The surging price of the world’s best-known cryptocurrency has made some investors rich and prompted skeptics to point to the excesses of the current bull market. Central bank digital currencies (CBDCs) may offer a surer route to greater financial inclusion, but are policymakers and the public prepared for this potentially radical innovation?
In this Big Picture, Harvard University’s Kenneth Rogoff thinks that the COVID-19 pandemic could accelerate the emergence of CBDCs, and outlines two ways in which monetary policymakers could introduce them. The case for a digital dollar, however, is far from clear-cut, says Barry Eichengreen of the University of California, Berkeley, not least because fear that a digital renminbi will challenge the greenback’s global dominance is overblown. But New York University’s Nouriel Roubini makes the case that CBDCs could replace both an inherently crisis-prone banking system and worthless private cryptocurrencies such as Bitcoin.
Chatham House’s Jim O’Neill is similarly unimpressed by the Bitcoin hype, and explains why cryptocurrencies like it will never be anything more than speculative vehicles. For that reason, says Willem H. Buiter of Columbia University, only those with a robust appetite for risk and the wherewithal to absorb heavy losses should consider investing in them. By contrast, Brian Armstrong of cryptocurrency exchange Coinbase argues that cryptocurrencies with strong consumer-privacy protections should be a key feature of the post-pandemic recovery.
Either way, conclude Katharina Pistor of Columbia Law School and Co-Pierre Georg of the University of Cape Town, central banks may soon need to expand their remit and develop a new regulatory infrastructure to manage both public and private digital currencies.
The COVID-19 pandemic is accelerating the long-term shift away from cash, and monetary authorities risk falling behind. A recent report from the G30 argues that if central banks want to shape the outcome, they need to start thinking fast.
CAMBRIDGE – As the COVID-19 crisis accelerates the long-term shift away from cash (at least in tax-compliant, legal transactions), official discussions about digital currencies are heating up. Between the impending launch of Facebook’s Libra and China’s proposed central-bank digital currency, events today could reshape global finance for a generation. A recent report from the G30 argues that if central banks want to shape the outcome, they need to start moving fast.
Much is at stake, including global financial stability and control of information. Financial innovation, if not carefully managed, is often at the root of a crisis, and the dollar gives the United States significant monitoring and sanctions capabilities. Dollar dominance is not just about what currency is used, but also about the systems that clear transactions, and, from China to Europe, there is a growing desire to challenge this. This is where a lot of the innovation is taking place.
Central banks can take three distinct approaches. One is to make significant improvements to the existing system: reduce fees for credit and debit cards, ensure universal financial inclusion, and upgrade systems so that digital payments can clear in an instant, not a day.
The US lags badly in all these areas, mainly because the banking and financial lobby is so powerful. To be fair, policymakers also need to worry about keeping the payments system secure: the next virus to hit the global economy could well be digital. Rapid reform could create unexpected risks.
At the same time, any effort to maintain the status quo should provide room for new entrants, whether “stable coins” pegged to a major currency, like Facebook’s Libra, or redeemable platform tokens that large retail tech companies such as Amazon and Alibaba might issue, backed by the ability to spend on goods the platform sells.
The most radical approach would be a dominant retail central-bank currency which allows consumers to hold accounts directly at the central bank. This could have some great advantages, such as guaranteeing financial inclusion and snuffing out bank runs.
But radical change also carries many risks. One is that the central bank is poorly positioned to provide quality service on small retail accounts. Perhaps this could be addressed over time, by using artificial intelligence or by expanding financial services offered by post office branches.
In fact, when it comes to retail central-bank digital currencies, economists worry about an even bigger problem: Who will make loans to consumers and small businesses if banks lose most of their retail depositors, who comprise their best and cheapest source of borrowing?
In principle, the central bank could re-lend to the banking sector the funds it gets from digital currency deposits. This would, however, give the government an inordinate amount of power over the flow of credit, and ultimately the development of the economy. Some may see this as a benefit, but most central bankers probably have deep reservations about assuming this role.
Security is another issue. The current system, in which private banks play a central role in payments and lending, has been in place around the world for more than a century. Sure, there have been problems; but for all the challenges banking crises have created, systemic breakdowns in security have not been the major issue.
Technology experts warn that for all the promise of new cryptographic systems (on which many new ideas are based), a new system can take 5-10 years to “harden.” What country would want to be a financial guinea pig?
China’s new digital currency offers a third, intermediate vision. As the G30 report describes in greater detail than previously available, China’s approach involves eventually replacing most paper currency, but not replacing banks. In other words, consumers would still hold accounts at banks, which in turn would hold accounts with the central bank.
When consumers want cash, however, instead of getting paper currency (which is rapidly becoming passé in Chinese cities anyway), they would receive tokens in their digital wallet at the central bank. Like cash, the central-bank digital currency would pay zero interest, giving interest-bearing bank accounts a competitive edge.
Of course, the government can change its mind later and start offering interest; banks may also lose their edge if the general level of interest rates collapses. This framework does take away the anonymity of paper currency, but many monetary authorities, including the European Central Bank, have discussed ideas for introducing anonymous low-value payments.
Last, but not least, a shift to digital currencies would make it easier to implement deeply negative interest rates, which, as I have argued for many years, would go a long way toward restoring the potency of monetary policy in crises. One way or another, the post-pandemic world will move very fast in payments technologies. Central banks cannot afford to play catch-up.
Who Needs a Digital Dollar?
Recently, the idea of a digital greenback elicited support from US Treasury Secretary Janet Yellen and Federal Reserve Chair Jay Powell. Ultimately, the advantages of a digital dollar will need to be weighed against the potentially high costs and significant risks to the financial system that come with it.
BERKELEY – The idea of a digital dollar has been in the air for some time now. Recently, it descended from the ether to the lips of US Treasury Secretary Janet Yellen and Federal Reserve Chair Jay Powell. At an event in February, Yellen flagged the idea as “absolutely worth looking at,” adding that the Federal Reserve Bank of Boston, in conjunction with academics at MIT, was already doing so. In Congressional testimony the following day, Powell called a digital dollar “a high priority project for us.”
Some see this as another front in the technological cold war between the United States and China. The People’s Bank of China (PBOC) will almost certainly be the first major central bank to roll out a digital currency, in 2022 at the latest. If the US doesn’t move quickly, it will fall behind. America’s financial system will remain stuck in the twentieth century, damaging US competitiveness. The dollar’s position as the dominant international currency will be eroded by the ease of using China’s digital unit in cross-border transactions, and the US will squander a singular source of monetary and financial leverage.
In fact, such concerns are either overblown or flat-out wrong. The PBOC’s main motivation for issuing a digital renminbi is to create a government-controlled alternative to two very large and loosely regulated digital payment platforms, Alipay and WeChat Pay.
The ubiquity of Alipay and WeChat Pay raises the specter of the Chinese authorities losing control of payment flows through the economy. And because they use information on payments to inform their lending activities, their pervasiveness points to the possibility of the authorities losing control of financial flows and credit allocation more generally. Thus, the PBOC’s determination to issue a digital currency is part and parcel of the Chinese government’s decision last November to quash the initial public offering of Ant Group, Alipay’s corporate parent.
The American government has no analogous worries. In the US, scores of different platforms, such as PayPal, Stripe, and Square carry out digital payments, which are ultimately settled by banks, and hence through Fedwire, the Federal Reserve’s in-house system for clearing interbank transactions. Visa, Mastercard, Discover, and American Express process the lion’s share of card-based payments, but their actual cards are issued by banks, which are regulated, limiting risks to the payments and financial system. Here, too, settlement occurs through Fedwire.
Similarly, it is important to bear in mind how far the renminbi lags behind the greenback as an international currency. Currently, China’s currency accounts for a mere 2% of global cross-border payments, a negligible share compared to the dollar’s 38%.
To be sure, the convenience of a digital renminbi would hasten its uptake in cross-border transactions. But that digital currency might also have a hidden backdoor, enabling Chinese authorities to track transactions and identify those undertaking them, discouraging use by third parties. Given this, it’s hard to see China’s digital currency as a game changer internationally.
So, the decision to create a digital dollar would have to be justified on other grounds. The soundest justification is financial inclusion. Americans without credit cards and bank accounts, who rely entirely on cash, are denied not just financial services but other services as well. Rideshare companies ask you to link your app to your credit or debit card; no card, no pick-up. And no bank account, no card.
In this context, recall the difficulty the US Treasury had in getting pandemic relief checks to the unbanked. If everyone had a Federal Reserve-issued electronic wallet into which digital dollars could be deposited, this problem would be solved.
Digital dollars could also address the exorbitant cost of cross-border money transfers. But foreign governments might be reluctant to permit their nationals to install the Fed’s digital wallet, because that would leave them and their central banks unable to enforce their capital controls, which they value as macroprudential tools.
Alternatively, the Fed’s digital wallet could be made interoperable with foreign digital wallets. But interoperability would require close cooperation between central banks on the details of technology and security. While there are efforts in this direction, making it work would be a daunting task, to say the least.
Ultimately, such advantages should be weighed against the costs and risks of digitizing the dollar. If people shift their savings from banks to digital wallets, banks’ ability to lend will be hamstrung. Some banks will close, and small businesses that rely on banks for credit will have to look elsewhere.
Moreover, a Fed-run network of retail payments would be a rich target for hackers and digital terrorists. Security and financial stability are of the essence, and it is not obvious that they can be guaranteed. All this is to say that while the case for a digital dollar may be worthy of examination by Yellen and Powell, it is hardly a slam-dunk.
