The Breakdown - The Mirage of the Money Printer: Why the Fed Is More PR Than Policy, Feat. Jeffrey P. Snider

Episode Date: June 5, 2020

The conventional wisdom is that central banks are the most important economic actors in the world. Markets hang on their every word.  Yet, what if that power has less to do with actual monetary policy and more to do with how the performance of that policy creates a self-fulfilling prophecy as market actors respond to media coverage? Jeff Snider is the head of global research at Alhambra Investments. In this conversation, he and NLW explore: How the Fed lost the ability to even determine what the money supply is. How the financialization in the 1980s exacerbated monetary confusion. Why the most important force in the global economy isn’t central banks but the eurodollar and shadow banking system. How the eurodollar and shadow banking sector creates a drag on real economic growth. Why the conventional wisdom and “central bank savior” narrative around 2008 was dead wrong. The problem with “survivor’s euphoria.” Why “money printer go brr” is actually a flood myth. 

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, Crypto, and Beyond. This episode is sponsored by BitStamp and CipherTrace. The Breakdown is produced and distributed by CoinDesk. And now, here's your host, NLW. Welcome back to The Breakdown. It is Thursday, June 4th, and I am really excited for this conversation today, guys. I'm joined by Jeffrey P. Snyder from Alhambra Investments. And as you guys know, usually I kind of just give my own rendition of what makes someone interesting rather than reading their own bio. But for Jeff,

I have to read at least part of his bio. So this is from the Alhambra website. It says, Jeff is the head of global research at Alhambra Investments. He is not an economist, which is probably why he's been able to develop a working model of the global monetary system. His research is unique and informative in ways that an economist would never consider. I think that that perfectly captures Jeff's tone and his different outlook, let's say, on the world. And that's a lot of what we talk about today. Jeff, I've noticed for a long time, he puts out some of the most interesting and compelling essays and writing and just thinking on macroeconomics, and in particular focuses on a number of areas of the system that many others simply don't. So in this interview,

you'll hear a lot about the euro dollar system and the shadow banking system and these forces, which are huge significant drivers in the economy but are hidden. They're subalternian to what we see. And they have, in Jeff's estimation, a huge determining impact on what monetary policy can and can't do. In fact, as you'll hear, one of Jeff's key thesis is that central banks just simply don't have the power they believe they have to shape monetary policy. And in that context, they become propaganda machines, effectively marketing machines to inspire self-fulfilling prophecies. You will love this conversation. I promise. I know because I loved having it.

And a final note, as always, long interview means lightly edited. So let's dive in. All right. I am here with Jeff Snyder. Jeff, thanks so much for joining today. Thank you for having me. Appreciate it. So for people who don't know you, could you say just a little bit about what you do other than

write incredibly thought-provoking ideas and put together really great slide presentations. Well, I work for a company called Alhambra Investments. You can find us at Alhambra Partners.com where we just, we're registered investment advisor offering portfolio management services. But we also do is try to, you know, educate the public for what we found is, you know, what's really going on in the world out there, you know, a deeper dive into the macroeconomic themes behind some of the things that we see in our daily world. And as part of that, you just launched something called the Eurodollar University, which I've been really, really liking. I'd love for you to just share a little bit about that.

And maybe also, because I think it's a good, it's good an entree into a lot of the things that you think about as anything else, where that name Eurodollar University came from. Well, Eurodollar University is sort of a separate but related project where it's really about public education. Trying to get people to understand and to have a real deep appreciation so that they can, you know, interpret and have a means of a framework from which they can interpret the way things are going on in the world and what's happening across a lot of different, you know, not just the bond market or financial markets, but even, you know, the political and social context. The name Eurodollar as part of Eurodollar University comes from the old term, which simply meant offshore dollars. What you find when you look at the topic is that for many, many years, going back decades,

it's even, you know, almost more than half a century, that there's this offshore dollar system that has grew up and evolved separate and in a lot of ways separate from what we're all taught about how the financial system works. And it's been allowed to perpetuate itself and grow and do all these kinds of things so that it affects basically all corners of the economy throughout, you know, the global economy too. So we have this offshore dollar system that practically no one has even, is even aware exist, and even fewer still have any real appreciation or understanding about what goes on in it.

It's really interesting. In some ways following your work, this idea of this hidden system, right, this shadow system that exists right there and exerts huge gravitational pull on our financial system becomes also almost a metaphor for how you approach a lot of things. I think the subcontext for a lot of your writing is this is the story, this is the narrative, but here's the narrative violation. Here's what's actually going on or a different way to look at this. Is that a is that kind of just the way that you see the world generally or is that just a byproduct of the way that kind of current financial media is structured? Well, it's an intersection of both, right? I mean, I have to start with the Eurodollar system as my framework of understanding because I think

that's how the world actually runs. But we've all been taught from the very beginning, you know, nothing about it. We've even taught, you know, an entirely different set of parameters. And so there's always this conflict about how do we interpret all of these things that are taking place when we're given us a worldview that doesn't seem to hold. And so it's, you know, it's always in conflict between, okay, this is what everybody says. Interest rates are supposed to do. But this is how you should really interpret them in the way that things actually work. So let's actually start maybe if we could and lay some foundations for people who aren't familiar with the euro dollar system, who aren't, familiar with kind of the shadow banking system, what it means and what is that that kind of force

that exerts in the economy today? Well, it's a bank-centered monetary system that, again, that evolved starting in the 1950s, where it was banks trading originally currency, but, you know, for whatever reasons, over time, they evolved where it is simply banks, this interbank system that exists in the offshore world. And offshore is a key term here. That's what the euro and euro dollar actually means. It means offshore dollar. It doesn't have anything. to do with the European common currency. So these offshore dollars are bank-centered liabilities. They get traded in these vast, enormous interbank markets, which then dictates the flow

of finance around the world, dictates the economic direction around the world. And because it's evolved in this way, because it's evolved in this offshore capacities, there's very little that authorities can do. There's very little that central bankers are able to do, except to try to influence the behavior the banks in that system through what are essentially expectations policy, which are basically sentimental indications. How does this compare in size to kind of the system that we see, the system that we understand? Well, I mean, that's, you know, it's a tough question to answer and it really shouldn't be. But the reason it's a tough question to answer is because this Eurodollar system

has evolved for so long and had been let go for so long, we really don't have any idea about how big it is. We know it's an enormous thing. because we can piece together what's going on, that it's probably orders of Maddoch Bigner than the domestic US dollar system. But, you know, again, that's part of our problem here. We're dealing with what we call shadow money for a reason because it takes place entirely in the shadows.

