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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. Many of you have been in touch

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Speaker 1: to ask whether it's possible to listen to our videos

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Speaker 1: in podcast format, and so your wish is my command.

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Speaker 1: This week, I've selected our videos about upcoming crypto regulations

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Speaker 1: in the European Union and a report published three years

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Speaker 1: ago by Black Rock which seems to have managed to

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Speaker 1: predict the future. Now, make no mistake, a regulatory tsunami

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Speaker 1: is heading towards the crypto industry and its effects are

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Speaker 1: going to be profound. As such, any insights we can

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Speaker 1: glean into what these regulations will look like our vital,

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Speaker 1: not only in helping us prepare for impact, but also

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Speaker 1: in allowing us to have some influence over their eventual form.

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Speaker 1: While regulators in the United States continue to sound off

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Speaker 1: negatively about crypto, it's happily looking like a different story

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Speaker 1: over in Europe. There, the Markets in Crypto Assets Regulation

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Speaker 1: or MICA bill is getting close to being voted into law,

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Speaker 1: which would mean clear and coordinated crypto regulations throughout all

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Speaker 1: twenty seven EU member states. What makes this news even

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Speaker 1: better is that the bill's authors seem to have taken

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Speaker 1: on board many of the criticisms leveled at an earlier

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Speaker 1: draft of the legislation. The result is a bill that

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Speaker 1: looks like being a lot more friendly to crypto than

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Speaker 1: many anticipated. That's not to say there aren't areas of

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Speaker 1: concern still, but it does seem like a big step

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Speaker 1: in the right direction. We were lucky enough to see

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Speaker 1: a leaked copy of the bill in advance, and you'll

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Speaker 1: hear our thoughts on it all in this episode next.

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Speaker 1: Black Rock is a name that just keeps coming up

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Speaker 1: more and more often these days. For those unfamiliar, this

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Speaker 1: giant of a company is the largest asset manager in

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Speaker 1: the world, which means it's one of the most powerful

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Speaker 1: forces at work in financial markets and beyond. Back just

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Speaker 1: a few months before the pandemic turned the world upside down,

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Speaker 1: black Rock published a report that predicted the extreme lengths

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Speaker 1: that US monetary and fiscal policies would have to go

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Speaker 1: to in the event of the next economic downturn. Turns

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Speaker 1: out the authors called it pretty well. So have a

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Speaker 1: listen as we unpicked this report and draw some conclusions

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Speaker 1: from it about what the rich and powerful want for

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Speaker 1: the world. I hope you enjoy listening to these two pieces,

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Speaker 1: and I'll be back talking crypto with Mike very soon,

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Speaker 1: so be sure to stay tuned, and if you want

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Speaker 1: even more content from Coin Bureau, be sure to subscribe

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Speaker 1: to our YouTube channel and visit us on social media too. Recently,

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Speaker 1: a draft of Europe's finalized crypto regulations was leaked to

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Speaker 1: the press, and the amendments were interesting, to say the least.

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Speaker 1: Although the final draft is not public, we were lucky

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Speaker 1: enough to get our hands on the document thanks to

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Speaker 1: a European crypto policy expert. Today, I'm going to explain

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Speaker 1: what Europe's finalized crypto regulations say in simple terms, when

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Speaker 1: they're expected to come into force, and why they could

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Speaker 1: be extremely bullish for the crypto market. I want to

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Speaker 1: start by giving you a quick recap of Europe's upcoming

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Speaker 1: crypto regulations. As some of you will know, the European

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Speaker 1: Union passed the Quote Markets in Crypto Assets Regulation or

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Speaker 1: MICA bill over the summer, specifically at the end of June.

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Speaker 1: If you watched our video about the MICA Bill from May,

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Speaker 1: you'll know that the regulations within the bill will apply

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Speaker 1: to every country in the European Union. These regulations will

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Speaker 1: also overrule every national law about crypto currency in the EU,

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Speaker 1: because well, that's just how the EU works now. Some

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Speaker 1: of you may also recall that the MICA Bill originally

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Speaker 1: contained crazy proposals like requiring k y C for all

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Speaker 1: n f T marketplaces, banning defy and crashing BTCS price

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Speaker 1: to get rid of proof of work. Note that MICA

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Speaker 1: does not contain any crazy proposals about tracking crypto transactions.

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Speaker 1: Those are in a different bill. Now. What's awesome about

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Speaker 1: MICA is that it contains some concrete definitions for different

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Speaker 1: types of cryptocurrencies and how they should be regulated as

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Speaker 1: far as the EU is concerned. There are three types

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Speaker 1: of cryptocurrencies utility tokens, Asset reference tokens or A r

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Speaker 1: T S, and E money tokens or E m T s.

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Speaker 1: For the sake of simplicity, you can think of utility

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Speaker 1: tokens as including basically every cryptocurrency that's not an A

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Speaker 1: r T or E m T. You tell t tokens

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Speaker 1: include e r C twenty tokens like decentral Land's manner,

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Speaker 1: and even cryptocurrency coins like bitcoins BTC. Under the version

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Speaker 1: of MICA from may any crypto project that wants to

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Speaker 1: conduct an i c O or have its coin or

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Speaker 1: token listed on exchanges in the EU must provide a

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Speaker 1: detailed white paper too and register with the relevant regulators.

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Speaker 1: I'll explain the differences in the final micro draft in

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Speaker 1: the moment. Now. Next, we have a r T S.

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Speaker 1: As the name suggests, Asset reference tokens are any cryptocurrencies

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Speaker 1: that derive their value from some basket of assets. This

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Speaker 1: includes decentralized stable coins like maker Dow's DYE, which is

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Speaker 1: collateralized by Ethereum Circles USDC, and other cryptocurrencies and stable coins.

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Speaker 1: Under the version of MICA from may, A, rt issuers

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Speaker 1: do not have to register with any European authorities so

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Speaker 1: long as their market caps do not exceed five million euros,

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Speaker 1: which is not much at all. If they exceed this

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Speaker 1: low limit, they must maintain high quality reserves and cannot

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Speaker 1: allow holders of their A r T to earn yield.

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Speaker 1: And last, but not least, we have E m T s,

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Speaker 1: which are of course centralized stable coins. This includes tethers

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Speaker 1: U s DT circles U s d C, and pack

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Speaker 1: sauce is b U s D. I believe it also

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Speaker 1: includes gold back stable coins like pack sauces packs G,

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Speaker 1: but I suppose it ultimately depends on whether the relevant

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Speaker 1: regulators consider gold to be money. Now, under the version

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Speaker 1: of MICA from may E, m T issuers were subject

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Speaker 1: to more or less the same rules as a RT issuers,

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Speaker 1: but with a lot more scrutiny. Stable coins deemed significant

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Speaker 1: would have their transaction volumes capped at two hundred million

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Speaker 1: euros per day. This is very low since all crypto's

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Speaker 1: trade against stable coins. As you might have guessed, these

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Speaker 1: restrictions around stable coins, be their A R T S

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Speaker 1: or e M t s are due to the e

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Speaker 1: U S fears that a stable coin could displace the Euro.

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Speaker 1: These fears date back to Facebook's Libre project, and they're

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Speaker 1: becoming more acute as the Euro declines against the U

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Speaker 1: S dollar. This is why it's so interesting that the

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Speaker 1: final draft of MICAH, which leaked in late September, revealed

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Speaker 1: that some of the restrictions on centralized stable coins had

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Speaker 1: been removed. As you'll soon see, this is just one

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Speaker 1: of the many interesting things in the final draft of MICAH.