Why Central Bank Digital Currencies Will Destroy Cryptocurrencies
Leading economic policymakers are now considering whether central banks should issue their own digital currencies, to be made available to everyone, rather than just to licensed commercial banks. The idea deserves serious consideration, as it would replace an inherently crisis-prone banking system and close the door on crypto-scammers.
NEW YORK – The world’s central bankers have begun to discuss the idea of central bank digital currencies (CBDCs), and now even the International Monetary Fund and its managing director, Christine Lagarde, are talking openly about the pros and cons of the idea.
This conversation is past due. Cash is being used less and less, and has nearly disappeared in countries such as Sweden and China. At the same time, digital payment systems – PayPal, Venmo, and others in the West; Alipay and WeChat in China; M-Pesa in Kenya; Paytm in India – offer attractive alternatives to services once provided by traditional commercial banks.
Most of these fintech innovations are still connected to traditional banks, and none of them rely on cryptocurrencies or blockchain. Likewise, if CBDCs are ever issued, they will have nothing to do with these over-hyped blockchain technologies.
Nonetheless, starry-eyed crypto-fanatics have seized on policymakers’ consideration of CBDCs as proof that even central banks need blockchain or crypto to enter the digital-currency game. This is nonsense. If anything, CBDCs would likely replace all private digital payment systems, regardless of whether they are connected to traditional bank accounts or cryptocurrencies.
As matters currently stand, only commercial banks have access to central banks’ balance sheets; and central banks’ reserves are already held as digital currencies. That is why central banks are so efficient and cost-effective at mediating interbank payments and lending transactions. Because individuals, corporations, and non-bank financial institutions do not enjoy the same access, they must rely on licensed commercial banks to process their transactions. Bank deposits, then, are a form of private money that is used for transactions among non-bank private agents. As a result, not even fully digital systems such as Alipay or Venmo can operate apart from the banking system.
By allowing any individual to make transactions through the central bank, CBDCs would upend this arrangement, alleviating the need for cash, traditional bank accounts, and even digital payment services. Better yet, CBDCs would not have to rely on public “permission-less,” “trustless” distributed ledgers like those underpinning cryptocurrencies. After all, central banks already have a centralized permissioned private non-distributed ledger that allows for payments and transactions to be facilitated safely and seamlessly. No central banker in his or her right mind would ever swap out that sound system for one based on blockchain.
If a CBDC were to be issued, it would immediately displace cryptocurrencies, which are not scalable, cheap, secure, or actually decentralized. Enthusiasts will argue that cryptocurrencies would remain attractive to those who wish to remain anonymous. But, like private bank deposits today, CBDC transactions could also be made anonymous, with access to account-holder information available, when necessary, only to law-enforcement authorities or regulators, as already happens with private banks. Besides, cryptocurrencies like Bitcoin are not actually anonymous, given that individuals and organizations using crypto-wallets still leave a digital footprint. And authorities that legitimately want to track criminals and terrorists will soon crack down on attempts to create crypto-currencies with complete privacy.
Insofar as CBDCs would crowd out worthless cryptocurrencies, they should be welcomed. Moreover, by transferring payments from private to central banks, a CBDC-based system would be a boon for financial inclusion. Millions of unbanked people would have access to a near-free, efficient payment system through their cell phones.
The main problem with CBDCs is that they would disrupt the current fractional-reserve system through which commercial banks create money by lending out more than they hold in liquid deposits. Banks need deposits in order to make loans and investment decisions. If all private bank deposits were to be moved into CBDCs, then traditional banks would need to become “loanable funds intermediaries,” borrowing long-term funds to finance long-term loans such as mortgages.
In other words, the fractional-reserve banking system would be replaced by a narrow-banking system administered mostly by the central bank. That would amount to a financial revolution – and one that would yield many benefits. Central banks would be in a much better position to control credit bubbles, stop bank runs, prevent maturity mismatches, and regulate risky credit/lending decisions by private banks.
So far, no country has decided to go this route, perhaps because it would entail a radical disintermediation of the private banking sector. One alternative would be for central banks to lend back to private banks the deposits that moved into CBDCs. But if the government was effectively banks’ only depositor and provider of funds, the risk of state interference in their lending decisions would be obvious.
Lagarde, for her part, has advocated a third solution: private-public partnerships between central banks and private banks. “Individuals could hold regular deposits with financial firms, but transactions would ultimately get settled in digital currency between firms,” she explained recently at the Singapore Fintech Festival. “Similar to what happens today, but in a split second.” The advantage of this arrangement is that payments “would be immediate, safe, cheap, and potentially semi-anonymous.” Moreover, “central banks would retain a sure footing in payments.”
This is a clever compromise, but some purists will argue that it would not solve the problems of the current fractional-reserve banking system. There would still be a risk of bank runs, maturity mismatches, and credit bubbles fueled by private-bank-created money. And there would still be a need for deposit insurance and lender-of-last-resort support, which itself creates a moral hazard. Such issues would need to be managed through regulation and bank supervision, and that wouldn’t necessarily be enough to prevent future banking crises.
In due time, CBDC-based narrow banking and loanable-funds intermediaries could ensure a better and more stable financial system. If the alternatives are a crisis-prone fractional-reserve system and a crypto-dystopia, then we should remain open to the idea.
The Bitcoin Lottery
The sudden rise of “special purpose acquisitions companies” and cryptocurrencies speaks less to the virtues of these vehicles than to the excesses of the current bull market. In the long term, these assets will mostly fall into the same category as speculative “growth stocks” today.
LONDON – I was recently approached about setting up my own “special purpose acquisition company” (SPAC), which would allow me to secure financial commitments from investors on the expectation that I will eventually acquire some promising business that would prefer to avoid an initial public offering. In picturing myself in this new role, I mused that I could be doubly fashionable by also jumping into the burgeoning field of cryptocurrencies. There have been plenty of headlines about striking it big, quickly, so why not get in on the action?
Being a wizened participant in financial markets, I declined the invitation. The rising popularity of SPACs and cryptocurrencies seems to reflect not their own strengths but rather the excesses of the current moment, with its raging bull market in equities, ultra-low interest rates, and policy-driven rallies after a year of COVID-19 lockdowns.
To be sure, in some cases, pursuing the SPAC route to a healthy return probably makes a lot of sense. But the fact that so many of these entities are being created should raise concerns about looming risks in the surrounding markets.
As for the cryptocurrency phenomenon, I have tried to remain open-minded, but the economist in me struggles to make sense of it. I certainly understand the conventional complaints about the major fiat currencies. Throughout my career as a foreign-exchange analyst, I often found that it was much easier to dislike a given currency than it was to find one with obvious appeal.
I can still remember my thinking during the run-up to the introduction of the euro. Aggregating individual European economies under a shared currency would eliminate a key source of monetary-policy restraint – the much-feared German Bundesbank – and would introduce a new set of risks to the global currency market. This worry led me (briefly) to bet on gold. But by the time the euro was introduced in 1999, I had persuaded myself of its attractions and changed my view (which turned out to be a mistake for the first couple of years, but not in the long term).
Similarly, I have lost count of all the papers I have written and read on the supposed unsustainability of the US balance of payments and the impending decline of the dollar. True, these warnings (and similar portents about Japan’s long-running experiment in monetary-policy largesse) have yet to be borne out. But, given all this inductive evidence, I can see why there is so much excitement behind Bitcoin, the modern version of gold, and its many competitors. Particularly in developing and “emerging” economies, where one often cannot trust the central bank or invest in foreign currencies, the opportunity to stow one’s savings in a digital currency is obviously an inviting one.
By the same token, there has long been a case to be made for creating a new world currency – or upgrading the International Monetary Fund’s reserve asset, special drawing rights – to mitigate some of the excesses associated with the dollar, euro, yen, pound, or any other national currency. For its part, China has already introduced a central bank digital currency, in the hopes of laying the foundation for a new, more stable global monetary system.
But these innovations are fundamentally different from a cryptocurrency like Bitcoin. The standard economic textbook view is that for a currency to be credible, it must serve as a means of exchange, a store of value, and a unit of account. It is hard to see how a cryptocurrency could meet all three of these conditions all of the time. True, some cryptocurrencies have demonstrated an ability to perform some of these functions some of the time. But the price of Bitcoin, the canonical cryptocurrency, is so volatile that it is almost impossible to imagine it becoming a reliable store of value or means of exchange.
Moreover, underlying these three functions is the rather important role of monetary policy. Currency management is a key macroeconomic policymaking tool. Why should we surrender this function to some anonymous or amorphous force such as a decentralized ledger, especially one that caps the overall supply of currency, thus guaranteeing perpetual volatility?
At any rate, it will be interesting to see what happens to cryptocurrencies when central banks finally start raising interest rates after years of maintaining ultra-loose monetary policies. We have already seen that the price of Bitcoin tends to fall sharply during “risk-off” episodes, when markets suddenly move into safe assets. In this respect, it exhibits the same behavior as many “growth stocks” and other highly speculative bets.
In the interest of transparency, I did consider buying some Bitcoin a few years ago, when its price had collapsed from $18,000 to below $8,000 in the space of around two months. Friends of mine predicted that it would climb above $50,000 within two years – and so it has.
Ultimately, I decided against it, because I had already taken a lot of risk investing in early-stage companies that at least served some obvious purpose. But even if I had bet on Bitcoin, I would have understood that it was just a speculative punt, not a bet on the future of the monetary system.
Speculative bets do of course sometimes pay off, and I congratulate those who loaded up on Bitcoin early on. But I would offer them the same advice I would offer to a lottery winner: Don’t let your windfall go to your head.