We don't have any sense of how big it is. We really don't really know what's going on a lot of times. Because if a bank in Singapore is doing some kind of dollar-based liability with a bank, say, in Brazil, we would have no way of knowing what's really going on. So it's shadow money is a perfect term for what takes place here because it truly does take place in the shadows. And so what that forces us to do is try to work backwards from what we do see in markets and the way markets behave, prices behave, in order to try to tease out what must be taking place in the shadows for which we have very little data and very little definition.

That's interesting. It's almost like studying the dark matter of the universe by figuring out what's unexplained by the matter. by the matter that we can observe, right? That's why, you know, I always use the analogy of quarks because, you know, quarks are an accepted part of fundamental physics. Everybody, you know, every physicist believes that quarks are an elementary nature of matter, but they've never been directly observed. The only reason we know they're there is because of what they do,

what they exert forces on other objects and we can observe those other objects and then interpret how, you know, it must be a cork that is causing these other phenomenon that we do see. That's really what we're doing. I mean, we look at the bond market, we look at, you know, muddy curves, We look at economic data. We can say, okay, we can't see what's actually going on in the shadow money system. But we know because all of these things are telling us, they're all pointing in the same direction and saying, hey, there's a problem here.

So, and this is, there is, have been attempts, correct me if I'm wrong, but there have been growing attempts, it seems, to try to monitor this, right? To try to get a better handle on how this system works. Is that the case? I don't know if I would say monitor. There's definitely been some progress made toward appreciating the fact that this thing does exist because, you know, for the longest time, you couldn't say euro dollar. I mean, it's a dirty little secret of the central bank. This is another part of the thing, but central banks can't define money anymore. And they haven't been able to since the 60s. And so you think, well, if a central bank can't define money, what the hell is monetary policy? And that's where you

really get off into the deep end of what central banks actually do. But, you know, to your point, you know, It's really about how this monetary bank-centered system, it approaches, you know, the rest of the world and how it intersects with the rest of the world in a way that, you know, just over the last couple years, finally people are starting to put these things together that, okay, this is how it, there must be, this euro dollar system must actually exist because it's the only way to we can finally explain all of these things that have taken place. So, yeah, what are the, what are some of the outcomes? I mean, it seems to me that the presence of this system would render monetary policy, if not completely useless. It certainly has a demonstrative impact on the efficacy of any given policy. Yeah, I tend to overstate it sometimes to say central banks are entirely irrelevant, which is probably taking it too far. But monetary policy is largely in the face of what's going on in the shadow money system. It's not completely powerless and impotent, but it's pretty close to it.

it. And really, I mean, that's the only way you can explain 2008. I mean, forget about what's going on recently. Let's go back 12 years. The reason we had a global financial crisis in the first, again, global financial crisis. How do you get a global financial crisis from the U.S. subprime mortgages? You don't. What you had was this global monetary system, this hidden shadow money, euro dollar system, which experienced its first big crisis. And what it amounted to was a massive global dollar shortage, which then caused the global financial. financial crisis. And the central bank, no matter what it did, Ben Bernanke's Fed, which, I mean, everybody thought it was considerable financial rescue. I mean, the Fed was doing a whole lot of stuff.

And for a while there, their, you know, their balance sheet was rising rather rapidly. And everybody called it money printing. Yet all the end result of all that money printing was somehow a global financial crisis. And how do you, you know, how do you reconcile those two things? We can see the Fed is doing a lot of stuff. Everybody's calling it money printing. Yet we have this global monetary crisis. And so, you know, again, How do you reconcile those two results? And the answer is that the Fed was responding to the same thing the global economy was responding to, which was a shadow money dollar shortage that it had very little ability to redirect an impact.

So I want to come back to a whole bunch of points from that. But actually, first, I want to start going back even farther to something that you mentioned before. You said that in the 60s, central banks stopped being able to identify or correctly profile money. Can you go into that a little bit more? Well, what happened, again, because this is a bank-centered system, because of a variety of reasons, including some, you know, Great Depression era banking regulations that were getting in the way of the way banks wanted to operate, what happened was banks started using all sorts of creative means to do to accomplish monetary ends. For example, you know, to get around regulation queue, which put a ceiling on how much banks could pay for deposits, in a rising rate environment, in a rising inflationary environment of the 1960s, customers wanted higher rates. But yet they were, they were, they were, they were, uh, regulatory prevented from offering them. So they began offering something called repurchase agreement accounts, which are nothing more than repo, what we call repo today, because that was not a depository account, therefore kind of skirted the rules.

What happened was, especially corporate customers, began to use more and more of these repo accounts, and then began to write checks against these repo accounts, even though repo didn't fall under the traditional monetary definition. So as more funds moved, more cash, more money moved into the repo market, it moved outside of the traditional, monetary definitions, what put it into the shadows, even though companies and banks in the real economy were using these other different kinds of methods to achieve very real economic, or very real monetary goals. So there's monetary evolution where banks started doing a whole bunch of different things. And there are things like, you know, negotiation upon withdrawal accounts and

money market funds and all these, you know, today things that we take for granted of that back then were revolutionary, that stretched the boundaries of money and it took it outside of the traditional definition so that central banks could no longer really define which account is monetary, which account is money, is a deposit, as a rep, I mean, all of this confusion and this evolution meant that, you know, if you can't, if you can't define money, you certainly can't target money, and therefore you can't, you can't intervene as a central bank directly in the money supply if you can't actually define any of it. And so for those who are trying to kind of understand, like, what this, okay, how does it expand from there, right? And what does it look like to have, you know, the shadow word is such an ominous word. But what was a, what is an example of a exchange, a transaction, an action that takes place in this sort of offshore shadow system that would be resonant for someone and kind of demonstrates the challenge?