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Speaker 1: This final draft of MICAH is a whopping one thousand

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Speaker 1: and fifty pages long. As you can see, it contains

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Speaker 1: four columns. The fourth column is titled Draft Agreement, and

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Speaker 1: it is the final text that will officially become law

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Speaker 1: in just a few months. Just an f y I

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Speaker 1: for anyone who manages to find the full document and

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Speaker 1: wants to understand it now. As I mentioned in the introduction,

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Speaker 1: we managed to get our hands on the document thanks

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Speaker 1: to a European crypto policy expert and adviser named Patrick Hansen.

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Speaker 1: Patrick has actually been the source for much of the

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Speaker 1: news you've been hearing about crypto regulations in Europe, especially MICAH.

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Speaker 1: If you're interested in European crypto regulation, I strongly suggest

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Speaker 1: following Patrick on Twitter. I'll leave links to a few

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Speaker 1: of his threads about MICAH in the description. If you're interested,

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Speaker 1: maybe you can convince him to share the document with

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Speaker 1: you too. In all seriousness, Patrick was kind enough to

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Speaker 1: answer all the questions we had about his version of MICAH.

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Speaker 1: Our first question was, obviously who leaked the bill? Not surprisingly,

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Speaker 1: it was one of the politicians who was intimately involved

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Speaker 1: with the bill itself. Not naming names, of course, Patrick

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Speaker 1: went on to explain that it's quite common for high

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Speaker 1: profile EU bills to be leaked. This is because the

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Speaker 1: final discussions always take place behind closed doors. Leaking the

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Speaker 1: bill essentially allows the lobbyists to check if the changes

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Speaker 1: they were implemented or if more persuasion is needed. So

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Speaker 1: this immediately begs the question of who wanted to see

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Speaker 1: the final draft of MICAH leaked. Given that the biggest

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Speaker 1: changes related to the restrictive regulations around centralized stable coins,

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Speaker 1: it's safe to assume that stable coin issuers were involved.

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Speaker 1: Again not naming names, but I think you can guess who.

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Speaker 1: As to whether these special interests were satisfied with the

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Speaker 1: final micro draft, Patrick said that as far as he

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Speaker 1: can tell, the answer is yes. This is because all

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Speaker 1: the regulations proposed by so called crypto skeptics were avoided.

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Speaker 1: This includes the crazy proposals I mentioned earlier. In Patrick's eyes,

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Speaker 1: the biggest upside is that MICAH will harmonize crypto regulations

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Speaker 1: across Europe. This means that a crypto project or company

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Speaker 1: just needs to get regulatory approval in one EU country

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Speaker 1: and it will allow them to do business in the

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Speaker 1: other twenty six. Trick believes that this will make it

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Speaker 1: easier for crypto projects and companies to scale within Europe

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Speaker 1: and will simultaneously provide much needed regulatory clarity for institutional

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Speaker 1: investors across Europe. MICAH could therefore serve as a catalyst

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Speaker 1: for the next crypto bull run. More about that later now.

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Speaker 1: Patrick summed up the final draft of MICAH as being

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Speaker 1: quote mostly reasonable. Unlike the transfer of funds or t

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Speaker 1: f R regulation which I alluded to earlier, that's the

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Speaker 1: one that wants k y C to be applied to

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Speaker 1: every single crypto transaction courtesy of the Financial Action Task

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Speaker 1: Force or fat F. You can learn more about the

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Speaker 1: fat F and how it's trying to kill crypto by

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Speaker 1: using the link in the description. Now, figuring out exactly

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Speaker 1: what changed between the MICA version in May and the

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Speaker 1: final draft of MICAH, which leaked late last month is

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Speaker 1: no easy task. I mean, the final draft is literally

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Speaker 1: a thousand pages long, and most of the text is

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Speaker 1: repeated four times due to the columns, making it very

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Speaker 1: difficult to search. My keyword what's scary is that Patrick

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Speaker 1: admitted that only a handful of people are intimately familiar

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Speaker 1: with what's in MICA and the changes that were made

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Speaker 1: between the two versions. For what it's worth, Patrick's research,

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Speaker 1: as well as our own, seems to have identified the

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Speaker 1: biggest changes. So let's start with the fun stuff, n

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Speaker 1: f t s and defy now. One of the biggest

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Speaker 1: criticisms of the previous version of MICA was that it

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Speaker 1: didn't contain many details about these two niches. To be exact,

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Speaker 1: it didn't have any details about n f t s

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Speaker 1: at all and seemed to imply that defied protocols would

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Speaker 1: have to register with regulators. In the final draft of MICAH,

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Speaker 1: the author specify that fractionalized n f t s will

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Speaker 1: be treated like utility tokens. This means that issues of

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Speaker 1: fractionalized n f t s will have to register with regulators,

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Speaker 1: present a white paper, and all that other stuff. More

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Speaker 1: about fractionalized n f t s in the description I digress.

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Speaker 1: What's odd is that the authors also say quote the

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Speaker 1: issuance of crypto assets as non fungible tokens in a

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Speaker 1: large series or collection should be considered as an indicator

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Speaker 1: of their fungibility. In other words, if there is an

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Speaker 1: n f T with a large collection of similar looking JPEGs,

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Speaker 1: they may also be subject to regulation. According to Patrick,

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Speaker 1: it's likely that regulators will decide the fungibility of n

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Speaker 1: f T collections on a case by case basis. He's

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Speaker 1: also concerned that extra scrutiny could be applied to larger

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Speaker 1: n f T collections, including popular ones like the board

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Speaker 1: a yacht club. Note that Patrick didn't name any names here.

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Speaker 1: Now defy is where things get really interesting. That's because

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Speaker 1: the author specified that MICAH does not apply to defy. Quote.

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Speaker 1: Where crypto asset services as defined in this regular relation

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Speaker 1: are provided in a fully decentralized manner without any intermediary,

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Speaker 1: they do not fall within the scope of this regulation.

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Speaker 1: This begs the question of what decentralized means. According to Patrick,

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Speaker 1: the definition of decentralization will be decided on a case

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Speaker 1: by case basis. This is a bit concerning, as it

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Speaker 1: leaves the door open to biased regulation, but it's still

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Speaker 1: easily the best defied regulation in any developed country so far.

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Speaker 1: It's also more significant than you think because regulators in

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Speaker 1: the United States don't even consider DEFY to be a thing.

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Speaker 1: As far as they're concerned, the defined niche doesn't exist.

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Speaker 1: The fact that European regulations are seen as the gold

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Speaker 1: standard could therefore help us cryptoregulators find reason. Don't get

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Speaker 1: too excited yet, though. The final draft of MICAH also

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Speaker 1: notes that a report will be issued next year that

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Speaker 1: will address the feasibility of regulating DEFY in the European Union.

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Speaker 1: With some luck, the crypto lobbyists will manage to protect

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Speaker 1: DEFY from a total crackdown by the bank lobbyists. Anyways,

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Speaker 1: when it comes to utility tokens, the final draft of

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Speaker 1: MICAH didn't have that much to say about them. Then again,

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Speaker 1: neither did the May version of MICAH. Your recall, this

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Speaker 1: is because the focus of MICA is fundamentally to protect

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Speaker 1: the Eurozone from succumbing to a foreign currency of some kind.

