The rise of the carry regime and its impact on markets

The podcast episode discusses the concept of the carry regime and its implications for financial markets. The carry regime refers to a period where financial structures and trades that involve short volatility and leverage dominate the market, driving asset prices and disconnecting them from the real economy. The regime is perpetuated by central banks' suppression of volatility, which encourages the growth of carry trades and exacerbates inequality. The discussants also touch on how the carry regime has changed the way investors think and behave, with buying the dip becoming a common strategy. They suggest that breaking out of the carry regime may be difficult, potentially leading to a cycle of recurring crises and highlighting cryptocurrencies as a potential alternative form of money.