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Fed Watch - Bitcoin and Macro


Mar 23, 2022

In this episode of the Fed Watch podcast, CK and I are joined by Benjamin Dicktor. He’s a trucker and bitcoiner who has been intimately involved in the Canadian peaceful protest earlier this year. We got an update on the donation status, the individuals’ legal status, and what bitcoin can do better to face similar attacks in the future. After that we roll into a Fed Watch update, talking about the Fed rate hike and increasingly aggressive and hawkish tone from Powell. Lastly, we cover the Russian sanctions from a different angle, but pointing out the growing clash between Wall Street and the Davos crowd.

We ran out of time before getting to all the Fed Watch specific news, so stay tuned for a mid-week episode!

Fed Watch is a podcast for people interested in central bank current events and how Bitcoin will integrate or replace aspects of the aging financial system. To understand how bitcoin will become global money, we must first understand what’s happening now.

Canadian Trucker Debrief 

After getting an update on the situation in Canada, the first question we ask Benjamin is how all of these financial attacks have affected Canadians’ trust in the financial system in general. His answer is very practical. He points out that the Bank of Canada has printed more as a percentage of GDP than the Federal Reserve, but from his point of view is that the vast majority of the public simply is ignorant of the monetary system and what is needed is more education. As people get more educated that is all the more bullish for bitcoin.

Dichtor then lays out the mechanics behind these financial attacks. They happened on three levels, the municipal, provincial and federal. On the provincial level, the attorney generals went after the banks to freeze all proceeds of the fundraisers as illegal in some way. Then they went after people’s whole finances by freezing banking services. Benjamin says that it wasn’t enough to freeze the specific donations, they de-banked people in an attempt to starve them out.

I follow this up with a question about what can the bitcoin space, with its open source ethos and entrepreneurial spirit do or build that would mitigate these types of attacks in the future. His answer is two fold, one is narrative and the other is integration.

For the narrative, Benjamin thinks it’s important to market bitcoin uses instead of its technical capabilities. “People don’t know how their car works, but they still drive it.” Marketing bitcoin as a hedge against overzealous authorities as a way to protect your rights is more important than explaining why and how it’s better money. On the integration side, Benjamin leans toward the Bitcoin Beach model down in El Salvador. Getting fuller integration by packaging it with business opportunity.

Fed Hikes Rates, What Next?

Since this is a central bank oriented show, we next make a hard pivot into Fed news. First and foremost on that agenda is the Fed’s rate hike. Last week, the Fed raised its target Fed Funds Rate up from 0-0.25% to 0.25-0.50%, in the first hike since 2018. Along with the hike came more aggressively hawkish language about further hikes, even a 50 bps hike soon, and beginning Quantitative Tightening as early as May. 

I point out that it is the rhetoric that the Fed is using to lower inflation expectations. That is the route by which the Fed themselves claim their policies to work, through the publics expectations. If people expect high inflation, they will act as if there is high inflation, and it will manifest in that way. A self-fulfilling prophecy.

What the Fed is doing now is the opposite, they want people to expect an irresponsibly hawkish Fed to crater inflation expectations, so people act as if inflation is coming down, to manifest inflation in that direction. It remains to be seen if the Fed will actually be able to follow through on this roadmap.

The Federal Reserve is explicitly a follower of the market. They proudly say they are “data dependent”, meaning the market moves and creates data, which the Fed follows. Therefore, the Fed will raise rates as long as the market cooperates and prices in higher a Fed Funds Rate. However, if the yield curve only flattens, and the long end starts coming down and the Fed will be forced to stop. I think that will happen around the middle of the year some time. Maybe after a couple more rate hikes.

I’ll go deeper into the yield curve on a mid-week episode for the viewers and listeners. Stay tuned for that.

The Clash Between Wall Street and Progressive Globalists

The next topic might be controversial. I lay out the sanctions put on Russian banks and how it surprised the Fed. Powell came out shortly after the SWIFT sanctions and said he was not consulted about the ban. He likely would have disapproved of it because his lane is financial stability. Banks are interdependent, and banks exposed to Russian debt in Europe or Asia, will spread contagion of these sanctions through the whole financial system. These sanctions therefore, risk causing a global financial crisis.

I try to expand on the thread that Wall Street and the Biden regime (as well as other Davos heavyweights) are at odds here. Those are the two 1000 lb gorillas in the room, capitalist Wall Street and authoritarian globalists. The Fed, banks, and Wall Street are generally neutral to bitcoin and will add it to reserves if need be. However, the globalist Davos elites despise bitcoin and will fight it by going with a CBDC. If that is true, the Fed becomes an ally to bitcoiners in the story of adoption. You’ll have to listen to get the fuller theory.

Conclusions

We end the show with CK and Benjamin’s reactions to my unique theory and closing remarks. I don’t think I have either of them convinced. Benjamin has a great view which we share here at Fed Watch, about the rise of localism and regionalism in the future. We should strive to form strong self-sufficient social circles to minimize the attack vectors open to the State.

That does it for this week. Thanks to the watchers and listeners. If you enjoy this content please SUBSCRIBE, and REVIEW on iTunes, and SHARE!

Written by Ansel Lindner

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