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Speaker 1: That said, I did find an interesting provision on page

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Speaker 1: forty quote, no requirements of this regulation should apply to

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Speaker 1: crypto assets that are automatically created as a reward for

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Speaker 1: the maintenance of the d l T or the validation

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Speaker 1: of transactions in the context of a consensus mechanism. Now

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Speaker 1: call me crazy, but this sounds like cryptocurrency coins will

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Speaker 1: not be subject to MICA. This makes sense when we're

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Speaker 1: talking about coins like BTC, Eth and even Ada. However,

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Speaker 1: it makes less sense when we start talking about new

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Speaker 1: crypto coins that were funded via VC focus I c

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Speaker 1: O s, at least in my opinion. Now. The very

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Speaker 1: next phase of this paragraph also suggests that tokens or

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Speaker 1: n f t s that are offered as part of

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Speaker 1: loyalty or rewards programs will not be subject to MICAH either.

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Speaker 1: If my interpretation is correct, I suspect we're going to

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Speaker 1: see no shortage of ship coins exploit this regulatory loophole

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Speaker 1: during the next bull market. On page one seventy nine,

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Speaker 1: I found another interesting provision about utility tokens. This provision

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Speaker 1: suggests that a crypto project that conducts an i c

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Speaker 1: O must complete its dep or blockchain within one year

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Speaker 1: of the white paper being published. It's not entirely clear,

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Speaker 1: but it makes sense, so I suspect this is the case.

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Speaker 1: After all, you wouldn't want someone to issue a white

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Speaker 1: paper conduct an I c O and then change what

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Speaker 1: the project is about later down the line. Come to

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Speaker 1: think of it, there are lots of crypto projects that

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Speaker 1: have pivoted like this. And from what I can remember,

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Speaker 1: it's never ended well for them or the I c

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Speaker 1: O participants. Now, when it comes to a r t S,

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Speaker 1: the term asset referenced token is used no less than

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Speaker 1: three thousand times in the final micro draft for reference,

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Speaker 1: this is half as many times as the term E

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Speaker 1: money token is mentioned. Meanwhile, the term utility token is

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Speaker 1: only mentioned seventy two times. Really gets the knocking jogging now. Unfortunately,

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Speaker 1: we didn't have time to check every single one of

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Speaker 1: the three thousand mentions of a r t S. Even so,

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Speaker 1: we still found a few very interesting things. I'll start

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Speaker 1: by saying that there was a lot of overlap between

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Speaker 1: provisions for A r t S and e m t S,

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Speaker 1: which again makes sense given Micah's stable coin focus. Interestingly,

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Speaker 1: this is not the case with all the provisions found

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Speaker 1: on pages sixty two to seventy two, where the authors

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Speaker 1: give an extremely long list of all the regulations that

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Speaker 1: a RT issuers must abide by. It appears that e

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Speaker 1: MT issuers are not subject to nearly the same degree

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Speaker 1: of scrutiny, and this is something Patrick also pointed out.

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Speaker 1: It's almost as if centralized stable coin issuers don't want

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Speaker 1: competition from decentralized stable coin issuers, but surely that would

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Speaker 1: never find its way into regulation, right conspiracies aside. On

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Speaker 1: page two d and fifty six, the authors specify that

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Speaker 1: white papers for a r T S must always include

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Speaker 1: three disclaimers. The a r T can go to zero,

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Speaker 1: the a RT may not always be transferable, and the

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Speaker 1: a RT may not always be liquid. Tell me you're

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Speaker 1: talking about terror without telling me you're talking about terror.

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Speaker 1: Then on page three hundred sixty, there's a peculiar provision

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Speaker 1: which seems to suggest that the release of an audit

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Speaker 1: of an A r T S reserves can be delayed

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Speaker 1: if it is quote deemed necessary are to protect the

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Speaker 1: economic interests of holders of the asset reference token. Make

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Speaker 1: of that what you will when it comes to e

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Speaker 1: M T S. The most significant change in the final

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Speaker 1: draft of MICAH is the clarification of what is meant

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Speaker 1: by transactions in the context of stable coin transaction limits.

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Speaker 1: Patrick found this clarification on page seventy seven, where the

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Speaker 1: author specified that transaction limits on stable coins will only

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Speaker 1: apply to payments. This is important because it means that

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Speaker 1: stable coins like us d T and USDC have no

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Speaker 1: usage cap in other contexts. They can be used for

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Speaker 1: trading in defy and other non payment purposes with no limits.

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Speaker 1: Now this is great, but I can't help but feel

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Speaker 1: that this provision could become a loophole for peer to

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Speaker 1: peer payments. What's interesting is that this loophole probably isn't

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Speaker 1: a problem because Patrick found that many of the original

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Speaker 1: e m T restrictions will still apply to US dollar

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Speaker 1: stable coins. This means that only eurostable coins will not

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Speaker 1: be subject to restrictions, which makes sense given that they

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Speaker 1: don't compete with the Euro. It also makes sense because

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Speaker 1: of the assets that back stable coins. If you watch

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Speaker 1: our video about that, you'll know that most of them

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Speaker 1: are backed by debt, mostly US government debt. This means

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Speaker 1: that when you buy a usd stable coin, you are

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Speaker 1: subsidizing the US government. Naturally, issuers of eurostable coins in

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Speaker 1: Europe will be required to hold their reserves in quote

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Speaker 1: highly liquid assets. This is almost certainly code for European

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Speaker 1: government debt as it is a highly liquid asset, and

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Speaker 1: I suspect which government debt will depend on which European

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Speaker 1: country requires the subsidy. For context, the European Central Bank

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Speaker 1: has had a hard time raising interest rates because it

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Speaker 1: would cause issues for countries like Italy and Spain. With

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Speaker 1: a eurostable coin, however, it would be possible to invest

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Speaker 1: the capital of unsuspecting crypto holders into Italian and Spanish

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Speaker 1: debt to keep the Eurozone intact. On that note, a

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Speaker 1: few months ago, Patrick explained that the reason why we

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Speaker 1: didn't see a eurostable coin until recently was because base

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Speaker 1: interest rates in the Eurozone were negative. This meant that

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Speaker 1: a eurostable coin issuer wouldn't stand to make any money

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Speaker 1: holding European government debt to back a eurostable coin. This

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Speaker 1: is why Circle revealed a eurobacked stable coin shortly before

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Speaker 1: the ECB started raising interest rates. It's safe to say

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Speaker 1: that Circle is now perfectly positioned to take advantage of

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Speaker 1: the favorable stable coin provisions in the final MICA draft.

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Speaker 1: Funny that, speaking of which, there were a couple of

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Speaker 1: interesting stable coin provisions I found which stuck out to me.

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Speaker 1: The first is on page nine eighty two, and it

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Speaker 1: says that stable coin issuers need to disclose whether they

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Speaker 1: have any affiliation with the smart contract cryptocurrencies their stable

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Speaker 1: coins are circulating on. Now. This is fascinating as it

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Speaker 1: could reveal some previously unknown affiliations between major stable coin

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Speaker 1: issuers and smart contract cryptocurrencies. I can think of a

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Speaker 1: few which might come up, but I'll leave that to

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Speaker 1: your own imagination and research. The other interesting stable coin

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Speaker 1: provision is on page nine hundred and eighty seven and

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Speaker 1: it seems to suggest that stable coin issuers will not

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Speaker 1: be allowed to charge any fees for minting and redeeming

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Speaker 1: their stable coin tokens. This just underscores how much stable

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Speaker 1: coin issuers will rely on European government debt for revenue.

