believe

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Speaker 1: that f t X or Alameda could possibly be facing

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Speaker 1: insolvency due to their supposedly immense war chests. F t

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Speaker 1: X alone had raised more than one point eight billion

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Speaker 1: dollars from investors across its lifespan, and then the unthinkable happened.

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Speaker 1: CZ and Sam announced that Binance was intending to buy

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Speaker 1: f t X to quote help cover the liquidity crunch.

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Speaker 1: This confirmed that f t X was in trouble, and

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Speaker 1: it led to speculation that f t X could be saved,

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Speaker 1: assuming it's intermingling with a Lameter wasn't nearly as bad

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Speaker 1: as believed. Unfortunately, it looks like ft x is financials

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Speaker 1: were seriously left up because Finance pulled out of the

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Speaker 1: deal earlier today after f t X revealed an eight

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Speaker 1: billion dollar hole. This effectively confirms that Alameter is also

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00:18:28,160 --> 00:18:31,520
Speaker 1: in trouble, and if you need more evidence, check their website.

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00:18:31,920 --> 00:18:35,679
Speaker 1: It's gone offline. This brings me to the big question,

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00:18:35,800 --> 00:18:39,199
Speaker 1: and that's how much the f t X Alameter situation

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Speaker 1: could affect the crypto markets as a whole. Well, in

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Speaker 1: case you haven't noticed, the crypto market is in free

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Speaker 1: fall already, and I repeat that a part of all

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Speaker 1: the cell pressure is probably coming from Alameter Research. That's

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Speaker 1: because Alameter isn't just another crypto company. They're a market maker,

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Speaker 1: meaning a substantial percentage of all the crypto on every

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Speaker 1: exchange is owned by them. Last year, Alameda was making

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Speaker 1: ten percent of the crypto market, and that figure was

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Speaker 1: probably much larger until recently. If you want an even

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Speaker 1: scarier statistic, consider that Alameda is the largest recipient of

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Speaker 1: all the u s d T that's ever been printed

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Speaker 1: by tether. Of the one hundred and ten billion USDT

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Speaker 1: minted between one, Alameda received around fifty billion. Interviews with

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Speaker 1: Sam suggests that Alameda was using this USDT to bypass banks.

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Speaker 1: Make of that what you will. Now, it wasn't just exchanges.

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Speaker 1: Alameda was providing liquidity two. Alameda was also one of

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Speaker 1: the largest liquidity providers in Defy, especially on SLANA. That's

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Speaker 1: primarily because of f t X is aforementioned DeFi project

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Speaker 1: serum and the important role it played in slana's defy protocols.

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Speaker 1: Speaking of SLANA, both Alameda and f t X were

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Speaker 1: heavily invested in the project and many tokens in its ecosystem.

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Speaker 1: According to crunch Base, Alameda has made almost two hundred

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Speaker 1: investments in crypto projects and companies, and many sources suggest

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Speaker 1: f t X has invested in at least fifty crypto projects.

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Speaker 1: Now I'll be doing a video about the crypto projects

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Speaker 1: that will be most affected by f t X and

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00:20:21,040 --> 00:20:24,560
Speaker 1: alamedas collapse next week. But if you can't wait, just

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00:20:24,720 --> 00:20:28,040
Speaker 1: check coin market cap. Chances are that all the cryptos

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Speaker 1: that have dropped the most over the last week had

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Speaker 1: the highest exposure to f t X and Lameter. And

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Speaker 1: then there's crypto regulations. SAM. F t X, and Alameda

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00:20:39,640 --> 00:20:43,080
Speaker 1: were well known names in Washington, d C. The worst

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Speaker 1: part is that they presented themselves as the krem de

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00:20:45,880 --> 00:20:49,159
Speaker 1: la creme of crypto. The fact that all three of

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Speaker 1: them have fallen spectacularly from grace is going to leave

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Speaker 1: a massive stain on the entire crypto industry. The craziest

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Speaker 1: part is that f t x is implosion has many

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00:20:59,720 --> 00:21:03,959
Speaker 1: disc gruntled individuals and institutions in the crypto community calling

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Speaker 1: for aggressive crypto regulations, specifically more transparency from cryptocurrency exchanges

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00:21:10,200 --> 00:21:14,439
Speaker 1: about the custody and segregation of customer funds. This is

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Speaker 1: exactly what we predicted would happen in our video about

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Speaker 1: Michael Barr, the Vice chair of the Federal Reserve, who

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Speaker 1: is itching to use the laws he created in the

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Speaker 1: aftermath of the financial crisis to crack down on crypto.

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Speaker 1: It's not just Michael or the Fed either. Late last night,

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Speaker 1: the Department of Justice or d o J and the

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Speaker 1: Securities and Exchange Commission or SEC announced they were investigating

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Speaker 1: ft X. This is a timely announcement given that the

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Speaker 1: Commodities Futures Trading Commission or CFTC had earlier announced that

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00:21:46,640 --> 00:21:50,639
Speaker 1: it too was watching the ft X situation. To clarify,

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00:21:50,760 --> 00:21:53,560
Speaker 1: the crypto industry has been pushing for the CFTC to

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Speaker 1: become its primary regulator because its regulations are more reasonable

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00:21:57,520 --> 00:22:00,760
Speaker 1: and easier for crypto companies and projects to follow. The

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Speaker 1: SEC swooping in is a sign that it wants to

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00:22:03,720 --> 00:22:08,840
Speaker 1: make sure the CFTC stays in second place. Not good. Now,

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Speaker 1: If there's anything to be salvage from this truly god

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00:22:12,080 --> 00:22:16,600
Speaker 1: awful situation is that Sam's own proposed crypto regulations will

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00:22:16,640 --> 00:22:19,439
Speaker 1: probably never get off the ground. If you watched our

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00:22:19,560 --> 00:22:22,399
Speaker 1: video about those, you'll know that he was essentially pushing

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Speaker 1: for crypto to become part of the existing financial system,

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00:22:26,000 --> 00:22:31,000
Speaker 1: especially defy. What I'm left wondering is who is responsible.

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Speaker 1: As bad as Alameda and ft X were acting behind

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Speaker 1: the scenes, both were brought down by truly exceptional circumstances,

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Speaker 1: who exactly is responsible is something I'll speculate about the

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Speaker 1: next time I cover this ship show, so look out

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Speaker 1: for more updates. Now. Many people's minds are probably made

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00:22:48,640 --> 00:22:51,439
Speaker 1: up on that score already, but perhaps there's more to

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00:22:51,560 --> 00:22:55,160
Speaker 1: it than we know yet. For now, I'll leave you

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00:22:55,200 --> 00:22:58,160
Speaker 1: with this sobering thought. The fallout we've seen so far

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00:22:58,400 --> 00:23:01,240
Speaker 1: is truly just the beginning of something that's probably going

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00:23:01,240 --> 00:23:04,680
Speaker 1: to take months or more to sort out. Until then,

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00:23:04,880 --> 00:23:07,719
Speaker 1: we're very likely to see lower lows for most coins

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00:23:07,720 --> 00:23:11,600
Speaker 1: and tokens, so brace yourselves, guys. The real crypto winter

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00:23:12,359 --> 00:23:16,080
Speaker 1: is just getting started. Now. Instead of my usual like

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00:23:16,240 --> 00:23:18,879
Speaker 1: and subscribe sign off, Spiel, I want to end with

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Speaker 1: a few personal thoughts. Firstly, my heart goes out to

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00:23:22,560 --> 00:23:25,560
Speaker 1: all those people who have funds stuck on ft X.