Well, you know, again, you're right. Because Eurodollar, like, the term shadow is sort of a catch-all. It's sort of, you know, it's a broad term that can encompass a whole bunch of things. And really, that's, that's really what we're talking about here because the sky is the limit. As long as you can get one bank to agree with you about any kind of liability you want to create, whether it's a currency swap, a basis swap, an interest rate swap, any kind of derivative transaction, if you can get another bank in another location to say, yes, I agree, that's a, that's, that's a form of money. Therefore, you have money. And though it goes on your balance sheet in any kind of a different way. As long as it goes on the other balance sheet in the same exact way,

you have a monetary transaction. You have something that takes place, and whether it's behalf of the corporate customer or wealthy individual, it doesn't really matter. What matters is that banks agree that these are monetary transactions and that the end result of these monetary transactions is their real world transaction that creates some kind of activity or the lack of activity in the real world. So how much does this wrap up with kind of the invention of these increasingly exotic financial instruments. Well, it's all, it's all put together. One of the big markers in monetary evolution was in the 1980s when interest rate swaps and Eurodollar futures were standardized for trade in Chicago. So once, now you had not just this, this basically blank canvas of this offshore dollar space that

up until that point had been primarily based on some of the more simplistic forms of monetary liabilities. All of a sudden, you introduce this, this absolutely massive potential in terms of, of derivatives and everything just skyrocketed from there. So, okay, so let's, by the way, one thing you'll know or you'll learn about me is that I kind of come at everything from a historical perspective. So if I sound like I'm trying to kind of drag through a curriculum, you're absolutely right, and I am because I think it's really, really helpful for people, so I appreciate it. So we kind of introduce all these instruments.

They become standardized in the 80s. What does it look like in the couple decades leading up to the great financial crisis? How is this system playing out or exerting force in the larger economy in the 90s and early 2000s? Well, you end up with a system that completely transforms itself, one from what used to be a traditional depository system, or at least largely a depository system, into what used to be called commercial banks. And the SNL crisis was a big part of this transformation. So that by the 1990s in particular and then into the middle 2000s, you had this other way of doing money, the shadow money, global, shadow, global euro dollar system.

that dominated. And the result was absolutely exponential growth in credit and money throughout the throughout the world, mostly, not entirely, but mostly denominated in the U.S. dollars because that was the global reserve currency. So what you have is this rising tide of globalization in the global economy, tying all these economies together, increased trades, a lot of the good things that we associate with globalization that was financed and funded by this missing shadow offshore exponential growth in money and credit, which is really exponential growth in banks and banking. So who did this system enrich, right? Who is this system good for and who pays the cost for it? Or how is the cost paid or does it show up, I guess? It's a better way to ask it.

Well, the cost for it is simply what happened in 2008, right? I mean, the downside of this kind of a system is it's inherently unstable. But it didn't look. Nobody actually believed it was inherently unstable, which is why it got to be such an excessive problem. Because before the 2008 crisis, what was assumed by these banks operating in that system was that there was no risk. There was no risk too big. There was no size that we wouldn't go to. There's no exotic transaction we wouldn't invent and then push out into the marketplace because there doesn't seem to be any downside to this. And oh, by the way, everybody believed, as we were all taught to believe, that even if there was some kind of downside, Alan Greenspan would bail everybody out and everybody

would be perfectly happy. So there's in this inherently unstable situation, an inherently unstable arrangement, which at the time didn't seem to have any downside in terms of costs either. Because again, the rising tide of globalization, you see, you know, emerging markets like China, Brazil, India, that all of a sudden they become economic miracles. And, you know, here we have the shadow money system providing the monetary and credit resources for those things to happen. So globalization was very, was looked upon very favorably in the preemptive.

pre-crisis era, the banking system that operated the monetary resources behind it, believed there was no risk to it. So the cost was eventually when everything broke down starting in 2007 and 2008, where now all of a sudden we have this arrangement, we're kind of stuck with it. We've got this globalized economy. We require these euro dollar resources to make it work, except now the euro dollar system's broken. Now the global economy's broken. And now we don't have economic growth for going on almost 13 years now. So let's talk about that a little bit. I guess first in the context of the great financial crisis, how did to the point that you were making

earlier a mortgage crisis in the U.S. turn into a global financial crisis? What was the mechanism? How did the system seize up, basically? Well, it wasn't a mortgage crisis. The subprime mortgage thing was really just the spark that lit the whole thing along. That was where the system began to realize, oh, yeah, maybe there are risks here. And so once it started, once you let it, once the horses were let out of the barn, so to speak, there was no going back because everybody realized it wasn't just subprime mortgages. The entire structure is inherently risky and unstable. We've we've undervalued the risks of everything in it. And so it was just one thing after another that just cascaded into implosion and failure because for a long time, the risks involved in it were never really appreciated, and including the idea that the central bank could bail it out if push ever came to show. And then when you had push come to shove starting in August of 2007, the Fed proved unequivocally

that it was really powerless to do much about it. And so it was just, it was a tidal wave of failures and structural implosion that just once it started, whether it was subprime mortgages or not, it was impossible to stop. So this, so the first myth that you mentioned was the kind of myth of the no risk to the system. The second myth had to do with the capacity for central banks to, to backstop it to fix it. You've called this the flood myth. And actually, I think just wrote a piece about, you know, we shouldn't have had to explain

this again. But can you explain what this, the flood myth actually is? Well, the flood myth, I mean, look, history repeats itself and we're repeating basically what happened in 2008 and 2009 again. And, you know, go back to that period of time, especially in early 2009, common wisdom or conventional understanding said Ben Bernanke's Fed had just flooded the world with liquidity, had just flooded the world with dollars. You can see it. I mean, the Fed's balance sheet is expansion. We've got hundreds of billions in bank reserves that created out of thin air.

He created him digitally, printed it's printed money. This is going to be inflationary. The dollar's going to be destroyed. How dare he? And oh, by the way, the government's being reckless. Barack Obama's administration is spending almost $800 billion. I mean, these were astronomical numbers at the time. And yeah, all we had was more crisis and more recession. the deepest recession since the Great Depression. And so what we're saying is that the myth is the Fed printed all this money and flooded the world with dollars. But the reality was that there was this deficit created by the breakdown in the shadow Eurodollar system, which overwhelmed anything the Fed or the federal government tried.

Because it's the bank-centered system in this offshore space that actually matters. That's where the rubber meets the road. That's where credit and money hit the real economy. in the bank offshore system, not what the Fed does on its balance sheet. So you have this interesting sort of dichotomy where the more the Fed does, the worst you know it is because the Fed is responding to the same thing. It's not what you see the Fed doing. It's what you don't see happening in the shadow money system.

Please tease that out a little bit more because I think this is really interesting. Like how much does this have to do with the, I guess the, the, the, I guess the, the, the, the contrast between sort of the money printer go-bur meme, the memeified view of the world, and the reality of a world where all debts are, a huge portion of debts are denominated in dollars and there's a perpetual shortage of them. Well, I mean, to begin with, you have to understand there's something called a global dollar short. And now this is distinct from a shortage.