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Speaker 1: So this brings me to the two big questions you

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Speaker 1: came here for, and that's when my co will come

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Speaker 1: into force and why it could be extremely bullish for

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Speaker 1: the crypti market. Patrick explained that the next step is

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Speaker 1: for the final draft to be voted on again by

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Speaker 1: European politicians. This will happen in the next couple of weeks.

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Speaker 1: It's important to note that no more changes will be

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Speaker 1: made and this vote is just a formality. Once that's done,

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Speaker 1: the text in the final draft will have to be

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Speaker 1: rewritten for clarity, reviewed by lawyers to make sure the

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Speaker 1: same regulations are being communicated, and then translated into all

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Speaker 1: the lovely languages of Europe. Patrick estimates that this whole

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Speaker 1: process will take another few months, but we should see

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Speaker 1: the official MICAH regulations published no later than February next year.

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Speaker 1: MICAH will immediately become law the moment it's published, but

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Speaker 1: there will be transitional periods for the regulations within it.

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Speaker 1: Patrick said that the stable coin related regulations will come

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Speaker 1: into force roughly one year from publication, so early four.

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Speaker 1: The rest of the to regulations will come into force

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Speaker 1: around eighteen months after publications, so mid to late four.

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Speaker 1: This coincidentally corresponds to roughly when the next crypto bull

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Speaker 1: run will begin. Hence why I believe MICAH could be

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Speaker 1: extremely bullish for the crypto market. It will bring regulatory

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Speaker 1: clarity to institutional investors in Europe at around the same

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Speaker 1: time when interest in cryptocurrency will be on the rise,

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Speaker 1: the perfect catalyst. This in turn could give rise to

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Speaker 1: lots of promising European crypto projects and companies. But there

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Speaker 1: is one caveat all. The regulatory compliance could make it

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Speaker 1: hard for new crypto projects and companies to get off

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Speaker 1: the ground from within Europe, something Patrick is also concerned about.

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Speaker 1: This is especially true of any crypto projects trying to

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Speaker 1: create decentralized stable coins, which will be subject to a

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Speaker 1: laundry list of limitations as a r T S. It

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Speaker 1: might also be tricky for DeFi pro ticals to get

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Speaker 1: off the ground, as their success will depend on whether

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Speaker 1: regulators classify them as decentralized or not. Now all in all,

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Speaker 1: I agree with Patrick that micah is mostly reasonable. I

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Speaker 1: also agree with his perspective that crypto regulation in the

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Speaker 1: United States will not be nearly as reasonable as it

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Speaker 1: is in Europe. This could make the current crypto bear

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Speaker 1: market worse and create headwinds for the crypto bullmarket when

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Speaker 1: it returns. You can learn more about the upcoming crypto

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Speaker 1: crackdown in the United States using, of course, the link

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Speaker 1: in the description. All the way back in August, black Rock,

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Speaker 1: the world's largest asset manager, published a research paper co

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Speaker 1: authored by Stanley Fisher, the former vice chairman of the

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Speaker 1: Federal Reserve. Now, believe it or not, but this research

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Speaker 1: paper predicted much of the unprecedented fiscal and monetary policy

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Speaker 1: we saw during the pandemic just a few months before

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Speaker 1: it happened. Today, I'm going to unpack this peculiar paper,

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Speaker 1: explain what it says in simple terms, and tell you

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Speaker 1: what predictions it makes about what comes next for the

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Speaker 1: global economy. The research paper i'll be summarizing today is

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Speaker 1: titled quote dealing with the Next Downturn From Unconventional Monetary

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Speaker 1: Policy to Unprecedented Policy Coordination. It was published by black

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Speaker 1: Rocks Investment Institute, and I'll leave a link to the

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Speaker 1: full research paper in the description. Now, the paper begins

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Speaker 1: with a short summary, but I'll preface it with a

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Speaker 1: couple of key terms. Monetary policy is what central banks

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Speaker 1: do and include stuff like raising and lowering interest rates.

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Speaker 1: Fiscal policy is what governments do and include stuff like

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Speaker 1: raising and lowering taxes and yes, sending out stimmy checks.

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Speaker 1: What the authors argue in this research paper is that

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Speaker 1: the next economic downturn will require quote unprecedented monetary and

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Speaker 1: fiscal policy that will need to be closely coordinated. I'll

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Speaker 1: reiterate that this research paper was published prior to the pandemic,

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Speaker 1: which saw exactly this occur. What's nice is that the

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Speaker 1: authors outline their argument in seven points. The first argument

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Speaker 1: is that monetary policy will not be enough to soften

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Speaker 1: the next economic downturn. This is because interest rates were

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Speaker 1: already at or near zero in most countries at the time.

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Speaker 1: Note that this was the case until fairly recently. The

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Speaker 1: second argument is that fiscal policy alone will likewise be

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Speaker 1: insufficient at softening the next economic downturn. This is because

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Speaker 1: it is quote typically not nimble enough, meaning there is

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Speaker 1: often a democratic process behind each batch of government spending,

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Speaker 1: and well, that's just not efficient. The authors also warn

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Speaker 1: that too much government spending could cause interest rates to

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Speaker 1: rise due to their negative effects on the valuation of

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Speaker 1: government debt. Note that the interest rates on government debt

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Speaker 1: are basically used as the baseline interest rates for other

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Speaker 1: kinds of debt in the economy. The third argument is

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Speaker 1: that monetary and fiscal policy must work in tandem to

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Speaker 1: soften the next economic downturn. The author's caution that quote

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Speaker 1: hoping for such an outcome will probably not be enough,

434
00:27:26,840 --> 00:27:29,840
Speaker 1: which seems to suggest that governments need to get their

435
00:27:29,840 --> 00:27:33,959
Speaker 1: central banks in line. Funnily enough, this was around the

436
00:27:33,960 --> 00:27:37,800
Speaker 1: time that former US President Donald Trump was slamming FED

437
00:27:37,920 --> 00:27:41,879
Speaker 1: chairman Jerome Powell for not lowering interest rates more in

438
00:27:41,920 --> 00:27:45,199
Speaker 1: the face of a slowing economy. Trump even tweeted that

439
00:27:45,320 --> 00:27:49,879
Speaker 1: Jerome had quote no guts, no sense, no vision, what

440
00:27:50,040 --> 00:27:53,199
Speaker 1: a time. Now. The fourth argument of the authors is

441
00:27:53,240 --> 00:27:56,600
Speaker 1: that softening the next downturn will require central banks to

442
00:27:56,720 --> 00:28:02,160
Speaker 1: quote go direct put simply interact directly with the economy.

443
00:28:02,400 --> 00:28:05,520
Speaker 1: In the case of the FED, that involved buying hundreds

444
00:28:05,640 --> 00:28:09,399
Speaker 1: of billions of dollars worth of corporate debt of FED first.

445
00:28:10,720 --> 00:28:14,199
Speaker 1: The fifth argument is that an extreme form of going direct,

446
00:28:14,400 --> 00:28:17,399
Speaker 1: such as the FED buying corporate debt, would be quote

447
00:28:17,560 --> 00:28:22,719
Speaker 1: an explicit and permanent monetary financing of a fiscal expansion,

448
00:28:22,880 --> 00:28:27,240
Speaker 1: or so called helicopter money. My interpretation of this is

449
00:28:27,280 --> 00:28:30,520
Speaker 1: that by doing something drastic like buying up corporate debt,

450
00:28:30,800 --> 00:28:34,640
Speaker 1: central banks have opened a Pandora's box they cannot close.