385
00:23:26,280 --> 00:23:31,399
Speaker 1: However stressful, upsetting, and enraging this situation must be. Please

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00:23:31,440 --> 00:23:34,320
Speaker 1: remember that your first duty of care is to yourself

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00:23:34,680 --> 00:23:39,720
Speaker 1: and those you love. Please don't do anything rash. It's money,

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00:23:39,760 --> 00:23:43,159
Speaker 1: and there are more important things in this life than money.

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Speaker 1: If you're in a bad place, then please do talk

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00:23:45,960 --> 00:23:50,159
Speaker 1: to someone. It will help. Second, this disaster has caught

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00:23:50,200 --> 00:23:53,840
Speaker 1: almost everyone by surprise, including all of us here at

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Speaker 1: Coin Bureau, My team and I are as disgusted by

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Speaker 1: what we're seeing as everyone else, and our primary ish

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00:24:00,600 --> 00:24:03,760
Speaker 1: is that ft XS customers are made whole as quickly

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00:24:03,800 --> 00:24:09,040
Speaker 1: as possible. Whether that will happen, I really can't say now.

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00:24:09,160 --> 00:24:13,680
Speaker 1: Third Crypto will survive this. However, grim things are going

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00:24:13,720 --> 00:24:16,359
Speaker 1: to get from here. It's going to be painful, and

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00:24:16,480 --> 00:24:19,359
Speaker 1: not every project is going to make it. But remember

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00:24:19,680 --> 00:24:24,440
Speaker 1: that this is sadly yet another instance of a centralized

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00:24:24,480 --> 00:24:29,240
Speaker 1: crypto platform going under due to mismanagement, incompetence, and quite

401
00:24:29,240 --> 00:24:35,600
Speaker 1: possibly criminality. But blocks are still being produced on blockchains

402
00:24:35,680 --> 00:24:40,199
Speaker 1: and great projects are still being built. If you believe

403
00:24:40,320 --> 00:24:43,840
Speaker 1: in the technology, then you must believe that this will

404
00:24:43,960 --> 00:24:49,280
Speaker 1: eventually pass. But we must all push for change because

405
00:24:49,280 --> 00:24:53,520
Speaker 1: we can't let this sort of stuff keep happening time

406
00:24:53,880 --> 00:24:58,680
Speaker 1: and time again. Bitcoin was invented because Sutoshi saw how

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00:24:58,800 --> 00:25:02,840
Speaker 1: broken our current financial system was and still is. But

408
00:25:03,480 --> 00:25:06,639
Speaker 1: the crypto industry as a whole has forgotten this and

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00:25:06,680 --> 00:25:11,239
Speaker 1: has moved ever closer to what Satoshi wished to destroy.

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00:25:11,480 --> 00:25:17,520
Speaker 1: Centralized entities misusing customer funds, opaque financial institutions doing shady

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00:25:17,560 --> 00:25:22,520
Speaker 1: stuff with unfathomable amounts of other people's money, self interested

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00:25:22,600 --> 00:25:26,200
Speaker 1: and incompetent rich dudes holding all the power with none

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00:25:26,440 --> 00:25:29,480
Speaker 1: of the oversight. God damn it. None of this has

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00:25:29,640 --> 00:25:33,240
Speaker 1: any place in crypto, and yet here we are. Now.

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00:25:33,320 --> 00:25:36,960
Speaker 1: Only we can get our house in order, and that

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00:25:37,040 --> 00:25:47,080
Speaker 1: process has to start today. Last week, the Federal Reserve

417
00:25:47,160 --> 00:25:50,440
Speaker 1: announced that it had raised interest rates by another point

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00:25:50,520 --> 00:25:55,119
Speaker 1: seven five as expected. This caused plenty of volatility in

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00:25:55,160 --> 00:25:59,000
Speaker 1: the markets, including of course crypto. However, it was the

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00:25:59,040 --> 00:26:02,439
Speaker 1: subsequent press conference by FED Chairman JR. Own Pow that

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00:26:02,640 --> 00:26:07,119
Speaker 1: really made the markets move. What he said suggests that

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00:26:07,160 --> 00:26:10,680
Speaker 1: the worst is yet to come for all asset classes.

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00:26:10,880 --> 00:26:12,919
Speaker 1: So today I'm going to give you a summary of

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00:26:12,960 --> 00:26:16,520
Speaker 1: the fed's press conference, explain what Jerome said in simple terms,

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00:26:16,680 --> 00:26:20,080
Speaker 1: and tell you why interest rates might stay much higher

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00:26:20,320 --> 00:26:25,240
Speaker 1: than what investors are pricing in Okay, Since that press conference,

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00:26:25,280 --> 00:26:28,560
Speaker 1: the crypto space has had slightly more pressing concerns to

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00:26:28,600 --> 00:26:31,760
Speaker 1: address than your own power and a video about the

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Speaker 1: ft X disaster is linked to below, so do have

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Speaker 1: a watch after this if you can bear it. But

431
00:26:38,400 --> 00:26:41,280
Speaker 1: despite all that's been happening in that sphere, the actions

432
00:26:41,320 --> 00:26:44,200
Speaker 1: and outlook of the Federal Reserve will have a big

433
00:26:44,200 --> 00:26:46,960
Speaker 1: effect on the crypto market in the weeks and months ahead.

434
00:26:47,600 --> 00:26:51,000
Speaker 1: So let's start with a quick bit of context. The

435
00:26:51,040 --> 00:26:53,480
Speaker 1: Federal Reserve a k a. The FED is the central

436
00:26:53,480 --> 00:26:56,560
Speaker 1: bank of the United States. Every six weeks, its board

437
00:26:56,560 --> 00:26:59,480
Speaker 1: of seven governors has a meeting where they decide how

438
00:26:59,600 --> 00:27:02,879
Speaker 1: much it will be raising interest rates by and issue

439
00:27:02,920 --> 00:27:06,800
Speaker 1: a statement announcing their decision. After the meeting, FED Chairman

440
00:27:06,880 --> 00:27:10,239
Speaker 1: Jerome Powell holds a press conference to answer questions from

441
00:27:10,280 --> 00:27:13,680
Speaker 1: the media about the fed's meeting, its interest rate decision,

442
00:27:13,960 --> 00:27:17,359
Speaker 1: and its future plans. Note that the minutes of the

443
00:27:17,400 --> 00:27:21,200
Speaker 1: meeting are only released three weeks later. More about that

444
00:27:21,320 --> 00:27:24,600
Speaker 1: in a bit now. Given the impacts that interest rates

445
00:27:24,600 --> 00:27:27,840
Speaker 1: have on the markets and the economy, every word that's

446
00:27:27,920 --> 00:27:31,639
Speaker 1: uttered during the fed's meetings and its press conferences is

447
00:27:31,680 --> 00:27:36,359
Speaker 1: scrutinized by investors. What they're looking for is forward guidance,

448
00:27:36,640 --> 00:27:40,320
Speaker 1: hints about how and when the FED will change interest rates.