Notwithstanding the recent spectacular surge in its price, Bitcoin will remain an asset without intrinsic value whose market value can be anything or nothing. Only those with healthy risk appetites and a robust capacity to absorb losses should consider investing in it.
NEW YORK – On February 8, Elon Musk’s electric-car firm Tesla announced that it had invested $1.5 billion of its cash reserves in Bitcoin back in January. The news helped to boost the cryptocurrency’s already skyrocketing price by a further 10%, to a record high of more than $44,000. But, especially in Bitcoin’s case, what goes up can just as easily come crashing down.
Bitcoin was invented in 2008 and began trading in 2009. In 2010, the value of a single Bitcoin rose from around eight-hundredths of a cent to eight cents. In April 2011, it traded at 67 cents, before subsequently climbing to $327 by November 2015. As recently as March 20 last year, Bitcoin traded at about $6,200, but its price has since increased more than sevenfold.
Today, Bitcoin is a perfect, 12-year-old bubble. I once described gold as “shiny Bitcoin,” and characterized the metal’s price as a 6,000-year-old bubble. That was a bit unfair to gold, which used to have intrinsic value as an industrial commodity (now largely redundant), and still does as a consumer durable widely used in jewelry.
Bitcoin, by contrast, has no intrinsic value; it never did and never will. It is a purely speculative asset – a private fiat currency – whose value is whatever the markets say it is.
But Bitcoin is also a socially wasteful speculative asset, because it is expensive to produce. The cost of “mining” an additional Bitcoin – solving computational puzzles using energy-intensive digital equipment – increases at such a rate that the total stock of the cryptocurrency is capped at 21 million units.
Of course, even if Bitcoin’s protocol is not changed to allow for a larger supply, the whole exercise can be repeated through the issuance of Bitcoin 2, Bitcoin 3, and so on. The real costs of mining will thus be replicated, too. Moreover, there are already well-established cryptocurrencies – for example, Ether – operating in parallel with Bitcoin.
But as the success of government-issued fiat currencies shows, the universe of speculative bubbles is by no means restricted to cryptocurrencies like Bitcoin. After all, in a world with flexible prices, there is always an equilibrium where everyone believes the official fiat currency has no value – in which case it consequently has no value. And there are infinitely many “non-fundamental” equilibria where the general price level – the reciprocal of the fiat currency’s price – either explodes and goes to infinity or implodes and falls to zero, even when the money stock remains fairly steady or does not change at all.
Finally, there is the unique “fundamental” equilibrium at which the price level (and the value of the currency) is positive and neither explodes nor implodes. Most government-issued fiat currencies appear to have stumbled into this fundamental equilibrium and stayed there. Keynesians ignore these multiple equilibria, viewing the price level (and thus the price of money) as uniquely determined by history and updated gradually through a mechanism like the Phillips curve, which posits a stable and inverse relationship between (unexpected) inflation and unemployment.
Regardless of which perspective one adopts, real-world hyperinflations – think of Weimar Germany or the recent cases of Venezuela and Zimbabwe – that effectively reduce the value of money to zero are examples not of non-fundamental equilibria, but rather of fundamental equilibria gone bad. In these cases, money stocks exploded, and the price level responded accordingly.
Private cryptocurrencies and public fiat currencies have the same infinite range of possible equilibria. The zero-price equilibrium is always a possibility, as is the unique, well-behaved fundamental equilibrium.
Bitcoin clearly is exhibiting neither of these equilibria at the moment. What we have instead appears to be a variant of a non-fundamental explosive price equilibrium. It is a variant because it must allow for Bitcoin to make a possible, if unexpected, jump from its current explosive price trajectory to either the nice fundamental equilibrium or the not-so-nice zero-price scenario. This multiple-equilibrium perspective doubtless makes it appear risky to invest in intrinsically valueless assets like Bitcoin and other private cryptocurrencies.
The real world is of course not constrained by the range of possible equilibria supported by the mainstream economic theory outlined here. But that makes Bitcoin even riskier as an investment.
Tesla’s recent Bitcoin buy-in shows that a large additional buyer entering the market can boost the cryptocurrency’s price significantly, both directly (when markets are illiquid) and indirectly through demonstration and emulation effects. But an exit by a single important player would likely have a similar impact in the opposite direction. Positive or negative opinions voiced by market makers will have significant effects on Bitcoin’s price.
The cryptocurrency’s spectacular price volatility is not surprising. Deeply irrational market gyrations like the one that drove GameStop’s share price to unprecedented highs in January (followed by a significant correction) should serve as a reminder that, lacking any obvious fundamental value anchor, Bitcoin is likely to remain a textbook example of excess volatility.
This will not change with time. Bitcoin will continue to be an asset without intrinsic value whose market value can be anything or nothing. Only those with healthy risk appetites and a robust capacity to absorb losses should consider investing in it.
Cryptocurrencies’ Time to Shine?
Now that the COVID-19 pandemic has accelerated the trend toward e-commerce, policymakers and the general public should apprise themselves of the latest developments in cryptocurrencies. And just as e-commerce requires encryption to protect personal privacy, so do digital coins.
SAN FRANCISCO – Even as all of humanity mobilizes against COVID-19, thoughts are turning to how the world will be different after the crisis. As businesses rush to adapt to the new world of social distancing, the pandemic has accelerated an already inexorable trend toward digital commerce. This broader shift should also include the widespread adoption of digital currencies, which provide stronger consumer financial and privacy protections.
For most of the twentieth century, encryption was reserved for national-security needs. Cryptography helped the Allies win World War II, and then protected secret communications during the Cold War. Until as recently as 1992, the United States, as a matter of national security, did not allow cryptographic technology to be exported. Encrypted communication was not widely available, and anyone using it was assumed to have something to hide.
But starting in the 1990s, early Internet entrepreneurs began calling for encryption to be used in e-commerce, arguing that it was needed in order to protect customer credit card numbers, passwords, and other information entered online. It turned out that the same encryption technology that had been created in academic labs – where trust and collaboration reigned – could be useful to everyone.
US policymakers and law enforcement initially balked at this push toward widespread encryption. In their view, privacy for everyone meant privacy for terrorists, drug dealers, and money launderers. As FBI Director Louis J. Freeh told Congress in 1994, preserving the US government’s ability to intercept Internet communications was “the No. 1 law enforcement, public safety, and national security issue facing us today.”
The debate about end-to-end encryption is still raging. But, crucially, consumer expectations have changed since the 1990s. The overwhelming majority of Internet traffic is now encrypted, and most of us have been trained to look for the closed-lock icon in our browser before entering sensitive information. Popular apps like WhatsApp, Telegram, iMessage, and Signal have led the way in normalizing private messaging that can’t be tracked by third parties.
But there is one area of our lives where privacy is not yet the norm: our personal financial information. By law, financial firms are required to collect reams of personal information about their customers. This information ultimately ends up on online databases, where it presents a tempting target for hackers. In 2017, the credit-rating firm Equifax revealed that a data breach had exposed sensitive information about more than 147 million consumers, or just under half the US population. That followed a similar breach in 2013, when hackers famously obtained the names, credit card numbers, and other information about tens of millions of Target customers.
Fortunately, a solution is on the horizon. Cryptocurrencies hold the promise of creating a more open financial system, with worldwide access, instantaneous fund transfers, lower costs, and vastly improved consumer-privacy protections. When Bitcoin first gained popularity, many people incorrectly assumed that it was anonymous money. In fact, as a blockchain technology, it uses a public ledger that records a digital trail of every transaction. Blockchain analytics firms are thus now helping law enforcement track down criminals who thought their trail was covered. And cryptocurrency exchanges like Coinbase have instituted robust anti-money-laundering and know-your-customer programs that rival those of any financial institution.
Several more recent developments in cryptocurrency technologies promise to take consumer privacy to even higher levels, and they are sure to be controversial. First, “privacy coins” such as Zcash and Monero offer new cryptocurrency protocols that make every transaction untraceable. Other cryptocurrencies aspire to replicate these features, and even JP Morgan has explored private transactions through its Quorum cryptocurrency. This shift is a bit like when websites moved from HTTP to HTTPS as the global standard: it lets consumers know that their information is protected by default.
Second, so-called non-custodial cryptocurrency wallets now enable customers to store their own private keys (which allow one to move funds) instead of relying on a third party. By not actually storing customer funds, the providers of non-custodial wallets are aiming to position themselves as software companies rather than financial institutions subject to regulation. In the past, non-custodial wallets required a certain degree of technical sophistication to operate, limiting their use. But, like encrypted messaging apps, they are becoming increasingly accessible to a mass market.
Unsurprisingly, these innovations have alarmed banks, regulators, and law-enforcement agencies. But just as the early Internet needed encryption to enable digital commerce, cryptocurrencies need privacy protections to unlock their full power and potential. Whether one needs to guard against authoritarian regimes, data harvesters, or criminals, the best way to ensure that sensitive financial data isn’t hacked is to avoid having to collect it in the first place.
Enhancing consumer financial protections does not mean giving free rein to criminals. Law-enforcement agencies still have a wide range of tools at their disposal, from subpoenaing cryptocurrency exchanges to examining conversions into and out of fiat currencies (which are likely to remain the choke points for law enforcement). And these exchanges will continue to be regulated as financial services, regardless of whether consumers are using privacy coins or non-custodial wallets.
Having watched the US benefit enormously from the creation of the world’s leading Internet companies, many countries are now working to attract the next generation of cryptocurrency firms. For countries thinking about cryptocurrency policy, the best approach, as always, will be to strike a balance between law enforcement, cybersecurity, privacy, innovation, and economic competitiveness.