451
00:28:35,080 --> 00:28:38,280
Speaker 1: In other words, similar measures will forever have to be

452
00:28:38,360 --> 00:28:42,440
Speaker 1: taken in future downturns, and could even expand to purchasing

453
00:28:42,480 --> 00:28:46,600
Speaker 1: other assets like stocks. Fun fact, the Bank of Japan

454
00:28:46,800 --> 00:28:50,640
Speaker 1: has been buying stocks for years. The authors seem to

455
00:28:50,680 --> 00:28:53,600
Speaker 1: suggest that if the FED starts doing the same quote,

456
00:28:53,800 --> 00:28:58,720
Speaker 1: it would undermine institutional credibility. Some would say that's already

457
00:28:58,760 --> 00:29:03,600
Speaker 1: happened with the corporate bond buying. Now. With the sixth argument,

458
00:29:03,680 --> 00:29:06,720
Speaker 1: the authors provide a four point plan for this kind

459
00:29:06,760 --> 00:29:12,200
Speaker 1: of unprecedented stimulus. These points are define the unusual circumstances

460
00:29:12,200 --> 00:29:16,959
Speaker 1: that justify the stimulus, set an inflation objective for the stimulus,

461
00:29:17,320 --> 00:29:22,080
Speaker 1: deploy the stimulus, and finally phase out the stimulus. This

462
00:29:22,160 --> 00:29:25,480
Speaker 1: ties into the author's sixth argument, and that's that this

463
00:29:25,600 --> 00:29:30,840
Speaker 1: unprecedented stimulus should be quote calibrated to achieve the inflation objective,

464
00:29:30,960 --> 00:29:35,320
Speaker 1: which could include making up for past inflation misses. This

465
00:29:35,560 --> 00:29:38,520
Speaker 1: is significant because prior to the pandemic, central banks in

466
00:29:38,560 --> 00:29:42,200
Speaker 1: the United States and elsewhere were actually struggling to meet

467
00:29:42,320 --> 00:29:46,800
Speaker 1: their two percent inflation targets. This is for multiple reasons,

468
00:29:46,840 --> 00:29:49,960
Speaker 1: mainly demographic decline, which seems to be why the people

469
00:29:50,000 --> 00:29:53,400
Speaker 1: in power are trying to transition to a rent based economy.

470
00:29:53,760 --> 00:29:57,760
Speaker 1: More about that in the description. Now, if you're wondering

471
00:29:57,840 --> 00:30:01,080
Speaker 1: why a two percent inflation target is so important, it's

472
00:30:01,080 --> 00:30:06,280
Speaker 1: really for two reasons. First, when money is slowly losing value,

473
00:30:06,360 --> 00:30:11,160
Speaker 1: it incentivizes people to spend rather than save. This stimulates

474
00:30:11,200 --> 00:30:15,520
Speaker 1: the economy, and it's ultimately why central banks lower interest rates.

475
00:30:15,560 --> 00:30:20,880
Speaker 1: They want a bit of inflation. Second, governments and corporations

476
00:30:20,920 --> 00:30:24,360
Speaker 1: around the world have taken on record levels of debt.

477
00:30:25,320 --> 00:30:29,120
Speaker 1: If the economy were to become deflationary, then the value

478
00:30:29,160 --> 00:30:32,400
Speaker 1: of that debt would increase rather than decrease as it

479
00:30:32,440 --> 00:30:37,720
Speaker 1: does in inflationary environments. This is why some analysts believe

480
00:30:37,960 --> 00:30:42,920
Speaker 1: the inflation caused by unprecedented stimulus during the pandemic was intentional.

481
00:30:43,280 --> 00:30:47,760
Speaker 1: The elites need high inflation to devalue their debts. High

482
00:30:47,840 --> 00:30:51,880
Speaker 1: inflation also crushes small businesses and allows bigger businesses to

483
00:30:51,960 --> 00:30:55,560
Speaker 1: eat up their assets and market share. Now, consider that

484
00:30:55,640 --> 00:31:00,000
Speaker 1: the authors of this research paper effectively called for governments

485
00:31:00,040 --> 00:31:04,200
Speaker 1: and central banks to cause more inflation in response to

486
00:31:04,320 --> 00:31:08,240
Speaker 1: the next economic crisis. Now, it's probably nothing. I mean,

487
00:31:08,360 --> 00:31:11,120
Speaker 1: it's not like Black Rock has incredible influence over central

488
00:31:11,120 --> 00:31:14,160
Speaker 1: banks and governments, is it? Say? Did I mention that

489
00:31:14,200 --> 00:31:16,880
Speaker 1: this research paper was co authored by the former vice

490
00:31:16,960 --> 00:31:22,120
Speaker 1: chairman of the Federal Reserve. Anyways, the first part of

491
00:31:22,200 --> 00:31:25,680
Speaker 1: the report provides another nugget of evidence that all the

492
00:31:25,720 --> 00:31:29,800
Speaker 1: inflation we're experiencing now is intentional. This is because the

493
00:31:29,880 --> 00:31:33,640
Speaker 1: authors specify that quote bringing inflation back to target in

494
00:31:33,680 --> 00:31:37,920
Speaker 1: a sustainable way is still proving challenging. The authors go

495
00:31:37,960 --> 00:31:41,040
Speaker 1: on to explain that quote in the Eurozone, the sovereign

496
00:31:41,040 --> 00:31:44,880
Speaker 1: debt crisis and low inflation environment ultimately lead the European

497
00:31:44,960 --> 00:31:48,800
Speaker 1: Central Bank to adopt many policy innovations that have helped

498
00:31:48,920 --> 00:31:53,680
Speaker 1: stave off deflation. They also complained that these policies were

499
00:31:53,680 --> 00:31:57,040
Speaker 1: held up in European courts. Now, if you watched our

500
00:31:57,120 --> 00:32:00,200
Speaker 1: video about the coming housing market crash, you might all

501
00:32:00,400 --> 00:32:03,960
Speaker 1: that housing costs in the European Union have been increasing

502
00:32:04,080 --> 00:32:08,640
Speaker 1: ever since the European Central Bank or ECB adopted these policies.

503
00:32:09,280 --> 00:32:12,960
Speaker 1: To clarify these policies were introduced in the aftermath of

504
00:32:13,040 --> 00:32:16,680
Speaker 1: the two thousand and eight financial crisis, the authors then

505
00:32:16,760 --> 00:32:19,240
Speaker 1: talk about all the other measures that were taken in

506
00:32:19,280 --> 00:32:22,120
Speaker 1: the aftermath of the two thousand and eight crisis around

507
00:32:22,120 --> 00:32:25,880
Speaker 1: the world. What's fascinating is that the authors admit that

508
00:32:25,920 --> 00:32:28,920
Speaker 1: the financial regulations we've seen since then are meant to

509
00:32:29,000 --> 00:32:32,440
Speaker 1: make it easier for central banks to stimulate the economy.

510
00:32:32,680 --> 00:32:36,160
Speaker 1: Another way of explaining this is that financial regulations have

511
00:32:36,360 --> 00:32:40,160
Speaker 1: centralized the economies of the world. It looks like the

512
00:32:40,280 --> 00:32:44,280
Speaker 1: endgame of this centralization is a central bank digital currency

513
00:32:44,440 --> 00:32:49,440
Speaker 1: or CBDC, where central banks control the economy itself. I mean,

514
00:32:49,760 --> 00:32:54,360
Speaker 1: how else can they keep this feat ponzi from falling apart. Now.