The global dollar short simply means everybody needs dollars. Everybody around the world needs dollars. Even the Chinese, though they hate it. They need dollars every day. Why? Because that's the global reserve currency. Therefore, you have to have enough currency in order to transact anything into the real economy, especially when you're talking about a globalized economy. You've got to have dollars available, and it's usually through your local banking system.

So your local banks, whatever country this is, they have to be able to participate in this global dollar marketplace. They have to be able to secure dollars because, you know, real economy participants, whether it's companies, national governments, even, wealthy individuals, they all have to transact in U.S. dollars. So there has to be a steady supply of U.S. dollars emanating from this offshore dollar system such that every place around the world has a sufficient amount of dollars in order to not to just conduct business activity, but to conduct economic growth associated with that activity. And that includes financial flows, what we call hot money. So there has to be

dollars available everywhere in sufficient quantities that it doesn't cause these kinds of disruptions that we see. So that's the global dollar short. And it's a synthetic kind of short, Because basically you're borrowing every day from the banks that operate in this euro dollar system. And every, you know, what you assume is that tomorrow, when you pick up the phone and call your euro dollar supplier, that they're going to say, yes, we'll just roll over the loans that you borrowed yesterday and the day before. We'll roll over them tomorrow. But the reality is there are times when the banks who are supplying the dollars that you need to participate in everyday life will say to you, you know, things aren't looking so good today. I'm going to need more money from you. I need you to put up more collateral.

I need you to do something there. It's going to be more costly for you to borrow dollars today than it was yesterday. And so that causes an enormous disruption. It can cause an enormous disruption that leads to all of these cascading things we see in markets and economies, which at certain points like in 2007 and 2008 became a global financial crisis. So the popular narrative, obviously, of the Fed around that time was, They came in with its kind of very bold policies to print a bunch of money and it kind of provided the liquidity that the system needed.

How did it actually play out if you take it from the standpoint of the shadow system? Well, it didn't really do a whole lot. And I would argue that that was not the intent either. The Fed wasn't actually providing liquidity. The Fed didn't, I don't think actually believed it was providing effective liquidity, at least not directly. You have to understand it in an expectations-based policy what the Fed has to do, at least what it believes it has to do is to convince people who are operating in the economy in the marketplace

that there are no risks that they have everything covered. And so they're perfectly happy to let people believe that they're printing money because they believe then that people will act on that belief and therefore that will create self-fulfilling prophecy whereby if you think the Fed has got liquidity covered, if you think the Fed has flooded the world with money and that's going to be inflationary, then you'll do a lot of things today that you normally wouldn't do. And that's really what monetary policy is about is influencing behavior. It's not about being technically proficient in the monetary system or offering actual money. It's about influencing people's behavior that they don't believe or they believe the kinds of risks or the environment that central bankers want them to believe.

And that's, you know, again, that's how you can see, you can start to understand why something like 2008 happened. If that is your response to what is a global dollar shortage, a world that screaming for action, actual effective monetary and prevention, and you offer nothing more than handholding and well wishes, yeah, you're going to end up with a global dollar crisis because you're not actually solving the problem. You're hoping that you can make people feel good enough that they solve the problem for you. That's a huge difference. It's really interesting. I mean, it's almost the perception of the role of central banks and the Fed in particular is to actually provide, you know, liquidity to do this sort of money printing, whereas the reality is they're closer to a marketing

agency for the system to continue on the path of assuming no risk. Right. And if you can't define money and you can't intervene in the monetary system, what's the next best thing? Well, in theory, the next best thing is to let the system work for you. So all you need to do, therefore, is control the behavior of that system or at least believe that you can control the behavior of that system. If you can't define money, but banks do.

But you can influence, if you believe you can influence the bank. banking system's behavior on your behalf, and you don't need to define money. And that's what really governed monetary policy throughout the 80s, 90s, and the middle 2000s was the idea that Alan Greenspan would raise or lower the federal funds rate, you know, a quarter point here and there. And that guided the entire global economy from nothing more than that. What he really thought was, I don't need to, I don't need to intervene in the monetary system. I don't need to know a damn thing about it. In fact, he actually admitted several times, several important times throughout the 90s that he couldn't define money, including.

his famous 1996 irrational exuberance speech. What he really said was, we can't define money, so how would we know if the stock market is behaving rationally or not? So what he was saying was, we don't need to. What we'll do is we'll move the federal funds rate around, will influence bank behavior, and the banks will do the work for us. Except he never really accounted for the possibility that maybe the banking system isn't so easy to control. Maybe the banking system has its own parameters and constraints. Maybe it's not so easy just to say, I'm going to influence bank behavior.

I'll get people to believe that I'm flooding the world with equinity, therefore they'll do the flood on our behalf. And that's really what happened. It was a breakdown in basically the way the world works versus how we're supposed to believe the world works. BitStamp is the original global cryptocurrency exchange. Since 2011, BitStamp has been the preferred exchange for serious traders and investors,

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protecting user privacy. Years of research have created the world's best cryptocurrency intelligence with the best attribution and deepest token coverage. So if your virtual asset business isn't using CypherTrace to manage compliance risks, you should start now. Learn more at cyphertrace.com. What was then looking at the last decade or so the last dozen years, the difference or the gap between the popular narrative of markets recovering, ascending asset prices going up, and what was actually happening in the economy that got us to perhaps where we are now? Well, the narrative has been that the economy is recovered and that's reflected in stock prices when in fact the economy really hasn't recovered.

I mean, you can draw a baseline growth and you can see that the economy, not just the U.S. economy, by the way, the entire global economy, whether it's anywhere else in the world. We departed from that baseline right in 2008, a global monetary event, the global dollar shortage that first erupted 12 years ago. And since then, we've not been able to reachieve that prior baseline, which means the economy has never recovered. So something that went wrong in 2008 was never fixed. And the idea that has perpetuated has been that QE fixed the monetary problem because the Fed printed a bunch of money. And we have all sorts of signs and signals that say that's just not true, starting with interest rates. What we're taught about interest rates is that lower rates mean stimulus. Because, I mean, that's Allen Greenspan lowered the federal funds rate.