449
00:27:41,000 --> 00:27:43,879
Speaker 1: If you watched our video about the fed's previous press

450
00:27:43,920 --> 00:27:47,240
Speaker 1: conference back in September, you'll know that Jerome said that

451
00:27:47,280 --> 00:27:50,760
Speaker 1: the FED would no longer be providing the forward guidance

452
00:27:50,880 --> 00:27:54,040
Speaker 1: that markets want. Well, it's safe to say that the

453
00:27:54,040 --> 00:27:58,399
Speaker 1: FED governors didn't keep his promise, including Jerome himself. The

454
00:27:58,480 --> 00:28:03,000
Speaker 1: forward guidance continues and the markets have been responding as expected.

455
00:28:03,600 --> 00:28:06,840
Speaker 1: Any suggestion that interest rates will be coming down results

456
00:28:06,880 --> 00:28:09,440
Speaker 1: in a rally, and any suggestion that interest rates will

457
00:28:09,440 --> 00:28:13,119
Speaker 1: be going up results in a crash. Because the FED

458
00:28:13,280 --> 00:28:17,000
Speaker 1: is fundamentally raising interest rates to fight inflation, this means

459
00:28:17,040 --> 00:28:20,400
Speaker 1: that are higher than expected inflation reading for the Consumer

460
00:28:20,440 --> 00:28:24,240
Speaker 1: Price Index or CPI results in a crash. The same

461
00:28:24,320 --> 00:28:27,879
Speaker 1: is true for the personal consumption Expenditures Index or pc

462
00:28:28,480 --> 00:28:33,040
Speaker 1: which the FED watches very closely. And because the FED

463
00:28:33,119 --> 00:28:37,320
Speaker 1: is also tasked with ensuring unemployment remains low, a higher

464
00:28:37,320 --> 00:28:41,640
Speaker 1: than expected unemployment rate paradoxically results in a rally. This

465
00:28:41,840 --> 00:28:45,120
Speaker 1: is basically why the markets rallied in the days following

466
00:28:45,120 --> 00:28:49,200
Speaker 1: the fed's most recent meeting and press conference. Now, because

467
00:28:49,240 --> 00:28:52,720
Speaker 1: the FED is the world's largest central bank, it's heavy

468
00:28:52,840 --> 00:28:55,960
Speaker 1: interest rate increases have put pressure on all the other

469
00:28:56,000 --> 00:28:59,360
Speaker 1: central banks to do the same. That's because when the

470
00:28:59,360 --> 00:29:02,040
Speaker 1: FED raised as interest rates, it causes money to flow

471
00:29:02,080 --> 00:29:05,800
Speaker 1: out of foreign economies and into the U. S economy.

472
00:29:05,880 --> 00:29:09,480
Speaker 1: That's the simple explanation. The problem is that not all

473
00:29:09,560 --> 00:29:12,000
Speaker 1: central banks can keep up with the FED due to

474
00:29:12,040 --> 00:29:14,480
Speaker 1: the massive amounts of debt in both the public and

475
00:29:14,560 --> 00:29:19,320
Speaker 1: private sectors of their respective countries and regions. Unfortunately, a

476
00:29:19,400 --> 00:29:22,120
Speaker 1: failure to do so means that money flows out of

477
00:29:22,160 --> 00:29:25,880
Speaker 1: their economies into the U. S Dollar, causing their currencies

478
00:29:25,920 --> 00:29:30,280
Speaker 1: to weaken. Another problem, meanwhile, is that many developing countries

479
00:29:30,360 --> 00:29:34,040
Speaker 1: have large amounts of dollar denominated debts, which become more

480
00:29:34,040 --> 00:29:37,320
Speaker 1: expensive when the FED raises rates. I talked about this

481
00:29:37,400 --> 00:29:40,320
Speaker 1: in more detail in a video on dollar strength, which

482
00:29:40,360 --> 00:29:43,840
Speaker 1: will be in the description for you. Anyways, these fears

483
00:29:43,880 --> 00:29:46,360
Speaker 1: are what prompted the U N to call out the

484
00:29:46,400 --> 00:29:51,200
Speaker 1: FED and other big central banks to stop raising interest rates. Unfortunately,

485
00:29:51,520 --> 00:29:55,120
Speaker 1: it doesn't look like they listened. So with that bit

486
00:29:55,160 --> 00:29:58,040
Speaker 1: of context in mind, we can turn to Jerome's speech,

487
00:29:58,080 --> 00:30:00,680
Speaker 1: which begins, as it always does, with him waddling onto

488
00:30:00,680 --> 00:30:03,800
Speaker 1: the podium with a big, serious looking binder, probably with

489
00:30:03,840 --> 00:30:08,320
Speaker 1: photocopies of its last speech inside. In all seriousness, Jerome

490
00:30:08,520 --> 00:30:11,720
Speaker 1: essentially repeated what he said last time. The FED is

491
00:30:11,760 --> 00:30:14,560
Speaker 1: strongly committed to bringing inflation back down to its two

492
00:30:14,560 --> 00:30:17,240
Speaker 1: percent target, and it has the tools and resolved to

493
00:30:17,280 --> 00:30:21,280
Speaker 1: achieve this mandate without price stability. The economy doesn't work,

494
00:30:21,320 --> 00:30:24,360
Speaker 1: and the labor market will not be strong without price stability.

495
00:30:24,960 --> 00:30:28,160
Speaker 1: That second comment didn't make much sense, because the labor

496
00:30:28,200 --> 00:30:31,280
Speaker 1: market in the United States is still strong, at least

497
00:30:31,320 --> 00:30:35,400
Speaker 1: on paper. A supposedly strong labor market is why the

498
00:30:35,440 --> 00:30:39,120
Speaker 1: FED has continued to raise interest rates so aggressively. Its

499
00:30:39,120 --> 00:30:41,920
Speaker 1: officials feel they have the wiggle room to do so.