Consumers in a free society will always demand and expect reasonable levels of privacy. Our financial lives are no exception. Fortunately, cryptocurrencies can fix some of the most vexing issues in financial services. As we plan to rebuild economically after the COVID-19 crisis, we must allow these technologies to grow.
The Right Response to the Libra Threat
Facebook’s plans for a digital currency and payments system have understandably been met with skepticism, bordering on outrage. Clearly, if a serial violator of the public trust can unilaterally insinuate itself into the global monetary system, something must be done to manage the rise of digital private monies.
NEW YORK – Facebook’s plan to launch a new digital currency, Libra, within a year has won few friends. Regulators, policymakers, and academics reacted to the news swiftly, and for the most part skeptically. US congressional committees quickly arranged hearings, and the issue featured prominently at the G7 meeting in France last month.
Facebook’s disrepute as a guardian of user privacy helps to explain some of the blowback. The real bombshell, however, was the sudden realization of the threat posed by digital currencies to the existing monetary system – not at some later date, but right now. Cryptocurrencies have been around for over a decade, but none has been adopted widely enough to challenge the existing order. With the potential to mobilize more than two billion monthly active users, Facebook could change that.
Now that the company has thrown down the gauntlet, governments should use the opportunity to advance a form of digital currency that serves the public good. Even the staunchest defenders of the current monetary system will admit that it does not work equally well for everyone. Moreover, the system is being rapidly outpaced by technological change, much of which is insufficiently regulated and could expose consumers to unforeseen risks.
It doesn’t have to be this way. Technology could enable the development of a far better system. One of the original motivations behind Bitcoin and other cryptocurrencies was to establish an alternative, censorship-resistant payment system. Sweden and Singapore are on track to create central-bank-backed digital currencies (CBDCs) of their own. In China, a handful of companies, including Alibaba and Tencent, have launched closely regulated and supervised digital currencies for transactions that are settled in renminbi. In Kenya, Mali, and elsewhere, phone companies offer digital-payment services to everyone, even those without a bank account.
These experiments offer plenty of models to choose from. But first, we must consider a fundamental question: Should the state allow the creation of private money, or should it tightly limit efforts like Bitcoin and Libra, even at the risk of curtailing innovation?
Money is conventionally defined by the functions it performs: it is a means of exchange, a store of value, and a unit of account. The dollar, pound, yen, and euro each perform all three functions, but not without some help from the private sector. Banks play a critical role in payment systems (the exchange function of money), by issuing private monies in the form of book money and the like. They also offer deposits, which can be viewed as stores of value (assuming they are insured). Only the unit-of-account function – which guarantees a currency’s nominal value as legal tender for paying taxes – is in the hands of the state alone.
Given that some of the defining functions of money can be farmed out to private actors, the question is whether, and to what extent, they should be. Shouldn’t we favor CBDCs over all the different forms of privately issued digital monies? After all, there are powerful normative arguments to be made for CBDCs. As public goods, payment systems should be available on equal terms to everyone. And with modern technologies, we can finally cut out the middlemen (banks) who have been skimming the cream off the top for centuries.
On the other hand, there is also a case to be made against the monopolization of the payment system. Under ideal circumstances, CBDCs could usher in a fully integrated, highly efficient system that works for everyone. But in the real world, even a slight technical glitch or other governance failure could have systemic effects. Generally speaking, monolithic systems lack the resilience of diversified systems, not to mention the incentives for further innovation.
Still, a multiplicity of payment systems comes with problems of its own. The transaction costs of converting diverse currencies, either into one another or into fiat currency, could be enormous. And the history of free banking tells us that unregulated monetary systems are prone to collapse.
This conundrum could be solved by creating a single framework for all digital currencies, which would keep the door open for innovation. Alternatively, it could be addressed through common protocols to govern interoperability among separate systems, similar to how the Internet has evolved.
Either way, we need a new infrastructure for managing both public and private monies. They should be treated as a public good, and thus accessible on a non-profit basis. They should be open to anyone looking to develop specific new products or services, subject to a simple registration requirement. Depending on the service, all offerings should be regulated to ensure the safety and stability of the monetary system. To reduce compliance costs for smaller start-ups, supervisory authorities could provide free consultation about the appropriate regulatory channels for new products. And, where necessary, regulation should be streamlined to avoid unnecessary overlap and other sources of inefficiency.
Digital monies present us with a massive challenge. Traditionally, the guardians of the money system, central banks, have focused narrowly on monetary policy and financial stability. Guiding financial innovation is far outside their existing mandates. But given the pace of change, they may have no choice but to expand their remit sooner rather than later.
Raoul Pal – Bitcoin May Have These Problems Later!
It’s only a matter of time before Bitcoin “death spirals” down to its true intrinsic value, which is $0, said Steve Hanke, professor of applied economics at Johns Hopkins University.
We speak to Willem Buiter, Global Chief Economist at Citigroup (2010-2018). In contrast to our interview with Bitcoin.com founder Roger Ver, Willem Buiter argues Bitcoin and other cryptocurrencies are essentially is an environmentally unfriendly, speculative fiat currency with no use countries trying to evade Western economic sanctions. He also disputes that it can be used as a currency and discusses why there won’t be mass-scale adoption.
00:01populism hits the financial markets00:03is it a fluke or does it point to00:05something deeper this is bloomberg wall00:07street week i’m david weston00:10this week special contributor larry00:12summers of harvard00:14yes there is retail fraud00:17not everything that’s done by short00:19sellers00:20is especially attractive bank of america00:23ceo00:24brian moynihan it’s good people00:26investing i think people have to be00:28careful and we all know that00:29charming mossovar rachmani of goldman00:32sachs00:33it is clear that this is not necessarily00:35justified from a valuation perspective00:38jared bernstein of the council of00:40economic advisors00:42related company’s ceo jeff blau00:45and peter atwater of financial insights01:01there was a lot going on this week the01:03federal reserve had its first meeting of01:05the new year01:06the economy is a long way from our01:08employment and inflation goals01:10and it is likely to take some time for01:12substantial further progress to be01:14achieved01:14president biden issued a new series of01:16executive orders janet yellen was sworn01:19in as the first woman to be the u.s01:21treasury secretary and oh yes the titans01:24of tech01:24announced their earnings from last01:26quarter but despite01:28all of the major news global wall street01:30was consumed with the story of what had01:33been01:33a small largely overlooked company that01:36sold01:36video games at the local mall a company01:39that the big hedge funds were happy to01:41bet against01:42until a flash mob on the social media01:44site reddit01:45decided to take on the shorts and the01:48rest01:48is history this has captured the01:50attention of the america01:52and every trader and nitrater alike the01:55word nuttiness comes to mind to be01:57honest01:57the gamestop story is good fun to watch02:00a sort of financial porn02:02but we need to ask ourselves whether02:04there’s more to it than just a battle of02:06the netizens versus the shorts02:08whether a combination of the liquidity02:10in the market driven by the fed02:12put together with the phenomenon of02:13social media with just a pinch of02:15lingering resentment of a financial02:17system02:18that seems to be rigged is part of a02:20larger truth02:21something that could point to an ugly02:23reckoning around the corner02:24with historically loose monetary and02:27fiscal policy02:28it’s really been the printing of money02:30by the central bank and the distribution02:32by the the government that’s financed a02:35lot of the activity02:38here to help us make some sense out of02:40these markets and how they’re reacting02:41to the news of the week02:43is charming most of our rachmani she is02:45chief investment officer at goldman02:46sachs wealth management sure i mean02:48always a pleasure to have you on we had02:50a fair amount of up and down in the02:51equity markets this week on wednesday02:53they were down the most since october02:55and you can tell us why that is maybe02:57because of what we heard of jay powell02:58the fetch here02:59and then on thursday they came roaring03:00back again what do we make out of all03:02this is it telling us anything more03:04fundamental about the economy03:06first of all thank you for having me i03:07always enjoy being on your show as well03:10in terms of the specifics of this type03:12of volatility03:13if you think about the equity markets on03:15average the volatility is around 1503:18now since the pandemic we’ve been above03:2020 for a long period of time03:22so seeing this type of market moves is03:24inevitable03:26in fact if we go back and look at the03:28post global financial crisis period03:30we have had episodes of the market down03:32five percent03:33uh at least 95 percent of the time03:36episodes of down 10 75 of the time03:40so one has to look at this at this kind03:43of market move and recognize03:45that this is just a lot of noise the03:48main03:48signal and the main message that we’re03:50giving our clients03:51is to stay invested we have good03:53economic growth03:55we have a very very favorable03:58earnings outlook and so when you combine04:01all of those04:01our recommendation continues to be stay04:04invested04:05and look beyond this kind of volatility04:07at this time04:08as you know we heard from chair powell04:10this week and he was asked about the04:12question of04:13bubble or froth or sort of extended04:16valuations because of the04:17very accommodative monetary policy he04:19sort of dismissed that i think it’s fair04:21to say he didn’t think that’s04:22the real problem here do you have any04:24concern about that at all because04:25there’s a lot of talk around right now04:27about04:27things being overextended when we look04:30at equity valuations04:31uh there are a couple of