515
00:32:54,400 --> 00:32:57,160
Speaker 1: In the second part of the report, the authors reiterate

516
00:32:57,240 --> 00:33:01,240
Speaker 1: that quote. After a decade of unpreced entered monetary stimulus

517
00:33:01,280 --> 00:33:06,240
Speaker 1: around the world, actual inflation and inflation expectations still remain

518
00:33:06,360 --> 00:33:11,040
Speaker 1: stubbornly low in most major economies. Well, they sure solved

519
00:33:11,120 --> 00:33:15,200
Speaker 1: that issue, didn't they. In all seriousness, the authors speculate

520
00:33:15,280 --> 00:33:18,360
Speaker 1: this inflation is low in major economies for two reasons.

521
00:33:18,800 --> 00:33:22,240
Speaker 1: The first is that the world has become globalized, interconnected,

522
00:33:22,280 --> 00:33:27,600
Speaker 1: and most importantly, technologically advanced. Note that technology is a

523
00:33:27,640 --> 00:33:32,520
Speaker 1: primary driver of deflation, as it makes everything cheaper. Speaking

524
00:33:32,520 --> 00:33:34,840
Speaker 1: of which you should know that were it not for

525
00:33:35,080 --> 00:33:38,720
Speaker 1: the constant money printing by central banks, things would actually

526
00:33:38,720 --> 00:33:43,040
Speaker 1: be getting cheaper over time, not more expensive. But alas,

527
00:33:43,240 --> 00:33:46,600
Speaker 1: allowing the economy to turn deflationary would do damage to

528
00:33:46,640 --> 00:33:49,440
Speaker 1: the people in power, so it must not be permitted.

529
00:33:50,000 --> 00:33:54,520
Speaker 1: I digress. The second reason why the authors believe inflation

530
00:33:54,680 --> 00:33:59,680
Speaker 1: is or rather was so low is because of inflation expectations.

531
00:34:00,320 --> 00:34:04,040
Speaker 1: The average pre pandemic person could see that the economy

532
00:34:04,160 --> 00:34:07,040
Speaker 1: was turning deflationary, so they were spending as if it

533
00:34:07,120 --> 00:34:11,160
Speaker 1: was deflationary i e. Not enough. If you've watched any

534
00:34:11,160 --> 00:34:13,680
Speaker 1: of our recent videos about the FED, you'll know that

535
00:34:13,719 --> 00:34:17,440
Speaker 1: today the people in power have the opposite problem. The

536
00:34:17,480 --> 00:34:21,920
Speaker 1: average post pandemic person sees that inflation isn't going anywhere

537
00:34:21,920 --> 00:34:25,480
Speaker 1: but up, so they're spending in accordance with that expectation.

538
00:34:25,560 --> 00:34:29,760
Speaker 1: I way too much in theory, of course. The authors

539
00:34:29,800 --> 00:34:33,040
Speaker 1: then provide this image of the consumer price Index or

540
00:34:33,120 --> 00:34:37,200
Speaker 1: c p I and cp I compared to inflation expectations.

541
00:34:37,680 --> 00:34:42,520
Speaker 1: Not surprisingly, inflation expectations are highly correlated to the consumer

542
00:34:42,520 --> 00:34:45,879
Speaker 1: price index. The authors go on to explain that this

543
00:34:46,120 --> 00:34:49,400
Speaker 1: low inflation means it's not possible for central banks around

544
00:34:49,440 --> 00:34:53,200
Speaker 1: the world to raise interest rates. That's because raising interest

545
00:34:53,280 --> 00:34:57,520
Speaker 1: rates would crush inflation even more. Again, the elites do

546
00:34:57,600 --> 00:34:59,600
Speaker 1: not want this to happen, as it will make their

547
00:34:59,680 --> 00:35:03,960
Speaker 1: debt more expensive. In the third part of the report,

548
00:35:04,080 --> 00:35:08,080
Speaker 1: the authors continued discussing the issue of low inflation. They

549
00:35:08,080 --> 00:35:11,520
Speaker 1: speculate that the Asian financial crisis of the ninety nineties

550
00:35:11,560 --> 00:35:14,560
Speaker 1: and the two thousand and eight financial crisis caused a

551
00:35:14,600 --> 00:35:20,120
Speaker 1: behavioral shift across the global economy from spending to saving. Obviously,

552
00:35:20,360 --> 00:35:23,400
Speaker 1: this is bad for the powers that be. Once again,

553
00:35:23,520 --> 00:35:26,520
Speaker 1: fascinating is that the author's managed to estimate that this

554
00:35:26,680 --> 00:35:30,640
Speaker 1: increase in savings corresponds to an additional interest rate of

555
00:35:30,760 --> 00:35:34,240
Speaker 1: one point five percent on top of whatever the central

556
00:35:34,239 --> 00:35:38,319
Speaker 1: banks had in place, not a literal interest rate, but

557
00:35:38,560 --> 00:35:43,160
Speaker 1: a de facto one. Truly fascinating stuff. The authors add

558
00:35:43,280 --> 00:35:46,080
Speaker 1: that many of these savings find their way into risk

559
00:35:46,160 --> 00:35:49,799
Speaker 1: off assets like government debt. As I mentioned earlier, the

560
00:35:49,880 --> 00:35:53,399
Speaker 1: interest on government debt sets the baseline for other kinds

561
00:35:53,440 --> 00:35:57,000
Speaker 1: of debt in the economy. By buying up so much

562
00:35:57,080 --> 00:36:02,479
Speaker 1: government debt, individuals and institutions were effectively keeping interest rates low.

563
00:36:03,239 --> 00:36:06,439
Speaker 1: This is because interest rates on government debt rise when

564
00:36:06,480 --> 00:36:10,960
Speaker 1: demand is low and fall when demand is high. Basic economics,

565
00:36:11,280 --> 00:36:15,759
Speaker 1: sort of. The authors conclude that for central banks to

566
00:36:15,840 --> 00:36:18,960
Speaker 1: cushion the next financial crisis, they would have to drop

567
00:36:19,080 --> 00:36:24,440
Speaker 1: rates to minus two percent, which they can't really do now.

568
00:36:24,480 --> 00:36:27,040
Speaker 1: In the fourth part of the report, the author's turn

569
00:36:27,160 --> 00:36:30,839
Speaker 1: to fiscal policy, which your recall is the government's job.

570
00:36:32,040 --> 00:36:35,719
Speaker 1: The authors argue that governments haven't been spending nearly enough

571
00:36:35,760 --> 00:36:40,080
Speaker 1: money on improving their country's infrastructures. That's probably because they've

572
00:36:40,120 --> 00:36:45,160
Speaker 1: been too busy buying votes. Logically, the authors argued that

573
00:36:45,280 --> 00:36:49,719
Speaker 1: governments should start borrowing and spending much more, and insists

574
00:36:49,840 --> 00:36:53,080
Speaker 1: this is fine because of the low interest rate environment.

575
00:36:53,440 --> 00:36:56,480
Speaker 1: This rhetoric relates to the fifth part of the report,

576
00:36:56,760 --> 00:37:01,600
Speaker 1: which concerns the coordination between governments and central banks. They

577
00:37:01,640 --> 00:37:05,000
Speaker 1: explain that for political and economic reasons, it will be

578
00:37:05,040 --> 00:37:08,440
Speaker 1: necessary for both parties to be on the same page

579
00:37:08,840 --> 00:37:12,880
Speaker 1: during the next market downturn. What's crazy is that the

580
00:37:12,920 --> 00:37:16,840
Speaker 1: author's point to Europe as an example of this coordination.