500
00:30:42,720 --> 00:30:45,680
Speaker 1: In any case, Jerome reiterated that the FED decided to

501
00:30:45,760 --> 00:30:48,880
Speaker 1: raise interest rates by another point seven five percent, and

502
00:30:48,960 --> 00:30:51,560
Speaker 1: it will continue to raise interest rates until the central

503
00:30:51,560 --> 00:30:55,560
Speaker 1: bank is confident that inflation is coming down. Jerome added

504
00:30:55,680 --> 00:30:58,800
Speaker 1: that the FED is actively reducing the size of its

505
00:30:58,840 --> 00:31:02,560
Speaker 1: balance sheet i selling the assets it holds for reference.

506
00:31:02,560 --> 00:31:05,520
Speaker 1: The FED holds trillions of dollars of US government debt.

507
00:31:05,960 --> 00:31:08,480
Speaker 1: When the FED sells this debt, then the interest rates

508
00:31:08,520 --> 00:31:11,640
Speaker 1: on that debt go up. This causes interest rates to

509
00:31:11,760 --> 00:31:14,640
Speaker 1: rise further, since interest rates on US government debt are

510
00:31:14,760 --> 00:31:17,520
Speaker 1: used as a reference for other types of similar duration

511
00:31:17,560 --> 00:31:21,240
Speaker 1: debt in the economy. The FED started reducing the size

512
00:31:21,240 --> 00:31:23,520
Speaker 1: of its balance sheet in June and has sold three

513
00:31:23,640 --> 00:31:27,040
Speaker 1: hundred billion dollars of US government debt since then. If

514
00:31:27,040 --> 00:31:30,840
Speaker 1: you watched our video about Jerome's testimony to U S politicians.

515
00:31:30,960 --> 00:31:33,680
Speaker 1: You'll know that he admitted five hundred billion dollars of

516
00:31:33,720 --> 00:31:36,720
Speaker 1: selling is equivalent to a rate hike of around point

517
00:31:36,760 --> 00:31:41,960
Speaker 1: five pc. So far, this effect is yet to be seen. Anyways.

518
00:31:42,480 --> 00:31:45,880
Speaker 1: Jerome went on to give a short summary of economic conditions.

519
00:31:46,160 --> 00:31:48,880
Speaker 1: The economy has slowed, the housing market is imploding, the

520
00:31:48,920 --> 00:31:53,320
Speaker 1: stock market is collapsing, but unemployment is at a fifty

521
00:31:53,440 --> 00:31:57,000
Speaker 1: year low. In other words, the economy is actually fine

522
00:31:57,120 --> 00:32:01,680
Speaker 1: because the questionable employment statistics say so. Meanwhile, the pc

523
00:32:01,840 --> 00:32:05,880
Speaker 1: E and core PCE are way above two percent, specifically

524
00:32:05,960 --> 00:32:09,480
Speaker 1: six point two and five point one percent respectively. Now,

525
00:32:09,520 --> 00:32:14,240
Speaker 1: although inflation expectations of the American population haven't gone up,

526
00:32:14,520 --> 00:32:18,840
Speaker 1: the FED can't be complacent. That's because history has shown

527
00:32:19,040 --> 00:32:22,400
Speaker 1: that inflation can come back if it's not crushed like

528
00:32:22,480 --> 00:32:25,160
Speaker 1: in the nineteen eighties. Now, for those who don't know,

529
00:32:25,400 --> 00:32:29,640
Speaker 1: inflation expectations are as important, if not more important, than

530
00:32:29,640 --> 00:32:32,800
Speaker 1: the actual inflation rate. That's because if he will expect

531
00:32:32,880 --> 00:32:35,520
Speaker 1: inflation to remain high, they will act in ways that

532
00:32:35,600 --> 00:32:39,320
Speaker 1: cause inflation to continue. This is the main reason why

533
00:32:39,400 --> 00:32:42,000
Speaker 1: the FED also watches the c p I. It's what

534
00:32:42,160 --> 00:32:45,880
Speaker 1: the people watch. It also begs the question of how

535
00:32:45,960 --> 00:32:49,600
Speaker 1: much the US government is fudging inflation related figures, But

536
00:32:49,800 --> 00:32:52,120
Speaker 1: let's not go there. All I will say is that

537
00:32:52,160 --> 00:32:56,520
Speaker 1: if inflation expectations get too high, then hyperinflation is the result.

538
00:32:57,040 --> 00:33:02,160
Speaker 1: Put differently, hyperinflation is a psychological and not an economic phenomenon.

539
00:33:02,520 --> 00:33:06,120
Speaker 1: The more you know now, Jerome continued his summary of

540
00:33:06,160 --> 00:33:09,200
Speaker 1: economic conditions by saying he is aware that it takes

541
00:33:09,240 --> 00:33:11,880
Speaker 1: time for the Fed's interest rate increases to have an

542
00:33:11,920 --> 00:33:15,560
Speaker 1: effect on the actual economy f y I. The consensus

543
00:33:15,640 --> 00:33:18,560
Speaker 1: among economists is that it takes around a year for

544
00:33:18,680 --> 00:33:22,440
Speaker 1: interest rates to affect the economy. Jerome acknowledged that at

545
00:33:22,480 --> 00:33:25,560
Speaker 1: some point it will become appropriate to slow the pace

546
00:33:25,640 --> 00:33:30,080
Speaker 1: of increases, but that point has yet to come. More importantly,

547
00:33:30,400 --> 00:33:33,240
Speaker 1: Jerome said that the terminal rate a k a. The

548
00:33:33,360 --> 00:33:37,720
Speaker 1: interest rate the FED is targeting, has increased significantly above

549
00:33:38,040 --> 00:33:42,360
Speaker 1: what had been announced in September. Jerome also repeated something

550
00:33:42,400 --> 00:33:45,080
Speaker 1: he said many times, and that's that the FED is

551
00:33:45,120 --> 00:33:49,160
Speaker 1: taking quote forceful steps to bring demand back in line

552
00:33:49,200 --> 00:33:52,800
Speaker 1: with supply. This is a scary prospect because it looks

553
00:33:52,840 --> 00:33:56,960
Speaker 1: like supply issues are the primary drivers of inflation right now.

554
00:33:57,720 --> 00:34:02,560
Speaker 1: Bringing demand down means doing damage. That's why Jerome repeated

555
00:34:02,600 --> 00:34:05,120
Speaker 1: another thing he said many times, and that's that bringing

556
00:34:05,120 --> 00:34:08,960
Speaker 1: inflation back down will require a quote sustained period of

557
00:34:09,000 --> 00:34:13,640
Speaker 1: below trend growth. This includes a quote softening of labor conditions,

558
00:34:13,680 --> 00:34:16,640
Speaker 1: which the FED has yet to see in the official statistics.