different04:32perspectives we bring to bear04:34first and foremost we look at a series04:36of metrics04:37but we look at them not just compared to04:39long-term averages04:41but one actually has to look at them in04:43the context of a period of low and04:45stable inflation04:46so when you’re looking at the04:48environment we have been in since04:50april of 1996 which is low and stable04:54inflation04:55we actually are not as expensive as04:57people think we are04:58in fact based on looking at the broad05:00range of uh05:02these metrics our view is that given a05:05view on where we’re going to be05:06on earnings this year we’re probably05:09about 14 to 20 percent overvalued05:12that is not a bubble in addition we05:14actually look at equity risk premium05:16what are equities yielding relative to05:19what bonds are we05:20yielding that is also above average and05:23finally we actually have something we05:24called05:25um is it’s an indicator that looks at05:27explosive price behavior05:29and we have to get that to around 90 to05:32100 to think we’re in a bubble05:34that currently stands at 26 it’s at a05:37hundred percent for bitcoin05:38but for something like equities it is05:41not showing bubble levels at all05:43furthermore if we compare it to where we05:45were in the dot-com bubble levels05:47we’re substantially below that so05:49definitely not a bubble trouble yet from05:51our perspective05:52charming a moment ago you explo referred05:54to explosive growth05:55we cannot talk about explosive growth05:57this week without talking about gamestop05:59i mean you just have to talk about it06:01give us your take on game stock what is06:02going on there is that a fluke is it a06:04symptom of something else06:06what’s driving that when we look at06:08these types of uh06:09headlines and this kind of price action06:12um it is clear that you this is not06:14necessarily justified from a valuation06:16perspective06:17so what is it driving driving in an era06:20of social media06:21easy access to trading very low cost06:24in terms of transaction costs for people06:27you could have a lot of momentum and a06:28lot of investors can pile into an06:30investment theme06:31and that does mean that you’re going to06:33end up with prices that06:35don’t probably reflect fair value and06:37this could be seen06:38in many areas it’s not just individually06:40in a particular stock06:42you could see it in other sectors and06:44asset classes and again cryptocurrencies06:46are a good example where you see the06:47same06:48type of price action where it’s not06:50clear these are justified by06:52any value argument and any fundamental06:54arguments06:55yeah i don’t hear anybody arguing that06:56it was justified by value arguments06:58does it pose anything of a risk for the07:00rest of the market in terms of the price07:02action it’ll get some attention it’ll07:04get a lot of headlines07:05but at the end of the day again one has07:07to separate all this noise07:09from the main signal it’s not as if we07:11would recommend our clients have a07:13significant07:14allocation to any of these sectors or07:17specific talks07:19core assets really need to be uh in07:22something like the s p 500 in something07:25like ifa07:26very small allocation for example to07:28emerging markets but it needs to be more07:30diversified07:31one of the pillars of our investment07:32philosophy is the real way07:35to create good long-term wealth is07:36through having some diversification in07:38the portfolio07:39okay charming as i say it’s always a07:41great pleasure to have you with us that07:42charming most of our rachmani07:44of goldman sachs coming up07:47what caused the gamestop spectacle and07:50what should be done about it07:52from peter atwater of financial insights07:55what we’re seeing today is very aimed at07:58going after companies that everybody was08:01convinced was08:02you know we’re on their way out in the08:03stretcher08:05this is wall street week on bloomberg08:13[Music]08:22a video game store is at the heart of a08:24titanic struggle between08:25short sellers and retail investors until08:28recently gamestop08:29was a company whose time seemed to have08:31passed with serious gamers turning to08:33the internet not the mall to get their08:35games08:36but then social media got involved08:38starting a meteoric rise08:40in gamestop stock after reddit’s wall08:43street bets forum started pumping the08:44stock to its users08:46the army of social media empowered day08:49traders catapulted the former small caps08:51market value08:52beyond those of even members of the s p08:55500.08:56it just reflects the liquidity that08:57exists and the new players in the08:59markets you know historically it’s09:01indicative of a bubble type environment09:03but you know to go for a long time09:05the amateur day traders were targeting09:07short positions held by09:08gabe plotkin’s melvin capital and andrew09:11left09:12citroen research hedge fund titans ken09:14griffin and steve cohen09:16injected a total of two and09:17three-quarters billion dollars into09:19melvin capital09:20amid the short squeeze distress what’s09:22happening is that the retail right now09:24is stronger but09:25the short bets come back and fill in so09:27it’s it’s just a battle that’s going to09:29continue you’re going to see09:30game stuff go way higher within a matter09:32of days the reddit army had pushed the09:35rally so high09:36that melvin capital and citroen threw in09:38the towel on their short positions09:40citron research will no longer be09:42publishing what can be considered09:45as short selling reports the reddit army09:47of day traders also boosted other09:49has-beens including blackberry09:51retailer express and amc which is09:53fighting to save09:54off bankruptcy hedge funds are now on09:56the hunt for other companies that could09:58end up on the reddit mob’s radar10:01i think you’re going to see a number of10:02hedge funds declare bankruptcy in the10:03next several days10:04online brokerages reported service10:07disruptions caused by the retail trading10:09frenzy10:09and a number of them including robin10:11hood took the rare step of limiting some10:13transactions on shares of gamestop10:15amc and others you’re witnessing the10:18french revolution of finance where the10:21proletariat is rising up to change10:24the order structure and finance there’s10:27been a surge in overall retail10:29trading activity as people stuck at home10:32tried their hands at trading10:34according to bloomberg intelligence10:35individual investors accounted for10:37almost 2010:38of the trading volume in 2020. the fact10:40that retail investors are going to be10:42able to communicate with one another10:44that they can actually consolidate their10:46buying power is something i don’t think10:48the regulars would have anticipated10:49even three years ago10:51[Music]10:55so what caused the perfect storm that10:57some call gamestop10:59we asked peter atwater president of11:01financial insights11:02and he said it was something that had11:04been in the works for some time11:08what we’ve seen over the past couple of11:09years have been these flash mobs with11:11money as i call them where11:13investors particularly using social11:15media get together and11:18you know aim at a single company you saw11:20this with tilray beyond11:22me just one after the other and what11:24we’ve started to see11:25is they move from moving shares to11:28buying options to now buying options and11:30things that are11:31you know most shorted and to me this11:33just reflects11:34on the the confidence of the crowd11:37they’ve gotten much more strident11:39much more aggressive and and honestly11:41they’ve succeeded at it so11:43so behaviorally this looks very very11:45predictable11:46and it’s coming to a head let’s talk11:48about regulation11:49because there’s various discussion about11:51whether the sec or someone else should11:53be getting involved does this11:54potentially11:55lie afoul of what’s going on with the11:57sec in terms of11:58existing regulation i i don’t know if it12:01runs a foul or not12:02but as a researcher i have found that12:05regulators12:07when they act react to sentiment and so12:11i expect that if sentiment becomes too12:13extreme12:14people become concerned about systemic12:16safety12:17then you’ll see the regulators moving in12:19force and and12:20you know that that’s what they do they12:22will close the barn12:24doors at the moment that the the animals12:26have already left they’ll they’re going12:28to pour12:28water on a fire that was already12:30extinguishing12:32those who defend short selling say this12:34is a way of really communicating12:35information in early stage12:37at least questions about a company that12:39really facilitates an effective market12:41functioning12:42uh does this get in the way of that or12:44is this just that same12:45market signaling on steroids as it were12:48yeah12:48i’m in the camp that this is signaling12:50on steroids i mean what you12:52have right now is absolute speculation12:56using enormous leverage12:57you know targeted where they believe it13:00will be most effective13:01and i step back and say that only13:04happens david13:05near the climax of a confidence cycle13:08where people are so certain that they’re13:10going to win13:11that they bet the ranch in things that13:13have enormous leverage this is13:15this is flipping houses um you know from13:18200513:19on steroids in 2021 well that’s one of13:22my questions actually because you are a13:23researcher13:24looking back through history whether13:25it’s the housing bubble or going back13:27further than that to tulips and south13:29sea and things like that13:30are there analogies that would inform us13:32now that might inform where we’re going13:34or is this a one-off13:35no i think that the the analogies hold13:37these are these tend to be climatic13:39events13:40where you know the crowd is enormous13:43it’s moving13:44in a manic very frequent way i mean it’s13:47to me it’s less13:48of a bubble than it’s a series of one13:50craze right after the other13:52and those those high energy moments tend13:55to happen13:56you know just at the at the peak in the13:58confidence cycle14:00peter we can’t get in the minds of the14:02people who are participating14:03particularly on reddit here14:05but from your research from your14:06reporting is this about finance as a14:09base or is it actually about14:11politics or about social norms and a14:14real resistance to sort of14:16some of the institutions we’ve had14:18including going all the way back to 200814:19and14:20sort of a resentment about the fact that14:22perhaps those in the financial14:24system were not held properly to account14:27i i i sort of look at the evolution of14:30of this14:30this paradigm starting with sort of14:33gamesmanship people going online and14:35using14:36uh social media to to make money almost14:39as a game14:40then it became very greed filled and now14:43what you’re seeing14:44is i i think a consequence of that14:47k-shaped recovery14:49that i’ve been talking about for the14:50past year where14:52there is a there’s a jealousy there’s an14:55anger there’s a frustration at the14:56system and i think14:58that the size of the crowd now15:00encompasses that15:02aspect i mean don’t get me wrong there’s15:03there’s always a stridents to peaks in15:05the market15:06but this is this has got anger behind it15:10and the behavior of the mob in many ways15:13reminds me of what we saw two weeks ago15:15at the capitol it’s a it’s a mishmash of15:18a