That's stimulus. The Allen Greenspan raises the federal fund rate. That's tightening. That's what we're taught to believe. But in fact, historical throughout history, what we see is the exact opposite. it. When the monetary system is loose and producing money, interest rates are actually high. Think back to the great inflation of the 1970s. Interest rates rose and got up into the double digits as monetary growth was unconstrained. And consequently on the other side of things, back in the

1930s during the Great Depression when money was dear, interest rates were low and they remained low. So straight away, what Milton Friedman called the interest rate fallacy was that when you see interest rates, especially bond yields, go down and stay low. low, that's a signal that the monetary system has been tight. Not that the Fed has flooded the world with money, but the monetary system has been tight. And the problem in 2008, which goes along with economic growth, the lack of economic growth since then, is that we have never resolved this shadow money problem that we started out with. And another important signal along those lines is the U.S. dollar's exchange value. When you see the dollar rising as it has since the weekend

Bear Stearns failed back in 2008, it's a signal, again, that money is dear, that the dollar is in huge demand for these financial flows out there in the euro dollar system. And we have those and many more that tell us ever since the first global financial crisis, it has not been resolved. The Fed has not flooded the world with money. We haven't seen inflation because we're still stuck in this tight money environment. So this gets into some of the ideas you wrote about.

You wrote a piece for Real Clear Markets a couple weeks ago now, I think, called the price of the U.S. dollar is ultimately our problem. Can you expand on that a little bit more? And you started to touch on it just a minute ago. But I think it's really important part of this conversation. Yeah. And it goes back to what we started our discussion at the beginning, you know, the difference between how the world actually is versus what we're taught. And I think there's a huge misconception about what a rising dollar actually means. I mean, people throw around the word strong or the term strong dollar way too loosely. And I don't. think many people really understand what a strong dollar actually means. It certainly doesn't mean one that rises in exchange value. Well, we should be looking at a strong dollar, true strong dollar is a stable dollar. But, you know, back to the major, you know, the rising dollar, what that actually shows and what I mean by that we're paying the price for it is that there is this monetary, the persistent monetary imbalance that is deflationary in nature, but it's also globally deflationary nature that creates a drag on economic growth such that we haven't been able to recover from the last crisis, and that we're paying the price for it in terms of all of these kinds of

not just market problems and balances and destruction, but also economic growth that doesn't happen. I mean, we don't really appreciate the fact that, you know, you talk about a counterfactual. What if the U.S. economy had been moving along at a $4 or $5 trillion better rate over the last several years? I mean, I don't think we would have had, we have undertaken the amount of political and social disruption before this year, that would have, that would, that would, that had occurred anyway. So we're paying the price for the fact that 12 years, 13 years ago, this shadow money, euro dollar system that the Fed claimed it could influence through its, it's, you know, expectations based policy actually broke down, but that was not a one-off temporary event.

It was a paradigm shift where because it hasn't, it hasn't been fixed, it hasn't been solved. The dollar goes higher. bond yields go lower and economic growth is that much more restrained as a result. So this brings us up to now, before the COVID crisis and everything that's transpired over the last few months, what were you, what was the counter narrative to, you know, stock markets printing all time highs? So this is, you know, last fall and early this year. What were you watching, you know, either either with concern or interest? Well, you had, first of all, the bond market. Again, yield curves, interest rates, money curves, those kinds of things, Eurodollar futures, swap spread. All these, you know, bank-centered indications that pointed to, no, I mean, the global economy is experiencing a downturn.

This is going back into 2018, where the bond market was very clear, not just in U.S. treasuries, but, you know, any kind of safety instrument, which were bid and overbid such that, you know, rates began to fall. even though here in the U.S., Jay Powell was still hiking interest rates thinking the economic growth is going to accelerate in 2019. So the bond market was right. I mean, it pegged these rate cuts because the constriction in the euro dollar system was becoming acute again going all the way back to 2017, and that it was creating a globally synchronized downturn throughout the last half of 2018 into 2019, which by the end of 2019 was, you know, Europe was basically in recession. was pretty close to recession and certainly slowing down. So just as the coronavirus pandemic hit, we were in pretty rough shape to begin with. So it's really interesting. This is a slight detour,

but part of what you're explaining, it's almost like there's these parallel things. There's the visible monetary system that we talk about as though it's the monetary system, the shadow system, which actually accounts, you know, the part of the iceberg that's under the water, so to speak. But then there's also a market signal gap or dialectic where you're talking about all these signals, which are telling a very different story than stock markets. And I wonder how much you think that part of our failure to understand some of these issues, part of our inability to really, the reason that some of this stays in the shadows is that our financial media is so focused on kind of the top line reporting of stock markets,

like it's a sport, right? It's sports statistics or something like that. Yeah, no. And I think that we're all meant to believe that, too, that the stock market is the only market, that it's the true discounting mechanism for everything that goes on in the entire world, across the entire world. And therefore, whatever the stock market says must be what's going on in reality. And the other part of that is, too, the bond market has been dismissed as nothing more than a tool of the central banks. In fact, central bankers actually believe that interest rates all belong to them. I know Alan Greenspan back in 2005 talked about his conundrum because the bond market wasn't actually behaving the way he wanted it to. He was trying to raise rates and the bond market

was saying, no, don't you know, hey, maestro, there's this major housing bubble here that's causing all sorts of risk and here you are trying to raise rates because you think everything is fine. So there's massive disconnect all across the board between nobody pays attention to the bond market. very few people pay any attention at all to the yield curve, except when it inverts, when in fact the yield curve will tell you everything that the stock market is supposed to tell you. And in fact, you know, when we go back to expectations policy and the idea what is the Federal Reserve trying to achieve, its primary market for its expectations influencing is stock market, its financial services industry, to try to signal to portfolio managers and fund managers to say, look,

we're going to do all this money printing, therefore buy, buy, buy in the stock market because we know the general public believes the stock market is the only market out there. And therefore, we're trying to, we're trying to influence consumer and business behavior through the financial services industry. Screw the, you know, pay no attention to the bonds because nobody understands that anyway. It's a, it's a mess all across the board where we're looking at the wrong thing and the thing that we should be looking at, we don't know how to interpret it. It's fascinating. So this gets to, I think, this idea of the, the Fed as a communications institution, as a propagator of narratives of self-fulfilling prophecy.

