Hedge fund manager and CFA James Lavish discusses recession dynamics, competition with the dollar, sovereign debt spiral, Bitcoin as a Reserve Asset. They explore moving away from the US dollar, reluctance of central banks, inflation crisis, and allocation of money for individual investors.
Predicting the timing of a recession is challenging, but it is inevitable and currently delayed by the AI tech boom and expansive debt ceiling crisis.
Quantitative easing (QE) poses greater inflationary risks due to the magnitude of current QE and ongoing interventions by the Federal Reserve.
Using Bitcoin as a reserve asset could address challenges faced by the BRICS nations in moving away from US Treasuries, as it provides a trustless and easily identifiable alternative to traditional reserve assets.
Deep dives
The Difficulty of Timing a Recession
Timing when a recession will hit is challenging, but the speaker believes one is inevitable. Unemployment numbers aren't a reliable indicator as they only spike during a recession. The Federal Reserve's assessments are lagging, and everything they look at is on a delay. The current AI tech boom and expansive debt ceiling crisis have delayed the recession's arrival.
The Impact of Quantitative Easing and the Fed's Intervention
Quantitative easing (QE) enables enormous fiscal deficits and allows for banks deemed 'too big to fail' to be saved. The Fed's ability to intervene and inject liquidity prevents these institutions from collapsing, creating excess credit creation and leverage. While QE in the early 2000s was less inflationary, the magnitude of current QE and ongoing interventions by the Fed pose greater inflationary risks.
The Challenges of Bricks' Proposed Gold-Backed Currency
The Bricks nations, Brazil, Russia, India, China, South Africa, are seeking to move away from US Treasuries and holding gold-backed currencies. However, creating a currency backed by gold presents challenges such as trust between countries and the scale of gold reserves needed. The Bricks countries collectively have only 7% of the gold reserves required. Additionally, creating their own currencies or a unified currency would create an isolated ecosystem without global recognition or trade. Using Bitcoin as a reserve asset could address some of these challenges.
The Potential for Bitcoin as a Reserve Asset
While not currently happening, adopting Bitcoin as a reserve asset could provide a trustless, easily identifiable, and quantifiable solution. Bitcoin's quick and cheap settlements could address trust issues and create a game-changing alternative to traditional reserve assets. However, this is speculative and not currently in progress.
Investing in Swan for Bitcoin Purchase and Education
Swan is recommended as a trustworthy platform for first-time Bitcoin buyers due to its user-friendly interface and commitment to education. They focus on providing excellent educational content to bridge the education gap between impulse buyers and long-term Bitcoin holders. Swan also supports dollar-cost averaging (DCA) and offers premium features like exclusive content, market insights, and discounts.
Challenges of Escaping the Network Effect and the Need for a Global Reserve Asset
There is a discussion about the difficulties faced by countries like the US and the challenges in escaping the network effect of the US dollar as the global reserve asset. The podcast highlights the importance of having a more neutral global reserve asset like Bitcoin that can provide settlement capabilities and reduce animosity and uncertainty between nations. The US debt downgrade by credit rating agencies is also mentioned, signaling the risks of default, both technical and soft default, and the need to be cautious when managing investment portfolios, especially for pension funds.
Hedge fund manager, CFA & macro analyst James Lavish stops by BCB to discuss recession dynamics, competition with the dollar, the sovereign debt spiral & more.
WE COVER:
Big Game Fishing
Where’s The Recession?
QE, monetary policy & “money printing”
Bitcoin as a Reserve Asset, USD Hegemony, BRICS Rising
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