581
00:37:17,480 --> 00:37:20,440
Speaker 1: This is crazy because the ECB has been struggling to

582
00:37:20,520 --> 00:37:24,200
Speaker 1: hold the Eurozone together while it raises interest rates. This

583
00:37:24,320 --> 00:37:28,160
Speaker 1: is because it's impossible to have the same monetary policy

584
00:37:28,360 --> 00:37:33,440
Speaker 1: for the different fiscal policies of European countries. The authors

585
00:37:33,520 --> 00:37:37,319
Speaker 1: then suggest that central banks by stocks to cushion the

586
00:37:37,360 --> 00:37:40,520
Speaker 1: next financial crisis, and you'll hopefully recall that the FED

587
00:37:40,760 --> 00:37:44,000
Speaker 1: wasn't far off from doing exactly that at the start

588
00:37:44,040 --> 00:37:48,160
Speaker 1: of the pandemic. Then, in the sixth part of the report,

589
00:37:48,440 --> 00:37:52,000
Speaker 1: the authors discuss the origin of the term helicopter money

590
00:37:52,080 --> 00:37:55,120
Speaker 1: and talk about how it could likewise be used to

591
00:37:55,239 --> 00:37:59,160
Speaker 1: cushion the next financial crisis. The author's stress that this

592
00:37:59,280 --> 00:38:02,600
Speaker 1: kind of ex stream action must be enough to drive

593
00:38:02,719 --> 00:38:07,279
Speaker 1: up inflation mission accomplished. They go on to explain that

594
00:38:07,360 --> 00:38:10,760
Speaker 1: helicopter money is nothing new and that it's totally fine

595
00:38:11,040 --> 00:38:13,920
Speaker 1: except for all the times that it ended in hyper

596
00:38:13,960 --> 00:38:19,279
Speaker 1: inflation yikes. The authors admit quote that highlights the main

597
00:38:19,360 --> 00:38:22,680
Speaker 1: drawback of helicopter money, how to get the inflation genie

598
00:38:22,760 --> 00:38:26,560
Speaker 1: back in the bottle once it has been released. They

599
00:38:26,600 --> 00:38:29,560
Speaker 1: also admit that history has shown that this kind of

600
00:38:29,600 --> 00:38:33,680
Speaker 1: stimulus cannot be fine tuned. For a quote, modest increase

601
00:38:33,760 --> 00:38:37,680
Speaker 1: in inflation is always either too much or too little.

602
00:38:38,280 --> 00:38:41,720
Speaker 1: You don't say now. The seventh part of the report

603
00:38:41,840 --> 00:38:45,960
Speaker 1: covers all the political challenges that are associated with money printing.

604
00:38:46,520 --> 00:38:50,040
Speaker 1: The authors start by explaining that quote many central banks

605
00:38:50,040 --> 00:38:53,000
Speaker 1: became truly independent in the wake of the painful lessons

606
00:38:53,080 --> 00:38:55,799
Speaker 1: learned from the high inflation and low growth environment of

607
00:38:55,840 --> 00:38:58,880
Speaker 1: the nineteen seventies. In other words, they pulled the money

608
00:38:58,880 --> 00:39:02,319
Speaker 1: printers away from the politicians the last time they tried this.

609
00:39:03,040 --> 00:39:06,600
Speaker 1: Oddly enough, the authors say that this separation of powers

610
00:39:06,719 --> 00:39:09,040
Speaker 1: was a good thing, but that the central banks have

611
00:39:09,080 --> 00:39:13,280
Speaker 1: again become politicized post two thousand and eight. The authors

612
00:39:13,320 --> 00:39:16,720
Speaker 1: predicted that the central banks and governments will become even

613
00:39:16,760 --> 00:39:23,160
Speaker 1: more intertwined during the next financial crisis, and they were right. Then,

614
00:39:23,280 --> 00:39:27,600
Speaker 1: the authors say the quiet part out loud, quote, there

615
00:39:27,719 --> 00:39:32,360
Speaker 1: is growing political discontent across major economies, and central banks

616
00:39:32,440 --> 00:39:36,600
Speaker 1: are one of the targets. Widening inequality has fostered a

617
00:39:36,680 --> 00:39:41,239
Speaker 1: backlash against elites. They add that quote, there are many

618
00:39:41,360 --> 00:39:45,799
Speaker 1: drivers of inequality, including at its root technology, winner take

619
00:39:45,840 --> 00:39:50,200
Speaker 1: all dynamics, and globalization. I'll add another driver, and that's

620
00:39:50,360 --> 00:39:53,560
Speaker 1: central banks printing money and shoveling it in the direction

621
00:39:53,640 --> 00:39:57,600
Speaker 1: of the largest institutions on Wall Street, such as Black Rock.

622
00:39:58,719 --> 00:40:01,520
Speaker 1: This is why I called when the authors claimed that

623
00:40:01,600 --> 00:40:04,680
Speaker 1: inequality started to be an issue after the two thousand

624
00:40:04,760 --> 00:40:08,440
Speaker 1: and eight financial crisis, the truth is that inequality began

625
00:40:08,600 --> 00:40:11,880
Speaker 1: the moment the US dollar went off the gold standard.

626
00:40:12,400 --> 00:40:15,319
Speaker 1: Since that time, money has been printed out of thin

627
00:40:15,360 --> 00:40:18,560
Speaker 1: air and allocated to all the entities I just mentioned.

628
00:40:19,040 --> 00:40:22,040
Speaker 1: But no, it's not the central banks or Wall Street.

629
00:40:22,560 --> 00:40:25,759
Speaker 1: According to the authors, the government is to blame the

630
00:40:25,880 --> 00:40:29,480
Speaker 1: very same politicians that Wall Street lobbies with printed money

631
00:40:29,760 --> 00:40:33,880
Speaker 1: from the central Bank. The authors seem to imply that

632
00:40:34,000 --> 00:40:37,480
Speaker 1: the solution to this discontent is a strong fiscal policy

633
00:40:37,560 --> 00:40:40,840
Speaker 1: a k a. Universal basic income through the use of

634
00:40:40,880 --> 00:40:44,239
Speaker 1: a digital currency issued by a central bank that will

635
00:40:44,320 --> 00:40:47,080
Speaker 1: keep the plebs from protesting until they realize all those

636
00:40:47,120 --> 00:40:50,960
Speaker 1: digital dollars are finding their way back to Wall Street. Now.

637
00:40:51,000 --> 00:40:54,600
Speaker 1: To their credit, the authors underscore the risks associated with

638
00:40:54,640 --> 00:40:57,200
Speaker 1: such a route, namely that it will lead to way

639
00:40:57,200 --> 00:41:00,200
Speaker 1: too much digital money printing to appease the mass, is

640
00:41:00,760 --> 00:41:03,960
Speaker 1: I reckon? That's what comes after all those CBDCs are

641
00:41:04,040 --> 00:41:07,000
Speaker 1: rolled out, And that's just one of the many negative

642
00:41:07,040 --> 00:41:12,520
Speaker 1: effects CBDCs will have. More about all that in the description. Now,

643
00:41:12,560 --> 00:41:16,440
Speaker 1: after discussing what a unified fiscal and monetary policy framework

644
00:41:16,480 --> 00:41:19,360
Speaker 1: would look like, the authors provide a template for the

645
00:41:19,440 --> 00:41:23,080
Speaker 1: United States, the Eurozone, Japan, and the United Kingdom to

646
00:41:23,239 --> 00:41:28,440
Speaker 1: implement this framework. Incredibly, this included notes about which laws

647
00:41:28,680 --> 00:41:31,600
Speaker 1: would need to be adjusted if any. As you might

648
00:41:31,640 --> 00:41:35,160
Speaker 1: have guessed, each of these economic areas did something along

649
00:41:35,200 --> 00:41:39,200
Speaker 1: the lines of what the authors suggested when the pandemic hit.