How does that play into what we've seen over the last 50 days? I think I just read today that we've had the largest growth in a 50-day period in S&P 500 history since the lows in March 23rd. And I know that you wrote recently about the lies that Powell told. I guess let's bring in that part of the story. Well, let's say the lies that Powell told was when he went on 60 minutes a couple Sundays ago, whenever that was middle of May, and basically said, first of all, when he was asked, you know, I think the question was, when did the light switch go on for you that we were going to be into a financial crisis? And Powell sat there with a straight face and said, oh, no, there was no light switch. There was no aha moment. We saw this thing coming, which is a total complete lie. Because if you remember anything about the, you know, late February, early part of first half, first 20 days. of March, there was nothing the Fed did that work. And furthermore, they were rolling out one panicky program after another. And nothing seemed, I mean, did he not think that people would

remember that Sunday night where they announced unlimited QE and they're jiggering on the dollar swaps and then the next day the market had its worst day since 1987? I mean, so, I mean, to come out and lie like he did, and that wasn't the only thing he lied about, he lied to a lot of different things. The reason he was doing that, because he had to show people, he had to establish in the public narrative that the Fed has got it covered. We're under control. And what most people realize, I mean, most of the general American public were not paying that close enough attention to what happened in March. All they know is that the stock market tanked, which again, since they're taught to believe that the stock market is the primary signal, that was a big, huge warning that

Powell had to answer for. So they know the stock market tank. The Fed supposedly bailed it out, and nobody the stock market is now fixed. If you believe that and you believe that the Fed saw it coming, that it responded effectively, then he's left you to believe that he's got everything covered from here on out. There's no more risk. Everything's fine. There's no possible way you shouldn't do anything other than buy more stocks and spend more money and behave like a reckless consumer because you've been led to believe that the Fed actually does flood the world with money. The Fed actually is a competent or monetary organization and that this is not all some big huge charade

where the guy behind the curtain really is a shabby guy who doesn't really know what he's doing, as was proven once again in the first half of March. It's interesting. One of the kind of almost tropes of FinTwit at this point is to call out the glaring incongruity between the stock market recovering to near where it was before all of this versus, you know, 40 million unemployed. And I know you just wrote about unemployment and jobs. And it's interesting because you basically made it an argument that what we were experiencing with this unemployment crisis is actually, I think these were your words, less disease, more breakdown.

Can you explain what that means? Yeah. It's less about the pandemic at this point than it is about this monetary and economic dislocation, which is beyond simply the non-economic shutdowns. I mean, look, everybody knew the economy was going to be bad based upon. the way governments reacted and I think overreacted to the threat they were facing. And so, okay, there was going to be an economic dislocation. But what has happened is that we've kind of seen that it's a lot bigger than we all thought it would be because, again, I think the global economy was in a bad shape to start this thing. But furthermore, it almost doesn't

matter. Once we got through the shutdown periods, once we got through the periods, once we got through the periods where, you know, people were thrown out of work because of the shutdowns and social distancing and all those means. The belief was that everybody would just go right back to work, which, I mean, if it was, if all we were talking about is a non-economic shutdown, that should have been what happened. We shut everything down, open everything up,

and it goes right back to the way it was. We don't really care about this thing anymore. It's just a historical oddity that we'll all laugh about someday. But that's not what we see going on here. And in fact, that's not what Jay Powell and his monetary models see either. They're actually showing that, which are the most optimistic case, these monetary models that actually believe Jay Powell is effective at what he does,

they're all showing how over the next year and a half, we're going to be worse off than we were in 2008 and 2009. By the end of 2022, or by the end of 2021, entering 2022, they're thinking we're going to have unemployment in still around 8.5% with the employment population ratio down around 56. I mean, you don't understand. I mean, these are tremendously awful number. as an utmost optimistic case.

So you can start to understand why Jay Powell lied on 60 minutes, why he's gone into this overdrive spin of, oh, we're going to buy it, we're going to support every market price. There's no risk, any, what we've got everything covered, because the reality of the situation is beyond the COVID-19 shutdowns is that we're in for the long haul here, that the economic pain is going to be real and it's going to linger for quite a lot of time. And what would that mean if we had another setback in markets?

It would be catastrophic. So he has to do everything he possibly can to forward this narrative that everything's covered. Don't worry about a thing. We've got to completely, we're going to support every market. We're going to buy corporate bonds, which they're not really buying corporate bonds. But don't, you know, don't worry about the details. We've got it covered. Just go back to sleep and start spending again.

That's really the task before him because, you know, what we're seeing, especially on the other side of this, is not strictly non-economic in nature. What are the narratives that you're seeing propagated in terms of what happens to come next? You know, obviously there's an inflation camp, there's a deflation camp, there's a set of things inside. And what's your best sense of how this plays out over the next, you know, few months or years? Well, again, we're right back in 2009 again where people are saying, oh, my God, the money printing, the irresponsible federal government spending, it has to be inflationary. And if you remember anything about 2009 forward, there was never inflation. And the reason was because the shadow money system and the economic drag it created meant that the entire way was disinflationary. We had deflationary problems.

They weren't strictly all at once or in a straight line. But for the most part, since 2009, the shadow money system overrode whatever the Fed did or whatever the federal government did. And that's why we had no recovery, new inflation. Now, what the Fed will tell you now is, okay, maybe so. but we've done everything even more. We've gone even bigger. The federal government has spent, you know, two and three times as much as it did back then. The Federal Reserve has bought, you know, increased the level of bank reserves by 1.6 trillion

in a matter of months, which is way more than Ben Bernanke ever did. And so, you know, the idea is that we've got much bigger numbers that we can see, you know, the quote, the so-called money printing that we see on the Fed's balance sheet. But yet again, it's what you don't see that matters and what the markets are telling, what the dollars tell. I mean, all these symbols are all these signals and market prices are that, you know, outside of the stock market, that no, I mean, the end result is the same. The shadow money problem is much bigger, even if we gave Federal Reserve credit for money printing, that the deficit that it's printing into is already much bigger and much more established and much wider, much more lingering than whatever the Fed's done so far and we'll probably pledge to do, assuming that even if you assume the Fed has been effective. So the idea of inflation because of the irresponsible government plus money printing doesn't take into account the other side of things, which is the shadow stuff that you don't see.

Where are we likely to see the cracks in the system or the problems in that system? How do they manifest in the period we're going into? I mean, other than what we've already seen so far. Yeah, I mean, well, I. It's, you know, some of the specific symptoms that we saw back in March, things like credit spreads blowing out with credit markets that were being, you know, basically bidless fire sales. You know, you've seen those spreads come way down on the belief the Fed is supporting those markets, but yet the volumes have been pretty thin on the buying, as well as how that played a role in repo markets and the way that repo collateral is transmitted throughout the system.

