Stablecoins Are The New Eurodollars | Daniel Neilson on Death Spirals, Liquidity Runs, and The Fragility of Par

Daniel Neilson, professor of economics at Bard College at Simon’s Rock and author of “Soon Parted,” returns to Forward Guidance to share findings from his seminal paper, “On par: A Money View of stablecoins.” Co-authored with Iñaki Aldasoro and Perry Mehrling as a working paper for the Bank For International Settlements (BIS), this paper compares on-chain currency (stablecoins) to Eurodollars to explore how they deal with issues of liquidity and par settlement. Filmed on December 8, 2023.

Today’s interview is brought to you by Sustainable Bitcoin Protocol, an environmental solution for bitcoin. Interested parties can find out more at https://bit.ly/46gFlgr

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BIS Paper, “On par: A Money View of stablecoins”: https://www.bis.org/publ/work1146.pdf

Dan Neilson’s newsletter, Soon Parted: https://www.soonparted.co/

Dan Neilson’s book, “Minsky”: https://www.amazon.com/Minsky-Daniel-H-Neilson/dp/1509528504

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Timestamps:

(00:00) Introduction

(01:34) Why Stablecoins?

(04:46) The Issue Of Par

(09:43) The Great Financial Crisis Of 2008

(12:12) Did The Fed's Rate Surge Halt The Stablecoin Boom?

(22:06) Stablecoins, The New Eurodollars

(24:20) The Need For Smooth Forward Markets

(27:40) There's No Central Bank In Crypto

(34:22) Silicon Valley Bank and Circle

(49:43) Tether

(01:02:20) The Role Of Zero Interest Rates

(01:05:01) The Role Of Stablecoins: "Lots of Fireworks"

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.