559
00:34:17,400 --> 00:34:20,720
Speaker 1: Jerome concluded his speech by repeating that history has shown

560
00:34:20,760 --> 00:34:24,279
Speaker 1: that easing too soon can create serious issues, that the

561
00:34:24,320 --> 00:34:27,960
Speaker 1: FED will fulfill its dual mandate, that it understands higher

562
00:34:28,000 --> 00:34:31,400
Speaker 1: interest rates are affecting everyone, but that it will quote

563
00:34:31,440 --> 00:34:34,400
Speaker 1: stay the course until the job is done. Now, before

564
00:34:34,440 --> 00:34:37,080
Speaker 1: I break down what was said during the question period,

565
00:34:37,280 --> 00:34:40,280
Speaker 1: you should know that the markets were rallying up until

566
00:34:40,320 --> 00:34:44,640
Speaker 1: this point. That's because the FED statement announcing its interest

567
00:34:44,719 --> 00:34:49,000
Speaker 1: rate decision contained an additional sentence which suggested rates would

568
00:34:49,040 --> 00:34:52,759
Speaker 1: start coming down. In a Block Works episode about the

569
00:34:52,760 --> 00:34:57,000
Speaker 1: fed's press conference, macro analyst Jim Bianco mentioned that the

570
00:34:57,080 --> 00:35:01,160
Speaker 1: sentence was eerily similar to something Layle Brainard, the Vice

571
00:35:01,239 --> 00:35:03,840
Speaker 1: chair of the FED, had said a few months before.

572
00:35:04,600 --> 00:35:07,759
Speaker 1: For those unfamiliar, Leal is a dove, meaning that she

573
00:35:07,880 --> 00:35:12,239
Speaker 1: supports lower interest rates. By contrast, Jerome is a hawk

574
00:35:12,440 --> 00:35:16,200
Speaker 1: who supports higher interest rates. Now, Jim's theory is that

575
00:35:16,239 --> 00:35:18,960
Speaker 1: the doves on the fed's Board of Directors are starting

576
00:35:18,960 --> 00:35:23,120
Speaker 1: to become concerned about the Fed's aggressive rate heights. Jim

577
00:35:23,120 --> 00:35:26,040
Speaker 1: believes the dovish sentence in the FED statement was a

578
00:35:26,120 --> 00:35:30,239
Speaker 1: compromise Jerome made with the doves. What's annoying is that

579
00:35:30,280 --> 00:35:32,840
Speaker 1: we won't know whether this is the case until the

580
00:35:32,880 --> 00:35:35,960
Speaker 1: minutes of the feds November meeting are released towards the

581
00:35:36,120 --> 00:35:41,440
Speaker 1: end of this month, specifically Wednesday, twenty three of November. Obviously,

582
00:35:41,640 --> 00:35:45,560
Speaker 1: the contents of those minutes will probably have a significant

583
00:35:45,600 --> 00:35:49,840
Speaker 1: impact on the markets any who. When it came to

584
00:35:49,880 --> 00:35:52,720
Speaker 1: the question period, the first to go was a reporter

585
00:35:52,840 --> 00:35:56,919
Speaker 1: from the Financial Times. They asked Jerome what inflation data

586
00:35:57,040 --> 00:35:59,720
Speaker 1: the FED needs to see before it starts to slow

587
00:35:59,800 --> 00:36:02,600
Speaker 1: it's pace of rate hikes. Note that a slowing of

588
00:36:02,719 --> 00:36:05,600
Speaker 1: pace doesn't mean that the FED will stop, just that

589
00:36:05,640 --> 00:36:08,879
Speaker 1: the increments will be smaller. Jerome said that the FED

590
00:36:08,960 --> 00:36:12,360
Speaker 1: wants to see multiple months of inflation coming down before

591
00:36:12,560 --> 00:36:15,239
Speaker 1: slowing the pace of rate hikes. But that's not all.

592
00:36:15,800 --> 00:36:19,480
Speaker 1: The Fed also wants to see positive interest rates across

593
00:36:19,600 --> 00:36:22,839
Speaker 1: the yield curve. In plain English, it wants to see

594
00:36:22,880 --> 00:36:28,960
Speaker 1: interest rates that are higher than inflation, specifically core PCE. Logically,

595
00:36:29,080 --> 00:36:31,799
Speaker 1: this means that all interest rates in the economy must

596
00:36:31,800 --> 00:36:35,600
Speaker 1: be above five point one. This is a pretty big

597
00:36:35,600 --> 00:36:39,440
Speaker 1: task considering most interest rates are currently around four percent,

598
00:36:39,800 --> 00:36:43,000
Speaker 1: but it's important to remember that inflation is likely to

599
00:36:43,040 --> 00:36:47,000
Speaker 1: come down. This means that positive interest rates could be

600
00:36:47,160 --> 00:36:50,760
Speaker 1: around the corner. The second question came from a reporter

601
00:36:50,840 --> 00:36:53,680
Speaker 1: at Reuter's and they asked Jerome how big the Fed's

602
00:36:53,760 --> 00:36:56,880
Speaker 1: rate hike will be after its next meeting in December.

603
00:36:57,200 --> 00:37:01,279
Speaker 1: Jerome responded by explaining the Fed looks at three things,

604
00:37:01,320 --> 00:37:04,480
Speaker 1: how fast to raise rates, how high to raise rates,

605
00:37:04,680 --> 00:37:07,680
Speaker 1: and how long to keep them there. Jerome continued by

606
00:37:07,760 --> 00:37:11,200
Speaker 1: saying that the Fed agreed to raise interest rates quickly

607
00:37:11,520 --> 00:37:14,040
Speaker 1: and is now working to figure out how high to

608
00:37:14,160 --> 00:37:17,280
Speaker 1: raise them. He revealed that the Fed will start discussing

609
00:37:17,280 --> 00:37:19,560
Speaker 1: this at its next meeting, but it will be a

610
00:37:19,560 --> 00:37:24,200
Speaker 1: while before it starts discussing how long to keep rates restrictive.

611
00:37:24,680 --> 00:37:27,719
Speaker 1: The Reuters reporter followed up by asking why the Fed

612
00:37:27,800 --> 00:37:31,279
Speaker 1: felt it necessary to signal that it will start discussing

613
00:37:31,360 --> 00:37:35,200
Speaker 1: when to stop raising rates. Jerome tacitly admitted that the

614
00:37:35,280 --> 00:37:37,719
Speaker 1: doves at the FED are starting to get nervous, but

615
00:37:37,800 --> 00:37:40,839
Speaker 1: that he doesn't feel that way at all, and since

616
00:37:40,880 --> 00:37:44,720
Speaker 1: he's the chairman, what he says goes looks like Jim

617
00:37:44,800 --> 00:37:47,799
Speaker 1: is onto something. Now. The third question came from a

618
00:37:47,800 --> 00:37:50,560
Speaker 1: reporter at the Wall Street Journal who asked where their

619
00:37:50,560 --> 00:37:53,000
Speaker 1: interest rates across the yield curve will need to be

620
00:37:53,080 --> 00:37:56,680
Speaker 1: higher than core PCE. Jerome confirmed this to be the

621
00:37:56,719 --> 00:38:00,160
Speaker 1: case and added that there must be a significant spread