So there are still those same fault lines that are there. we just don't see them anymore. You know, we still have monetary deficiencies show up all over the world, but yet they're not as obvious as they were in March. That's really what's been different is that back in March, this hidden shadow money dysfunction suddenly broke out into the open where everybody could see what was going on and everybody could see that was wrong because, I mean, the stock market dropped 35%. Now that's kind of receded back into the shadows, but receding back into the shadows is not

the same thing as going away or dissipating entirely. which, by the way, this is the way crises work. This is what we saw in 2008, too. In the middle part of 2008, everybody thought the same exact thing. You know, from August of 2007 until Bear Stearns was, you know, guided into the hands of J.P. Morgan in March of 2008, you had this, you know, the shadow money crisis that became an obvious, visible public crisis. And then after, you know, Bear Stearns, it was like, oh, is that it? That wasn't so bad.

And you had this multi-month period where stocks rose, credit spreads normalized, things that started to look like they were, that was the worst of it. We saw the, we saw the worst of it and it wasn't really that bad. And what I call today Survivor's Euphoria. That's what really happened from between, you know, middle of March 2008 until that summer was the idea that, okay, because these monetary problems are back in the shadows, we don't see them anymore, the Fed must have fixed it. And, well, by the way, the Fed fixed it by flooding the world with liquidity. That was the narrative back then too. Of course, by late summer of 2008 into September 2008, we realized that wasn't the case at all because the system had been broken. Its fault lines had been exposed and there really was no way going back.

So what I see is a parallel to what's going on now is the same kind of thing. March 2020 wasn't a one-off event. It was simply the warning that, hey, default lines, the cracks in the system have been re-exposed in a very public way. But these crises are not, you know, they don't go in a straight line. It's not like, you know, March through, you know, September 2008 was crisis, crisis, crisis. You have these ebbs and flows, these twists and turns, which there are periods during them where you think, oh, that was it. We've gotten past the worst. And what's happening now is that that's being attributed to, oh, well, we've seen the worst of the shutdown.

We don't seem to be having a second wave of the disease pandemic showing up. You know, companies are starting to reopen. And, you know, there were no big bank failures. We didn't have anything beyond what happened in March. So it must be that everything is fixed. And in fact, you know, there are lots of signs that know. It's just we're in the same kind of interim period where we're just waiting for the next leg, the next shoe to drop. There's an interesting time horizon part of this.

Going back to, you know, one kind of theme for our conversation has been the way that these narratives get propagated via media. and you see it, you know, when media is organized around what's the story of that day kind of model, which is, you know, which it obviously is, you see it even in the context of the dollar, right? So we had Brent Johnson on last week and, you know, for this big period, everyone was like, ooh, dollar milkshake theory, got it. We were on board with it now. And then the dollar starts to look a little less strong compared to everything else. And everyone's like, ha, we were right all along. There was no dollar milkshake theory. And the thing that's so crazy about it is how fast the narrative shifts almost on the basis of production deadlines as much as any real analysis, it seems like.

Yeah, I mean, you know, all of these kinds of things, these kinds of periods in history are spread out over a long period of time. And they don't lend themselves to nuggets and, you know, bite-sized daily stories where you can't really see the big picture. I mean, the dollar can rise and fall on any given day and it can rise and fall in a given week and months. And it won't make it a difference. It's what matters. It's the long-term trends behind all of them. You know, the great global financial crisis in 2008 took two years to manifest and get through to a conclusion. You know, the Great Depression, everybody thinks, oh, the crash of October 1929 and boom, we're into depression.

Well, no, the contraction phase took almost, you know, three and a half years to play out. And there were ebbs and flows, twists and turns within it, too. You know, he had massive rallies in the stock market during the contraction, the collapse of the Great Depression. And that's really what you have to keep in mind that this is not a short-term thing. It doesn't just happen all at once. You know, because March, what happened in early March was all condensed in a couple-week period, people think, well, that's it. That's what happened.

It's a process that plays out over a pretty lengthy period of time. You have to pay attention to the big picture. And you're right. It's not just that it doesn't lend itself easily to the way the financial media works, but we also have to keep in mind financial media to, you know, to explain. how they operate, you know, editorial standards demand that they pay attention to what central bankers say because central bankers are the declared authority about how these things work. So if Jay Powell says, I flooded the world with money, nobody in any media room is going to say, well, no,

you didn't because that would run against all established editorial standard. Even though those standards are absolutely wrong and Jay Powell is absolutely wrong, nobody will say it. Nobody will challenge what these guys who have been given an authority are saying. So you have both of those things working in concert where people are getting the wrong idea about what's actually happening. At the same time, they're focusing way too narrow on short-term fluctuations that in the end are just noise. How do you see or do you see geopolitical intrigue contributing to this in any way, particularly I'm thinking about growing kind of return to trade war tensions with China? Well, it's been the, I mean, monetary growth in the shadow money system and globalization went hand in hand. And it went hand and hand for a reason because you couldn't have one without the other. And so the lack of monetary growth in the euro dollar system over the last 12 years has made globalization turn on its ear. And so all of the benefits or even just presume benefits of globalization that even, you know, emerging market countries were taking from that prior, the pre-crisis era have disappeared. And so economies across the,

world have been suffering as a result. And because people are not given an explanation for why that is, because they've been told, hey, there's no monetary problem. Jay Powell said so, just like Janet Yellen said so, just like Ben Bernanke said so. Because they're not able to correctly identify what's been wrong, they've turned their, their ire and their anger on globalization itself. They've said, well, it must be this globalization trend that screwed everybody. And some, I mean, you know, globalization, to be fair, did create some winners and losers. And, and some, So there are definitely pockets of messiness that are always associated with economic trends, big economic trends. By and large, over the last 12 years, because nobody's been able to identify what's really going wrong in the global economy, people have been left to their own devices.

And politicians, as politicians will always do, have been left to fill the vacuum with their own ideas about who to blame. And it's usually we're going to blame the other guy. That's the easiest thing to do. When nobody has any idea what's wrong, furthermore, when the people we listen to say there's nothing wrong and we know that there is, it's easy for ideal logs to fill that space and to start saying, we're going to blame this guy, we're going to blame that person, we're going to blame everybody else. And it never, you know, it doesn't fix the problem because nobody really knows what the problem is, except that they know that there is a problem.

What should average or regular people want? What should citizens want in this, in this sort of case? In what, I mean, you're talking about, you know, the monetary. That's a pretty broad question. Yeah. So I guess what I've been thinking about a lot as we've been talking is there is this incredible frustration and anger, this deep-seated sense of something being wrong, something being off. And you have that contrasted with the reality of the lived economic experience for people. And it's produced a lot of different things. On the one hand, you have kind of the Bitcoin libertarian, less government type of backlog.