650
00:41:40,160 --> 00:41:43,040
Speaker 1: In the final part of the report, the authors talk

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00:41:43,080 --> 00:41:46,560
Speaker 1: about the implications their master plan would have on the markets.

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00:41:47,239 --> 00:41:50,640
Speaker 1: They start by saying that this coordination of fiscal and

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00:41:50,760 --> 00:41:55,400
Speaker 1: monetary policy would ideally take place well before a financial crisis.

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00:41:55,920 --> 00:42:04,200
Speaker 1: I wonder how they would know one was coming. In

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00:42:04,239 --> 00:42:07,320
Speaker 1: any case, one of the many scenarios, the author's outline

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00:42:07,400 --> 00:42:13,080
Speaker 1: is essentially what's happening now. Quote. Shorter run inflation expectations

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00:42:13,120 --> 00:42:16,840
Speaker 1: could overshoot as a central bank aims for above average

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00:42:16,840 --> 00:42:21,839
Speaker 1: inflation during its price level targeting phase. Naturally quote, this

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00:42:21,920 --> 00:42:25,240
Speaker 1: would push up the relative returns of inflation linked bonds

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00:42:25,360 --> 00:42:29,319
Speaker 1: over nominal counterparts. It would also boost returns of other

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00:42:29,480 --> 00:42:33,280
Speaker 1: real assets in private markets, such as infrastructure and property.

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00:42:34,239 --> 00:42:37,359
Speaker 1: What the authors didn't predict, however, is that we're not

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00:42:37,520 --> 00:42:42,160
Speaker 1: just in an inflationary environment, where in a stagflationary one.

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00:42:42,360 --> 00:42:45,960
Speaker 1: This means that prices continue to rise while the cost

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00:42:46,040 --> 00:42:51,120
Speaker 1: of assets continues to fall, including infrastructure and property. Come

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00:42:51,160 --> 00:42:53,480
Speaker 1: to think of it, this might be a result of

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00:42:53,560 --> 00:42:57,799
Speaker 1: the governments and central banks engaging in these emergency measures

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00:42:57,840 --> 00:43:02,280
Speaker 1: after the markets had already reacted. The authors actually warn

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00:43:02,400 --> 00:43:05,960
Speaker 1: about the issues that could arise when doing this. The

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00:43:06,040 --> 00:43:10,040
Speaker 1: difference is the authors see deflation as the primary issue

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00:43:10,040 --> 00:43:13,960
Speaker 1: arising from the incorrect implementation of a coordinated monetary and

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00:43:14,000 --> 00:43:17,800
Speaker 1: fiscal policy. I know this sounds insane, but it's quite

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00:43:17,800 --> 00:43:21,840
Speaker 1: possible that extreme deflation is what comes next once the

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00:43:21,880 --> 00:43:25,560
Speaker 1: inflation fight has been one. According to the author's quote,

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00:43:25,800 --> 00:43:29,400
Speaker 1: this scenario would argue for a preference of nominal bonds

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00:43:29,400 --> 00:43:33,640
Speaker 1: over inflation linked instruments. This is interesting because so far

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00:43:33,840 --> 00:43:36,640
Speaker 1: government bonds have failed to be the safe haven asset

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00:43:36,800 --> 00:43:40,920
Speaker 1: they typically are during downturns. They've fallen in value along

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00:43:40,920 --> 00:43:44,920
Speaker 1: with everything else. Some macro analysts believe it's only a

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00:43:44,960 --> 00:43:48,239
Speaker 1: matter of time before government bonds start to rally as

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00:43:48,280 --> 00:43:52,600
Speaker 1: they should during such circumstances. I must admit I don't

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00:43:52,760 --> 00:43:55,799
Speaker 1: fully understand the reasoning there, but it sounds like it's

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00:43:55,840 --> 00:43:58,919
Speaker 1: the same reasoning of the experts over at Black Rock.

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00:43:59,440 --> 00:44:02,719
Speaker 1: What I'm one during is what happens when the financial

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00:44:02,719 --> 00:44:06,200
Speaker 1: crisis comes. It's easy to forget that the financial crisis

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00:44:06,200 --> 00:44:09,359
Speaker 1: being talked about in this research paper is the one

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00:44:09,480 --> 00:44:13,839
Speaker 1: that happened immediately after the pandemic hit. What we seem

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00:44:13,880 --> 00:44:18,160
Speaker 1: to be facing now is something else entirely. It's too

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00:44:18,200 --> 00:44:21,439
Speaker 1: soon to say how bad the next downturn will be,

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00:44:21,520 --> 00:44:24,440
Speaker 1: but the last time we had a great depression, the

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00:44:24,480 --> 00:44:26,919
Speaker 1: way we got out of it was through a World war.

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00:44:27,920 --> 00:44:30,880
Speaker 1: Given everything that's been going on these days in Ukraine,

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00:44:31,000 --> 00:44:35,400
Speaker 1: Taiwan and elsewhere, that's an outcome that's way too close

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00:44:35,440 --> 00:44:39,359
Speaker 1: for comfort. The worst part is that the only alternative

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00:44:39,840 --> 00:44:43,200
Speaker 1: is a central bank digital currency, at least as far

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00:44:43,280 --> 00:44:47,640
Speaker 1: as the people empower are concerned. There is a third way, however,

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00:44:47,719 --> 00:44:51,680
Speaker 1: and that's through crypto. The question is whether crypto will

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00:44:51,719 --> 00:44:54,520
Speaker 1: be ready to play this role. I reckon it will

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00:44:54,560 --> 00:44:57,439
Speaker 1: be when the day comes. But until then we'll get

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00:44:57,480 --> 00:45:01,400
Speaker 1: to experience more fiscal and monetary policy madness, no shortage

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00:45:01,440 --> 00:45:05,120
Speaker 1: of warmongering, and a bunch of crypto crackdowns driven by

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00:45:05,360 --> 00:45:09,600
Speaker 1: central banks. More about that using the link in the description.

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Speaker 1: Thank you so much for listening to the coin Bureau podcast.

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00:45:13,680 --> 00:45:16,520
Speaker 1: If you'd like to learn more about cryptocurrency, you can

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00:45:16,600 --> 00:45:19,920
Speaker 1: visit our YouTube channel at YouTube dot com forward slash

706
00:45:19,920 --> 00:45:22,719
Speaker 1: coin Bureau. You can also go to coin bureau dot

707
00:45:22,760 --> 00:45:25,640
Speaker 1: com for loads more information about all things crypto. You

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00:45:25,680 --> 00:45:28,200
Speaker 1: can follow me on Twitter at at coin bureau or

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00:45:28,280 --> 00:45:32,239
Speaker 1: one word, and I'm also active on TikTok and Instagram too,