whole lot of people15:20again we’re reaching for analogies15:21because it’s so unprecedented but i also15:23wonder if it has15:24something to do in parallel with some of15:26the cryptocurrency speculation the15:28extreme volatility there and is it15:31perhaps a generational issue15:33you know what started though was was15:35very futuristic15:36you know bitcoin tesla you know evs it15:39was very15:40oriented towards possibility what we’re15:43seeing today is very15:45aimed at going after companies that15:48everybody15:49was convinced was you know were on their15:51way out in a stretcher15:52you know the retailers these are these15:54are companies that nobody15:56was expecting to prosper and the short15:59interest just16:00really has enabled the crowd to catalyze16:02around them16:05that was peter atwater president of16:06financial insights16:09coming up bank of america ceo brian16:11moynihan on the rise of retail investors16:14and16:14what it means for the markets it’s16:16already been pretty democratized it’s16:18good people are investing i think people16:19have to be careful and we all know that16:23this is wall street week on bloomberg16:36this is wall street week i’m david16:38weston brian moynihan during his time as16:40chairman and ceo of bank of america has16:42emphasized the strategy of responsible16:44growth16:45what went on with gamestop this week16:48seems like just the opposite of that as16:49some16:50would say was the earlier parabolic16:52increase in bitcoin16:53but brian says that it’s not a problem16:55with the democratization of finance16:58the forces are larger than that17:01it’s already been pretty democratized we17:03we everybody talked about free trading17:06i think somewhere in like 2007 or17:09something like that i17:10i was riding around manhattan on a17:12double decker bus was free trading on17:14the side17:14side of it from bank of america this is17:16not a new concept and so17:18you know we we’ve seen 30 percent growth17:21in in our17:22uh balances for our in our maryland17:24which is our more affluent segment we’ve17:26seen a17:27net growth of 10 i think in in17:30what you call sort of digital brokerage17:32accounts and stuff and so it’s it’s good17:34people are investing i think people have17:35to be careful and we all know that but i17:37think if you look at it overall17:38if you look longer term what what are17:40the themes in financial services17:42more and more digital we saw we’re now17:44up to 80 of our direct consumer loans17:46done digitally17:47up from the start three years ago uh17:50more and more digital17:51more and more demand for i want digital17:53and i want high touch i want the17:55branches and i want the digital17:57more and more artificial intelligence18:00applied more and more operational18:01excellence18:02across all our platforms in terms of18:04process engineering and taking out paper18:06and18:06putting in digital work those are the18:08themes are just going to be tremendous18:09artificial intelligence distributed18:11networks18:12data information movement all those18:15things are incredibly important18:17but those things have been with us now18:18the questions we may have made a step18:20change and we’ll be after that so18:22yes investors yes borrowers yes18:24everything but18:25it’s really the digital it’s the new18:27news not as much as the underlying18:29asset cost when we talk about a lot of18:31capital looking for18:32a limited number of investments it’s not18:34limited to esg goodness knows18:36we’re seeing a lot of situations that18:38some people think18:39might be a bubble or at least froth or18:41something are you concerned that in fact18:42because the liquidity that’s been18:44injected for good and sufficient reason18:45to help the economy18:46that we really are risking ourselves in18:48some places i’ll give you two examples18:50bitcoin goodness knows has gone all over18:52the place and another gamestop right now18:54that is really quite a phenomenon and18:55it’s not the only one right now that’s18:57really getting bid way up18:58should we be concerned that maybe this18:59is an indication that maybe we’re19:00getting a little bit out over our skis19:03yeah you know those issues the moment19:06happen that time you know in the ebbs19:08and flows in the market and frankly i19:10don’t have great insight as to19:12uh those things uh we’ve been clear19:14about how we stand on bitcoin and19:16versus blockchain which is a technology19:17and stuff but let me let me back up19:19and and and the question is when you19:22look at the economy19:24and it’s about as big as it was in 201819:27the projections from our team offered to19:28grow up five percent this year19:30in 21. um laugh at in 2018 in the19:33in the second quarter was the economy19:35was this big it was projected to grow at19:37like one half to two percent19:38and the interest rate environment was19:39100 150 basis points higher19:42and there wasn’t all this uh so there19:44wasn’t interest rate accommodation there19:45was a fiscal stimulus out there19:47now you have the same thing so the19:49fiscal stimulus is needed to help people19:51make it across the river here you have19:53six percent plus unemployment you have19:54these companies have an open that’s the19:56ppp19:56program you have holes in state budgets19:58and and that were created by the20:00cost of paying for all this work and20:03maybe tax20:04loss revenues and stuff those ought to20:06be dealt with and i think if we deal20:07with that20:08responsibly then what happens but the20:10possibility of overshooting here20:12is real and that’s what you’re hearing20:13less about the equity trading values the20:15moment but more about the question20:17when rates are one percent are going to20:18stay there for a long time20:20it’ll lead to risk and that could lead20:21to bubbles but the real question that20:23would be fundamentally bad for everybody20:25is if20:25if we miss the inflation turn and it’s20:27not there now but that’s one of the20:29challenges that20:30you know every that chair powell and his20:32colleagues have is to is to really be20:34watching this thing and they need to20:36make sure this great economy20:37grows again at the right rate and above20:39that right rate20:40and there’s some inflation in order to20:42make sure it doesn’t go backwards but on20:43the other hand20:44it’s going to be an interesting you know20:46as we move through the end of this year20:47the next year when this has all come20:48true the vaccine’s out and stuff it’ll20:50be interesting to see how they play20:51through that20:52well exactly let’s pursue that just for20:54a moment because uh there’s been a lot20:56of money given to a lot of people20:58again for good and sufficient reason20:59they’ve needed it but the indications21:01are a lot of it’s getting saved it’s not21:02getting spent in part because they don’t21:04have a place to spend it frankly because21:05a lot of the economy is shut down21:07how concerned are you as you look at the21:09economy because you have a real vantage21:10point into the economy broadly21:12i’ll continue there might be a snapback21:14that might actually trigger21:16believe it or not inflation we haven’t21:17talked about in a long time well21:19there’s been i mean it’s kind of21:20interesting if you traced last year21:22and we’ll see what the fourth quarter21:24all ends up final but21:25if you think about down 30 up 30 and up21:28a few percent21:29you have three four percentage points or21:30whatever it turns out to be and then21:32this quarter21:32the projections are may come down closer21:34to flat and that has a little bit to do21:35with the first quarter but21:37if you actually then pull that apart and21:38look at our our consumer21:40uh what we call consumer spending and so21:43debit and credit card spending is one21:45thing but this is around you know people21:46taking money on21:47atms and spending it writing checks for21:50services21:50uh p2p the zell product which is huge21:53right now21:54if you look at that spending through the21:57first 23 days of january21:59it’s up eight or nine percent over last22:01year’s first 23 days of january which22:03was up nine percent of the year before22:05so it is bigger in dollar amount it is22:07growing faster than it grew from22:10uh uh from eight uh from 19 to 20 18 to22:1419 and as fast as 19 to 2022:16if you look at the customer obviously22:17for the people who are unemployed and22:19you can see them receiving unemployment22:20benefits they’re using the money faster22:22if you look at the rest of customers22:23they’re using a discretionary retail not22:25uh sustenance retailing not you know so22:27they they are paying for their food22:28because they’re employed and so i think22:30these stimulus dollars can be spent much22:32more precise and i think the last22:34case was a good one and that it went22:35unemployment to the unemployment some22:37supplement there this22:39dollars under seventy five thousand22:40those are those are good items and22:41future stimulus ought to be likewise22:43geared22:44because otherwise it gets diminishing22:46returns and then you have the issue how22:47you pay for it long term and22:50the issue of whether it creates22:51inflation but there’s a lot of pent-up22:53savings and we would expect a good22:54second half of the year22:56now this is the mistake everybody makes22:58is they get talked about all the22:59economics and they forget there’s one23:01simple question23:02which is we have to win the war on the23:03virus and23:05right now we’re going in with a much23:07better23:08situation from a fight and that we have23:10this vaccine23:11and there’s vaccines going into people’s23:13arms and that then changes the course of23:15this23:15and yet that’s still out there but23:17that’s a light in a tunnel that wasn’t23:19here this year23:19you know last year in the summer23:23that was brian moynihan chairman and ceo23:25of bank of america23:28coming up working from home once seemed23:30to be the bold new innovation23:33but now for many the question is when23:35can i come back23:36to work people don’t come back to the23:38office new york cannot recover23:40and that’s really that’s really the sad23:42thing that’s happening now23:45this is wall street week on bloomberg23:51[Music]23:58this is wall street week i’m david24:00weston wall street has joined so many24:02others in figuring out how to work from24:04home24:04efficiently and effectively but the24:07appreciation for all that added24:08flexibility just24:09may be wearing off it feels like it is24:13fraying it is hard it takes a lot of24:18inner strength it’s remarkable that it’s24:20working as well as it is but i don’t24:21think it’s sustainable we have24:2310 12 back we weren’t telling they come24:25back but a lot of people want to come24:26back24:28related companies is the largest24:30landlord in new york city24:32and one of the most important real24:33estate developers in the entire country24:35and we asked its ceo jeff blau what it’s24:38going to take to get people back24:39into the office in new york the two24:42obvious answer answers are24:44vaccine roll out but probably even more24:47critical right now is testing um you24:50know we all thought24:51after new year’s that everyone would24:52would return right back to the office24:54but24:55in an interesting twist i i have a24:57feeling that the vaccine announcement24:59and the25:00closeness of it has really enabled25:02companies to just say you know i’m going25:04to25:04just wait it’s so close i’m not going to25:06pull