But then you've also seen the rise of things like MMT. You've seen populism on both sides of the political aisle in the U.S. And all of these things share a sense of kind of an economic dislocation disconnect, even though they locate its cause somewhat differently. And I guess the challenges, you know, the Fed, it almost sometimes feels like the Fed has no choice but to propagate this story. But if that's the case, what should citizens want from the Fed? What should they want from their elected leaders vis-a-vis monetary policy, you know?

Well, I think the larger question here is really one about technocracy and the ideal of a technocracy, right? Because that's really what we're talking about. You know, Alan Greenspan controlling bank behavior by moving the federal funds rate around. That's what really mean. We mean that we have this enlightened individual who knows enough about what he's doing that he can guide the hand of the entire global economy through nothing more than these, you know, ridiculous levers. So what we're really talking about is, you know, are they really, to be a technocracy, shouldn't they be technically proficient at what they do? And what you find is that, you know, even if even if you pin them down and make them admit it, what they'll say is, no, we're not really technically proficient in monetary matters. We just kind of believe that if we influence people's behavior, it'll all work out predictably.

And that's kind of an idiotic proposition. So I think, you know, just from a more basic fundamental level, maybe we shouldn't, we should demand something more than an idiotic proposition. That if we do believe in a technocracy, which I particularly don't, but if that's really what the public demands, then we should demand it to be proficient. in the thing that it claims to be proficient in, which is the monetary system in the economy. And that's not really what economists do, by the way. Economists are nothing more than statisticians who spend their time perfecting elegant mathematical equations that have absolutely limited use in the real world systems. So, I mean, on the one sense, that's what we should demand. But on the other, you know, the other question is, you know, if we don't really want the, I don't really want the Fed involved in this much in this stuff at all. And so, you know, what is a monetary system or an economic system that actually delivers what we all want, which is, you know, return to actual economic growth.

And that to me is not inflation or deflation. I think that misses the point, which is inflation like deflation are both forms of monetary instability. You know, again, we're taught to believe that if we're in a deflationary environment, the way out of it is to do the opposite, which is inflation. And that's entirely wrong. If we're in a deflationary environment, that's an unstable environment. and the way to get out of it is the opposite, which is to create a stable environment. And so that, to me, is the overriding question, the overriding answer is how do we create a stable monetary environment so that we can have a stable economic environment so that we go back to a system that actually perpetuates that has been missing for a very, very long time.

And to me, that does not involve a Federal Reserve. It certainly doesn't involve these economists who want to, who are trying to be, you know, want to be psychologists and think that's their method of, of, of, of, technocracy. So, you know, I think there's a couple of different parts of that question there, and a lot of it has to do with first understanding the situation that we're in, which is, no, the Federal Reserve is not what you think it is. Do you think that the Overton window has shifted a little bit on that? I mean, it feels to me, certainly I'm coming at it from the Bitcoin perspective where these kind of conversations happen more frequently, but, you know, you've been thinking about this, writing about this, researching this for a while. Do you see more

receptivity to these conversations than we had, call it a decade ago. Oh, absolutely. But it's very incremental and it's very reluctant. It's embraced reluctantly. The idea that, okay, there's this offshore dollar system. Yeah, well, maybe there is. But it's got to be limited because we still have to preserve the central bank at the center of our universe because, you know, economics, when you break it down, is not a discipline

or a science. It's certainly not a scientific discipline. It's mostly an ideology. The ideology has placed economists at Central Bank at the center. of it. And therefore, no matter how they realize that, you know, there must be something wrong with this ideology and their theology, because it's not producing the results that are, that are promised and intended, they still can't make that leap forward where they say, okay, this is really how it works. And it's not at all what we thought it was, it's not at all how we thought it

worked. And that's really where we are, is that there's economics and central banking and modern in mainstream monetary thought are trying to reconcile a decade's worth of broken promises with preserving their worldview at all costs. And it makes for very small and incremental improvement. Well, Jeff, I really appreciate your time. I know the audience is going to love this conversation. And I imagine that it's going to open up a lot more doors than it closes. So I'd love to have you back again sometime as we see if,

See if the emperor's clothes are revealed to be not there even more over the next few months. Yeah. And, you know, my last parting thought is, you know, we've only just scratched the surface here. And, I mean, you know, we want to have an encompassing discussion about all of these things. But, you know, you talk about the history, you talk about the way the monetary system actually works. We could spend hours on each one of these particular topics because there's so much there. And the reason there's so much there for us to talk about is because economics and, you know, mainstream popular thought has done such a poor job. you know, economic illiteracy is rampant monetary scholarship has been non-existent for 40, 50 years.

And so there's this tremendous space for us to, you know, to try to get everybody to be brought up to speed. Well, I would say it'll go on the record on air. This is an open invite if we ever want to collaborate on figuring out how we expand this education to more different types of people and bring those voices together. Because that's certainly what the mission of this podcast is. And the more interesting ideas to get out there, the happier that I am. Me too. And, you know, I think that's what unites us. And when we're talking about, you know, cryptocurrency, people who are drawn to the cryptocurrency space, it's the same thing, maybe coming at it from a different angle.

We all agree that something's wrong. Now, I think I have an answer to what that something is. And it's my job to try to convince you that I have the right answer. But really, that's what we're united is that we believe that we're missing something here, man. And something's not right. And we're going to figure out what it is and we're going to do something about it. Well, thank you for all your work on that progress.

And again, really appreciate the time. Thanks. There's so much to unpack and think about and dive deeper in what Jeff was saying. But one concept that I keep coming back to is this idea that if central banks can't actually properly identify the money supply and what is or isn't money, How could they possibly actually interact with it? How could they exert influence on it? In a world where they can't, their only tool is actually perception. It's media. It's the idea of giving markets information which reinforces markets behavior. And instead of dealing with economics, they instead become

machines for trying to provoke particular types of human behavior. It's a really fascinating concept and I think also has some pretty serious implications for how we look at those institutions. If, for example, everyone just treated that as normal, it might change the nature of their ability to inspire that behavior for sort of the normal tricks of the trade to actually have their desired impact. It's so much, like I said, to unpack here. And I hope we have Jeff on again to dig deeper into it. But for now, guys, I appreciate you listening. I appreciate you hanging out. Let me know what you think. Have you spent any time on the shadow banking system? thought about the Eurodollar system before. Hit me up at NLW. Let me know if you want more of Jeff's

perspective or perspectives like this. And as always, be safe and take care of each other. Peace guys.