622
00:38:00,160 --> 00:38:04,840
Speaker 1: i e. Difference between real yields and core PCE. The

623
00:38:04,920 --> 00:38:08,040
Speaker 1: fourth question came from a reporter at the New York Times,

624
00:38:08,120 --> 00:38:10,960
Speaker 1: and they asked Jerome whether there's any evidence that inflation

625
00:38:11,040 --> 00:38:15,800
Speaker 1: expectations are becoming entrenched. Jerome said this isn't the case

626
00:38:15,880 --> 00:38:20,440
Speaker 1: for long term inflation expectations, but shorter term inflation expectations

627
00:38:20,520 --> 00:38:24,680
Speaker 1: do concern him. Then Jerome said something interesting, and that's

628
00:38:24,719 --> 00:38:28,920
Speaker 1: that there's no scientific way of measuring when inflation expectations

629
00:38:28,960 --> 00:38:32,640
Speaker 1: become entrenched. This is interesting because it's believed that the

630
00:38:32,680 --> 00:38:36,600
Speaker 1: FED slow response to inflation was due to Jerome trusting

631
00:38:36,680 --> 00:38:40,799
Speaker 1: the academics around him instead of his own intuition. Now,

632
00:38:40,840 --> 00:38:43,760
Speaker 1: the fifth question came from a reporter at the Washington Post.

633
00:38:44,160 --> 00:38:46,760
Speaker 1: They asked Jerome about how long it takes for monetary

634
00:38:46,760 --> 00:38:50,120
Speaker 1: policy to affect the economy and which sectors start to

635
00:38:50,120 --> 00:38:54,160
Speaker 1: feel the squeeze and when. Jerome's response was surprising because

636
00:38:54,160 --> 00:38:57,200
Speaker 1: he said that the economy reacts much sooner than assumed.

637
00:38:57,760 --> 00:39:00,279
Speaker 1: This is something that was brought up by former FED

638
00:39:00,360 --> 00:39:04,880
Speaker 1: trader Joseph Wang during that aforementioned block Works episode. Joseph

639
00:39:04,960 --> 00:39:09,880
Speaker 1: believes that Jerome understands just how financialized the economy has become,

640
00:39:10,480 --> 00:39:14,160
Speaker 1: and because investors are always pricing in the future, the

641
00:39:14,160 --> 00:39:18,600
Speaker 1: economy reacts faster as a result. Even so, Jerome said

642
00:39:18,640 --> 00:39:21,840
Speaker 1: that the FED would rather raise interest rates too much

643
00:39:22,200 --> 00:39:25,479
Speaker 1: than not enough. That's because it's easier to come back

644
00:39:25,520 --> 00:39:29,640
Speaker 1: from overtightening than from not tightening enough. The cost of

645
00:39:29,760 --> 00:39:33,960
Speaker 1: inflation expectations becoming entrenched is also much higher than the

646
00:39:34,000 --> 00:39:38,040
Speaker 1: recession this tightening is likely to cause now. The Washington

647
00:39:38,080 --> 00:39:41,520
Speaker 1: Post reporter followed up by asking Jerome about the additional

648
00:39:41,560 --> 00:39:45,680
Speaker 1: sentence in the FED statement. Jerome slammed investors for thinking

649
00:39:45,840 --> 00:39:49,560
Speaker 1: that slower rate hikes means lowering interest rates and said

650
00:39:49,640 --> 00:39:53,439
Speaker 1: that won't be happening anytime soon. The sixth question came

651
00:39:53,480 --> 00:39:56,320
Speaker 1: from a reporter at Axios and they asked Jerome about

652
00:39:56,360 --> 00:39:59,680
Speaker 1: the housing market. After rambling about the labor market for

653
00:39:59,719 --> 00:40:02,360
Speaker 1: a bit, Jerome asked whether he had missed anything the

654
00:40:02,400 --> 00:40:05,880
Speaker 1: reporter had asked, to which the reporter responded, the housing market.

655
00:40:06,040 --> 00:40:09,280
Speaker 1: Tell me about the housing market. I'm paraphrasing. Of course.

656
00:40:10,160 --> 00:40:12,920
Speaker 1: All Jerome had to say was that the FED needs

657
00:40:12,920 --> 00:40:15,760
Speaker 1: to bring the demand for housing back in line with supply.

658
00:40:16,400 --> 00:40:18,720
Speaker 1: If you watched our recent video about the housing market,

659
00:40:18,800 --> 00:40:21,279
Speaker 1: you'll know that the Fed is doing a damn good

660
00:40:21,360 --> 00:40:25,480
Speaker 1: job of that so far. The seventh question came from

661
00:40:25,520 --> 00:40:28,800
Speaker 1: a reporter at Politico, and they asked Jerome what employment

662
00:40:28,840 --> 00:40:32,560
Speaker 1: statistics the FED is watching. Jerome fired off a long list,

663
00:40:32,640 --> 00:40:36,919
Speaker 1: including unemployment, the supply of labor, the labor participation rate,

664
00:40:36,960 --> 00:40:41,040
Speaker 1: another such statistics. The stat that caught my ear was

665
00:40:41,320 --> 00:40:45,799
Speaker 1: wage growth. That's because it's believed that higher wages contribute

666
00:40:45,840 --> 00:40:50,000
Speaker 1: to inflation. Right now, wages are increasing at a rate

667
00:40:50,040 --> 00:40:53,080
Speaker 1: of you guessed it, five percent per year, at least

668
00:40:53,080 --> 00:40:56,440
Speaker 1: in the United States. I reckon, you can't blame people

669
00:40:56,480 --> 00:40:59,840
Speaker 1: for wanting to keep up with inflation. It sounds like

670
00:41:00,239 --> 00:41:04,439
Speaker 1: some economists do, though. Now. The eighth question came from

671
00:41:04,480 --> 00:41:07,640
Speaker 1: a reporter at CNBC who asked Jerome about the u

672
00:41:07,840 --> 00:41:10,360
Speaker 1: n's warning to central banks that I talked about earlier.

673
00:41:10,960 --> 00:41:13,480
Speaker 1: After acknowledging that the rest of the world is having

674
00:41:13,520 --> 00:41:16,600
Speaker 1: a rough time with the fed's rate hikes, Jerome said, quote,

675
00:41:16,960 --> 00:41:20,880
Speaker 1: but in the United States, we have a strong economy.