everyone back to the office yet25:08you know unfortunately in new york25:11you know office actual occupancy people25:13showing up for25:14at their desk every day is under 1025:17um and it’s it’s critical that we kind25:20of25:20really push testing make people feel25:23safe and comfortable25:24until they ultimately do get vaccine so25:26people come back to the office if people25:28don’t come back to the office new york25:29cannot recover one of the things we’re25:31very conscious of in new york obviously25:32are the financial organizations uh do25:34you have a sense of companies in25:36in wall street how eager they are to get25:38their people back in25:40you know i’d say it varies i mean i’m25:42sure you’ve heard david solomon really25:44encouraging25:45uh goldman to encourage his employees to25:48get back25:49he had a very uh funny quote he kind of25:52said25:52well sure you guys all want to work home25:54from your living room and you can do25:56that25:57until your competitor shows up in person25:59and wins an assignment26:00you guys need to get back to the office26:02right so i do think that there is26:04pressure26:05um the market will ultimately bring26:07pressure for people to come back26:09you know it’s interesting you hear a lot26:10about uh tech tenants or ceos saying26:14i’m gonna let my employees just work26:15from home until june or december or or26:18forever in some cases26:20and yet behind the scenes when you talk26:22to them and i i spent a lot of my time26:25doing exactly that really trying to26:26understand26:27what their plans are they realize that26:30this doesn’t work from a26:32long-term perspective they realize that26:34culture is not26:35does not work it is not created over26:37zoom over skype or26:39whatever we’re using today and you26:42really26:42interactions happen in the hallway and26:44you bump into each other i know26:46certainly here at related that’s how26:48we work it’s a little bit less formal26:50and our best meetings just occur26:52when you walk down the hall and see26:53somebody and it’s it’s hard to26:56to create that on zoom you can’t26:57schedule that interaction26:59um how do you how do you train new27:02people27:03you know you have an incoming class of27:05analysts27:06uh goldman has 2500 new analysts come in27:10and what are they supposed to do on zoom27:12so i i ultimately do think27:14um i think the long run answer here is27:18that27:18there will be more flexibility in the27:20workplace27:21i think that employees value the ability27:24to work from home27:25a portion of the time if you divide a27:27person’s day into27:29the bump into a hall an interactive27:31meeting and27:32writing an investment memo which they27:34can do by themselves27:35maybe there’s a way to divide that work27:37up and the i’m just using this the27:39investment memo writing actually happens27:41you know on friday at home27:43um and the rest is but it also needs to27:46be a coordinated day27:47in that world of more flexibility as you27:49call it does that affect the long-term27:51demand27:52for commercial real estate as a27:54practitioner are you looking at a27:55different curve on the out years27:58um i don’t really think so because28:00ultimately you still need28:02for those days that you’re coming in28:05people to have an office28:06i what i think might happen is that the28:09build out of space28:10might change so there might be more28:12meeting rooms more conference facilities28:14more auditoriums28:15and smaller certainly private offices28:18and and maybe more open cube type28:22seating so28:23i think it’s going to change i don’t i28:25don’t think it will really affect28:26the overall demand are you seeing a28:29shift in your own business between28:31commercial on the one hand and28:33and uh residential on the other and28:35particularly when it comes to some of28:36the big luxury malls you had a really28:38big one there28:39at hudson yards are you shifting your28:41use at that massive project on hudson28:43yards28:44yes so we spent a lot of time thinking28:47about the future of real estate28:48development28:49um in response to the pandemic but also28:52just over time that everything evolves28:55and actually if you think about hudson28:56yards it really28:58had uh many of the features that we29:00think are critical today29:02i mean the the the words that people29:04like to say today are29:0515 minute cities what does that really29:07mean it means that you want basically29:09everything you could work your whole day29:11or spend your whole day within a29:1215-minute walk so it goes back to29:15kind of the live work play nature of of29:17the way we’ve been designing our29:19mixed-use developments29:20so you think about hudson yards here we29:22have office retail residential retail as29:24you said29:26yes is there too much retail in many of29:28these things today29:29yes and we are converting a former29:32neiman marcus base into29:33420 000 square feet of of incredible29:36office space29:37because there is demand for office and29:39less demand for retail29:42that was jeff blau ceo of related29:44companies at the bloomberg year ahead29:46summit29:48coming up the biden administration takes29:50on the battle with covet29:52and dealing with the economic29:53consequences of it we talked with29:55council of economic advisers member29:57jared bernstein about what is needed30:00this package30:01uh uh is is what is what it’s going to30:05take30:05to finally put covet 19 behind us30:11this is wall street week on bloomberg30:24this is wall street week i’m david30:26weston the bind administration is30:27hitting the ground running30:29but boy does it have a lot of ground to30:30cover we talked with the long time bind30:33advisor30:34just named to the council of economic30:35advisers jared bernstein30:37about what it needs to get done30:40the biggest problem is a dual problem30:42and you yourself david just30:45nailed it which is the dual impact30:48of the persistence of the virus30:51and its impact on economic activity on30:54commerce30:55unemployment on our ability to really30:58get30:58a recovery underway and as i think you31:02know31:02it’s not a uh an impact that is hitting31:05everyone31:06when the president talks about a31:08k-shaped recovery he’s talking about31:09something real31:10when he talks about racial equity he’s31:12also making a connection31:14between who gets most hurt by these31:16dynamics these dual dynamics were31:18describing31:19and this uh legislative priority top31:22legislative priority31:23of passing the american rescue plan uh31:26this package31:27uh uh is is what is what it’s going to31:30take31:31to finally put covet 19 behind us31:35and get a bona fide recovery underway it31:38funds a national31:39vaccine campaign to dramatically31:42increase the pace of inoculations of31:45vaccines it mobilizes a hundred thousand31:48public health workers31:49it ramps up testing treatments and31:51therapeutics31:52it engages with emergency paid leave it31:55brings science31:56back into the picture in a big way it31:58provides states and localities32:00with the money they need to reopen32:01schools which is so important for kids32:03and their parents and the economy32:05and that and you know i can say much32:06more about its components but32:08that is the dual challenge we face32:11and this plan is designed to attack it32:14and attack it hard32:16and i must say jared i don’t hear many32:18people republican or democrat32:19complaining about trying to really32:20attract the coronavirus getting the32:22vaccination program up supporting public32:24health things like that32:25there are other issues though that32:26people ask is it really targeted at that32:28k32:28aspect you just addressed how do we make32:30sure the dollars get to the people who32:32need it the most32:33for example on the 1400 payments anybody32:35will say some people really32:36need that desperately frankly some32:38people don’t they’ve kept their jobs32:39they’re doing just fine32:41yeah now that’s important and i think32:43the uh thing to recognize32:45there is that the checks are are better32:48targeted than i think many folks realize32:50now that doesn’t mean that they just go32:52to folks at the bottom32:54but that’s because it’s not just folks32:56at the bottom who need the money32:57and if anybody’s listening to me in the32:59you know 75 100k33:01range uh many of them yes many have kept33:04their jobs many have lost hours many33:06have lost wages33:07lots of those folks again i’m not just33:10talking about the poorest i’m talking33:11about folks in the middle class33:12something that’s always been33:14very important uh to uh to president33:16biden so he talks a lot about the33:18struggles that middle class families33:20have had in recent decades33:21many of those folks face um uh33:24uh issues around rent and um mortgage33:27payments so33:28there’s been these moratorium in play as33:30you know and that’s a lot that but33:31moratorium is not33:33you know forbearance is is not33:34forgiveness so at the end of these33:36moratoria33:38uh people face very significant bills33:40now that means that they and this is33:42really33:42important bit of economics here this33:44gets down into some keynesian33:45multipliers33:47um what we’re talking about here is that33:50yes33:50some of these expenditures will be33:53initially saved and not spent33:55and that gives them kind of you know a33:57low mo a lower multiplier in a keynesian33:59sense34:00but that’s just kind of a technocratic34:02concern34:03i think what’s most important is that we34:05finally34:06look ahead that was jared bernstein34:10member of president biden’s council of34:12economic advisors at the bloomberg34:13year ahead summit and now it’s time for34:15a look at the week ahead34:17on global wall street thanks david the34:20liquidity squeeze in china will remain34:23front and center34:24well we’ll be looking at the january34:26readings on china’s pmis to get an idea34:28of the economy’s pulse34:30we also have central bank meetings in34:31australia and thailand34:33with the rba expected to maintain its 7734:36billion34:36quantitative easing program india’s34:39finance minister has a tough job on her34:41hands to help spur a recovery in an34:43economy facing its worst recession34:46since 1952 when the country’s budget is34:49handed down on monday34:51and quiet show technology the main rival34:53to bike dance in china34:55is slated to list in hong kong on friday34:57in what would be the world’s34:58biggest internet ipo since uber danny35:02thanks juliet in the eu a dispute has35:05opened up35:06between them and astrazeneca with the eu35:09saying that they need to fill their35:10contractual obligation to deliver more35:13vaccines35:13despite the fact there was a glitch in35:15belgium production35:17at the week ahead we also have a boe35:19meeting to look forward to35:21what will the reaction from the boe be35:23considering that data has significantly35:26weakened35:26in the uk we’ll see what type of35:28stimulus they might35:30propose or any other support measures35:32romaine35:33thanks danny well u.s investors will35:35have a slew of corporate earnings to35:36digest next week more than a quarter35:39of the 1000 largest u.s listed companies35:41set to report earnings35:42big tech will be in focus alibaba35:45alphabet and amazon35:46and in the healthcare space pfizer amgen35:48and regeneron35:49will be ones to keep an eye on based on35:51the company’s reporting so far35:53the s p 500 in aggregate has seen about35:56a one percent drop in