676
00:41:21,239 --> 00:41:23,840
Speaker 1: Jerome went on to say that price stability in the

677
00:41:23,920 --> 00:41:26,799
Speaker 1: United States was the most important thing for the FED,

678
00:41:26,880 --> 00:41:30,480
Speaker 1: and that bringing inflation down will quote pay dividends for

679
00:41:30,600 --> 00:41:34,479
Speaker 1: decades in some The FED doesn't give a damn about

680
00:41:34,520 --> 00:41:38,080
Speaker 1: the developing countries that are struggling under dollar debts. Inflation

681
00:41:38,400 --> 00:41:42,200
Speaker 1: must be crushed. The CNBC reporter followed up by asking

682
00:41:42,280 --> 00:41:45,160
Speaker 1: Jerome whether there is a risk that inflation will remain

683
00:41:45,239 --> 00:41:48,600
Speaker 1: high given that it's being driven primarily by supply side

684
00:41:48,600 --> 00:41:52,520
Speaker 1: forces that the FED cannot affect. Jerome acknowledged that there

685
00:41:52,560 --> 00:41:56,400
Speaker 1: are supply side issues, but argued that inflation is demand

686
00:41:56,520 --> 00:41:59,839
Speaker 1: driven in the USA. This brings me back to one

687
00:41:59,880 --> 00:42:03,239
Speaker 1: of Gym's theories, which is that inflation will remain much

688
00:42:03,320 --> 00:42:07,160
Speaker 1: higher than most people expect due to a structural change

689
00:42:07,200 --> 00:42:11,239
Speaker 1: in the economy. In short, supply chains and manufacturing are

690
00:42:11,280 --> 00:42:14,799
Speaker 1: moving back on shore in many countries, and this transition

691
00:42:14,840 --> 00:42:18,839
Speaker 1: will create a long period of inflation. More on that later.

692
00:42:19,800 --> 00:42:23,000
Speaker 1: The ninth question came from a reporter at Bloomberg who

693
00:42:23,040 --> 00:42:26,560
Speaker 1: asked whether the FED is still focused on the inversion

694
00:42:26,719 --> 00:42:30,359
Speaker 1: in yields between three month government debt and ten year

695
00:42:30,440 --> 00:42:34,000
Speaker 1: government debt. That's because the three month yield and the

696
00:42:34,000 --> 00:42:37,719
Speaker 1: ten year yield were close to inverting at the time

697
00:42:37,719 --> 00:42:41,960
Speaker 1: of shooting. They have. You see, under normal economic conditions,

698
00:42:42,160 --> 00:42:45,600
Speaker 1: longer types of debt offer higher interest rates, mostly due

699
00:42:45,600 --> 00:42:48,759
Speaker 1: to the opportunity cost of lending that capital for so long.

700
00:42:49,440 --> 00:42:52,520
Speaker 1: As such, when interest rates on shorter term debts are

701
00:42:52,600 --> 00:42:55,400
Speaker 1: higher than those on longer term debts, it's a sign

702
00:42:55,440 --> 00:42:58,680
Speaker 1: that the economy is in bad shape, i e. Recession.

703
00:42:59,480 --> 00:43:03,080
Speaker 1: Not surprised, Lee Jerome was unconcerned and just said that

704
00:43:03,120 --> 00:43:07,280
Speaker 1: the FED is watching other indicators to The tenth question

705
00:43:07,520 --> 00:43:10,040
Speaker 1: came from a reporter at the Associated Press who asked

706
00:43:10,120 --> 00:43:13,959
Speaker 1: Jerome whether he was concerned about the housing market. Jerome said,

707
00:43:14,000 --> 00:43:16,520
Speaker 1: he is aware of how bad the housing market is

708
00:43:16,560 --> 00:43:20,319
Speaker 1: getting hit, but rents must come down. It looks like

709
00:43:20,680 --> 00:43:23,160
Speaker 1: that will be the last domino to fall on the

710
00:43:23,160 --> 00:43:26,960
Speaker 1: housing front. The AP reporter followed up by asking Jerome

711
00:43:27,040 --> 00:43:29,480
Speaker 1: whether the FED was happy about the market rally that

712
00:43:29,560 --> 00:43:33,400
Speaker 1: resulted from the additional sentence in the FED statement. Jerome's

713
00:43:33,440 --> 00:43:36,560
Speaker 1: response to this question went viral, and I think you

714
00:43:36,600 --> 00:43:40,560
Speaker 1: can guess why. Jerome started by reiterating that the terminal

715
00:43:40,680 --> 00:43:43,920
Speaker 1: rate will be much higher than initially projected. Then he

716
00:43:43,960 --> 00:43:46,959
Speaker 1: said there is quote no evidence that inflation is coming

717
00:43:47,000 --> 00:43:50,360
Speaker 1: down and even added that quote we are exactly where

718
00:43:50,360 --> 00:43:53,480
Speaker 1: we were one year ago in terms of crushing inflation.

719
00:43:53,880 --> 00:43:58,200
Speaker 1: The markets instantly nos dived now. The eleventh question came

720
00:43:58,239 --> 00:44:00,959
Speaker 1: from a reporter at Fox News, who asked Jerome whether

721
00:44:01,000 --> 00:44:04,960
Speaker 1: fiscal policy i. Government spending is affecting the Fed's ability

722
00:44:05,000 --> 00:44:09,279
Speaker 1: to fight inflation. Jerome admitted that fiscal policy was making

723
00:44:09,360 --> 00:44:12,279
Speaker 1: it harder to fight inflation at first, but seemed to

724
00:44:12,280 --> 00:44:16,640
Speaker 1: suggest it actually might be helping now. That's because all

725
00:44:16,680 --> 00:44:20,480
Speaker 1: the unprecedented stimulus during the pandemic has resulted in record

726
00:44:20,560 --> 00:44:25,040
Speaker 1: levels of savings for individuals and cash balances for institutions.

727
00:44:25,360 --> 00:44:28,840
Speaker 1: While this wealth is still concentrated in the upper echelons

728
00:44:28,880 --> 00:44:33,319
Speaker 1: of the economy, it presents a cushion against rising interest rates. Nonetheless,

729
00:44:33,560 --> 00:44:36,800
Speaker 1: the Fox News reporter followed up by asking Jerome whether

730
00:44:36,920 --> 00:44:39,120
Speaker 1: all the hundreds of billions that have yet to be

731
00:44:39,160 --> 00:44:41,919
Speaker 1: pumped into the U S economy will affect the FED

732
00:44:42,040 --> 00:44:46,240
Speaker 1: going forward. Jerome danced around the question, which was honestly

733
00:44:46,320 --> 00:44:50,319
Speaker 1: a good political move given the polarized political climate in

734
00:44:50,360 --> 00:44:54,120
Speaker 1: the USA. The final question came from a reporter at

735
00:44:54,200 --> 00:44:57,600
Speaker 1: Marketplace who asked Jerome whether the window for a soft

736
00:44:57,719 --> 00:45:01,759
Speaker 1: landing has narrowed put some Is it still possible for

737
00:45:01,800 --> 00:45:04,840
Speaker 1: the FED to raise interest rates without causing a recession?

738
00:45:05,520 --> 00:45:09,360
Speaker 1: Jerome said yes, but admitted that this is becoming less

739
00:45:09,440 --> 00:45:12,799
Speaker 1: likely by the day. When the reporter asked why that is,

740
00:45:13,200 --> 00:45:17,480
Speaker 1: Jerome explained that inflation hasn't come down nearly as quickly

741
00:45:17,520 --> 00:45:20,520
Speaker 1: as the FED was hoping. This means that the FED

742
00:45:20,600 --> 00:45:23,800
Speaker 1: will have to be more restrictive with its monetary policy,

743
00:45:23,920 --> 00:45:28,359
Speaker 1: and that increases the possibility of a recession. You can

744
00:45:28,480 --> 00:45:31,360
Speaker 1: learn all about what that would mean for the economy

745
00:45:31,600 --> 00:45:40,279
Speaker 1: using the link in the description. So this brings me

746
00:45:40,360 --> 00:45:43,760
Speaker 1: to the big question, and that's whether inflation will stay

747
00:45:43,840 --> 00:45:47,640
Speaker 1: much higher than investors are currently pricing in. This ultimately

748
00:45:47,640 --> 00:45:50,319
Speaker 1: depends on whether you believe the global economy is going

749
00:45:50,400 --> 00:45:52,719
Speaker 1: back to the way that it was, or that it

750
00:45:52,840 --> 00:45:56,360
Speaker 1: is undergoing a paradigm shift that will cause lots of inflation.

751
00:45:57,000 --> 00:46:01,000
Speaker 1: To clarify, Jim Bianco isn't the only macro analyst who

752
00:46:01,000 --> 00:46:05,200
Speaker 1: falls into the latter camp. If all the macro podcasts

753
00:46:05,239 --> 00:46:08,560
Speaker 1: I've been listening to lately are any indication analysts are

754
00:46:08,640 --> 00:46:11,920
Speaker 1: divided down the middle on whether the economy will change,

755
00:46:12,239 --> 00:46:16,160
Speaker 1: you'd think that everyone and everything will fall back into

756
00:46:16,200 --> 00:46:19,640
Speaker 1: their old habits. However, it's clear to see that a

757
00:46:19,760 --> 00:46:24,200
Speaker 1: multipolar world is forming. The United States, the European Union,

758
00:46:24,280 --> 00:46:26,840
Speaker 1: and parts of Latin America and Asia seem to be

759
00:46:26,920 --> 00:46:30,520
Speaker 1: at one pole, and China, India, Russia, Saudi Arabia and

760
00:46:30,560 --> 00:46:33,160
Speaker 1: other parts of Latin America and Asia seem to be

761
00:46:33,200 --> 00:46:36,320
Speaker 1: at the other pole. If you watch my video about

762
00:46:36,440 --> 00:46:39,680
Speaker 1: China's influence in Africa, you'll know that many countries on

763
00:46:39,800 --> 00:46:42,839
Speaker 1: that continent are being drawn towards the second pole too.

764
00:46:43,320 --> 00:46:46,920
Speaker 1: If this is the case, then inflation could skyrocket at

765
00:46:46,960 --> 00:46:49,960
Speaker 1: the first pole, if, say, trade between the US and

766
00:46:50,040 --> 00:46:53,319
Speaker 1: China starts to slow down. This seems to be more

767
00:46:53,440 --> 00:46:56,480
Speaker 1: likely than ever, as the United States, Europe, and other

768
00:46:56,560 --> 00:47:00,600
Speaker 1: Western powers have announced ambitious plans to bring them manufacturing

769
00:47:00,640 --> 00:47:05,480
Speaker 1: of microchips and electric batteries on shore. Something tells me

770
00:47:05,680 --> 00:47:10,479
Speaker 1: that these products will be more expensive than their Chinese counterparts. Now,

771
00:47:10,600 --> 00:47:14,360
Speaker 1: consider a scenario where individuals and institutions in the United

772
00:47:14,400 --> 00:47:17,959
Speaker 1: States and Europe are restricted or banned from importing such

773
00:47:18,000 --> 00:47:21,680
Speaker 1: products from China. Did I mention that the US recently

774
00:47:21,719 --> 00:47:25,799
Speaker 1: banned the export of semiconductors to China, The same response

775
00:47:25,920 --> 00:47:30,520
Speaker 1: from the CCP would be inflationary. That said, individuals and

776
00:47:30,680 --> 00:47:34,280
Speaker 1: institutions at both poles will be very reluctant to cut

777
00:47:34,320 --> 00:47:38,160
Speaker 1: their lucrative economic ties because of some geopolitical power struggle

778
00:47:38,160 --> 00:47:42,120
Speaker 1: between their countries. Case and point, many of these restrictions

779
00:47:42,160 --> 00:47:47,120
Speaker 1: have loopholes, including say, the sanctions on Russian oil and gas. Still,

780
00:47:47,480 --> 00:47:50,680
Speaker 1: relations could deteriorate to the point that loopholes are no

781
00:47:50,760 --> 00:47:54,560
Speaker 1: longer possible. There's no question that the risk of this

782
00:47:54,680 --> 00:47:57,200
Speaker 1: happening is higher than ever, and it looks like this

783
00:47:57,320 --> 00:48:00,839
Speaker 1: risk is only scheduled to rise. The over lining is

784
00:48:01,000 --> 00:48:04,760
Speaker 1: that inflation should come down after the initial adjustment period

785
00:48:04,840 --> 00:48:08,839
Speaker 1: is over. When that will be nobody knows, but the

786
00:48:08,880 --> 00:48:12,880
Speaker 1: inflation would definitely last longer than a few months. That

787
00:48:12,960 --> 00:48:16,120
Speaker 1: means it could be a long time before the FED

788
00:48:16,200 --> 00:48:19,560
Speaker 1: starts to drop interest rates. In fact, some believe that

789
00:48:19,600 --> 00:48:21,960
Speaker 1: the FED may be forced to change its two percent

790
00:48:22,080 --> 00:48:26,400
Speaker 1: target to accommodate a higher level of inflation. I suppose it.

791
00:48:26,440 --> 00:48:28,200
Speaker 1: We'll have to wait and see, but I must say

792
00:48:28,280 --> 00:48:32,640
Speaker 1: it's times like these that I am still thankful for cryptocurrency.

793
00:48:34,080 --> 00:48:37,280
Speaker 1: Thank you so much for listening to the coin Bureau podcast.

794
00:48:37,360 --> 00:48:40,239
Speaker 1: If you'd like to learn more about cryptocurrency, you can

795
00:48:40,320 --> 00:48:43,600
Speaker 1: visit our YouTube channel at YouTube dot com forward slash

796
00:48:43,600 --> 00:48:46,439
Speaker 1: coin Bureau. You can also go to coin bureau dot

797
00:48:46,440 --> 00:48:49,319
Speaker 1: com for loads more information about all things crypto. You

798
00:48:49,320 --> 00:48:51,880
Speaker 1: can follow me on Twitter at at coin bureau or

799
00:48:51,920 --> 00:48:55,960
Speaker 1: one word, and I'm also active on TikTok and Instagram too.

800
00:49:00,040 --> 00:49:01,800
Speaker 1: S of co Cock