earnings per35:58share despite the fact that revenues are36:00actually higher now on the economic36:01front keep an eye out for manufacturing36:03data on monday36:04auto sales on tuesday and u.s monthly36:06employment numbers36:07that arrives on friday and will be sure36:09to bring back into focus36:11that two trillion dollar fiscal stimulus36:13plan that president joe biden36:14is trying to push through congress david36:18thanks to juliet danny and romain36:22coming up we wrap up the week as always36:24with special contributor larry summers36:26of harvard36:28this is wall street week on bloomberg36:41this is wall street week i’m david36:42weston we wrap up every week with our36:44special contributor larry summers of36:46harvard36:46and this week we have to get larry’s36:48thoughts on the phenomenon that is36:50gamestop36:51and what it may tell us about the state36:52of our markets our economy and maybe our36:55politics36:56more broadly i should say larry so thank36:58you so much for being with us uh you’re37:00a macroeconomist you’re not a day trader37:02that i’m aware of you’re not a short37:03seller that i’m aware of37:05so i’m not asking about as a trader but37:07from a macro perspective37:09is gamestop let me put it simply a fluke37:12or a symptom37:15i think it’s a bit of i think it’s a bit37:16of both i think it37:18points up that there’s a lot of activity37:22in finance and in financial markets37:24that’s not necessarily particularly37:26productive37:27or particularly rational and that37:29there’s a need for37:30adult supervision uh sometimes37:33uh i don’t think that this is something37:36that’s either gonna37:37lift the economy up or bring the37:40american economy37:42uh down but it does seem like there’s37:45more risk uh than there has to be37:49born in a variety of directions so37:52that’s a question really could this be a37:53canary in the mine shaft37:55the economy’s not going to make it or37:58not make it based on gamestop goodness37:59knows38:00but it could be an indication couldn’t38:02it of of of sort of froth or even more38:05than fourth maybe a bubble as you know38:06chair powell has asked about that38:08this week look i i think you’ve got to38:11be38:12concerned gamestop is one thing38:16the uh ways in which ipos have38:19popped by a factor of two or three38:23the uh new financing vehicles38:26associated with some of what’s happened38:30in38:31the spac sector certainly not all of38:33what’s happened in the38:34uh spac sector all of this38:37has a slight feeling of 2000 or 192938:42uh in the air and so i think the idea38:46that we’ve got a new group of financial38:48regulators coming in who are38:50more committed to regulation than the38:53previous38:54uh group i think that’s all welcome38:58whether that means that markets are in39:00some39:01aggregate sense uh overvalued uh39:05that’s not a judgment uh that i’d be39:08prepared to reach39:09uh certainly with confidence but i39:12certainly think39:12risks are uh in a39:16two-way direction but i also39:20think david that you got to look at both39:22sides as yes39:23there is retail froth not everything39:27that’s done by39:28short short sellers is especially39:31attractive39:32either and certainly there have been39:34excesses of the practice39:37of uh short selling and then trying to39:40disparage and39:42so there are things that have gone on in39:44the hedge fund39:45uh community that i think uh39:48can at least be uh questioned39:51uh as well and in general the activity39:55of some people trying to short and other39:56people trying to39:58uh squeeze them and people trying to40:01create bandwagons40:02to the down uh to the downside40:06it’s a pretty imperfect uh40:09business and i don’t think anybody can40:12feel entirely comfortable about what’s40:14there40:15i guess the other question i’d want to40:17put40:18is not all well-intentioned regulation40:23works out well and you know it turned40:26out that in their early incarnations40:28certainly circuit breakers ended up40:31exacerbating volatility because people40:34started selling when they were afraid40:36the market40:37might close in the incarnation that got40:40put in some of the rules we had on money40:43market funds40:44actually made runs on money market funds40:47more likely not less likely so40:51indignation and dismay about the status40:54quo40:55may be a necessary condition for new40:57regulation40:59but it’s not a sufficient condition for41:01any kind of41:03regulations i think we’re going to need41:06people who are with regulatory41:07responsibility to sit down41:09consult with all the parties reflect41:12very carefully41:13on what’s happened here and what its41:16lessons are41:18larry from your experience having41:20studied these things and lived through a41:21fair number of them41:22where does this all lead i mean this41:24week we had the likes of41:25alexandria ocasio-cortez joined together41:28with ted cruz for goodness sakes to41:30agree41:30there’s got to be a congressional41:31investigation where does washington take41:33something like this41:38look i’d almost be prepared to say that41:41whenever aoc and ted cruz agree41:44they’re wrong and that there’s a general41:47principle41:49when a cause attracts the attention41:53of both extremes41:56you have to worry a lot about that42:00particular uh cause42:03and i think the idea that42:06somehow the people who are involved in42:10this42:10are really great social justice warriors42:13um and that this is an occasion to get42:16the man42:17i don’t think is a particularly fruitful42:20way to think about42:21uh policy but my guess is that two42:25things are going to happen42:26one is this thing’s gonna in some ways42:30set in its own undoing they’re gonna be42:32some painful lessons learned42:34people are gonna be more careful about42:36shorts about shorting42:38because they got squeezed and routed on42:40the one side42:41and people who are involved in pushing42:43this stock up to ludicrous levels are42:45probably going to end up losing a lot of42:47money42:48and they’re going to learn a lesson from42:49that too so to some extent42:51this thing is going to teach its own42:53lessons and42:55i think the dull work of government42:58we’re not going to have any instant43:00legislation43:02but we’re going to have committees43:03formed to study various aspects of this43:07to make recommendations that are then43:09considered43:10is actually going to probably lead us43:12with better financial43:14markets and a better set of rules43:17than the rules we have today okay larry43:20let’s wrap up the week as we do every43:22week43:22with some summer says three quick43:24questions number one on the vaccination43:26program43:27will it over perform or underperform43:29what is now expected43:30i think it’s going to over perform i43:32think it was a masterpiece of spin43:35frankly to define the objective as 10043:38million doses over43:39100 days at a time when even the trump43:42administration had figured out how to do43:44850 00043:46doses a day so i think they’re going to43:49see that43:49target massively outperformed on43:52my best guess would be you’ll see 17543:56million doses43:57in uh the first hundred days and that’s44:00as it should be44:02and if we don’t get a bad shock from44:05biology44:06i think we’re going to make more44:07progress more quickly on covid44:10than many people expect what kind of44:12progress we’re going to see with the44:13economy44:13second question is will we over perform44:16or underperform current expectations for44:18the u.s economy44:19different people have different44:21expectations but i’m betting on growth44:23above six percent this year44:25and i think that’s over performing on44:28most people’s expectations i really44:30think we44:31very much now are in a world of44:34two-sided risk44:36both in terms of real activity and in44:38terms of possible inflation risk44:41third thing jay powell chairman of the44:44federal reserve we heard from this week44:45we heard from the fomc44:47how do you react to what you heard and44:49saw44:52we’re lucky to have jay there and i44:55think in the fullness of it all he’s44:57made44:58very good judgments i45:01think that they need to be more mindful45:04of the possibility that the conventional45:07wisdom is wrong45:09and that we have a little more inflation45:12picking up45:13a little sooner or that financial45:16markets get away from us45:18and so i thought he was45:21so focused on providing reassurance45:25on the fed’s continued stimulus to the45:28economy45:29that he created a dynamic where if it45:32was necessary45:33to do things the other way it would come45:36as a pretty jarring shock45:38and that was my worry about how he45:41calibrated the balance45:43by all things considered i’m glad he’s45:45there45:46larry it’s always such a pleasure to45:48deal with you every single week that is45:50special wall street week contributor45:51larry summers45:52of harvard finally one more thought45:57the vaccination site 800 years in the46:00making46:00as we press forward urgently impatiently46:03to get as many people vaccinated as soon46:06as possible46:06we face a series of hurdles46:08manufacturing doses as fast as we can46:10testing and approving new vaccines46:12getting the medicine distributed46:14covering the last mile and getting it46:16into people’s arms46:18only vaccinating everybody everywhere46:22would get us out of the risk of this46:24mutation46:25but of all the problems we face real46:27estate isn’t really one of them46:30google the term mass vaccination sites46:32and you get almost46:33one and a half million results46:35everything from pharmacies to hospitals46:37to sports arenas we hope to open up in46:40roughly about46:40two weeks time to do base center for uh46:43mass46:44vaccination centers but there’s only one46:46that has the highest spire in all of46:48england46:48the largest cathedral clothes the46:50largest cloister and that is the46:51cathedral of salisbury46:53where according to legend at least back46:55in about 12 20 or so46:57a bishop shot an arrow into the air hit46:59a deer and where the deer fell is where47:01they built the cathedral47:02and that cathedral now is a mass47:04vaccination site47:06and now the chapel of saint michael the47:08archangel is filled with refrigerators47:10for the vaccine the huge nave is full of47:13chairs47:13rather than pews and that’s where the47:15elderly who have been inoculated wait to47:18make sure they have47:19no allergic reaction wait while two47:22church organists play soothing music47:24while they wait47:25you can call it song freud you can call47:28it a stiff upper lip47:29but as we all wait for the vaccine we47:31believe will save us47:33leave it to the brits to do it with47:35class47:36that does it for this episode of wall47:38street week i’m david weston this is47:40bloomberg47:41see you next week
Bitcoin is one of the most unequally distributed assets in the world, with just under half a percent of all bitcoin investors owning more than 80% of all bitcoins, and should they liquidate, the market could see a substantial sell-off, said Ryan Giannotto, director of Research at GraniteShares ETFs.
0:00 – Bitcoin is ‘cornered’
5:50 – Bitcoin’s volatility
8:17 – Bitcoin ETF coming soon?
11:44 – Economy, inflation, and gold
Kevin O’Leary argues against Bitcoin [BTC]:
- small and insignificant (which actually means more potential upside)
- no one serious is talking about it because they fear the regulator
- I’m waiting for the day when regulators come down hard on Bitcoin and people lose big.