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In this episode of the “Fed Watch” podcast, Christian Kerolis and I discuss our thoughts on the April 21, 2022 IMF debate between Federal Reserve Chair Jerome Powell; Christine Lagarde, President of the European Central Bank; Kristalina Georgieva, Managing Director, International Monetary Fund; Indonesian Finance Minister Sri Mulyani Indrawati; and Prime Minister of Barbados Mia Motley.
Fed Watch is a podcast for people interested in current events for the central bank and how Bitcoin will integrate or replace aspects of the legacy financial system. To understand how Bitcoin will become global money, we must first understand what is happening now.
Takeaway
First, I should begin my writing by saying that this was not a discussion at all. These financial bureaucrats were simply using this forum to get their message across to people all over the world. They basically all agreed on the main points, namely: inflation is high and we can blame Russia for much of the problem with supply shocks.
The main theme from Lagarde and Powell was to return the Consumer Price Index (CPI) to their acceptable 2% range, they should rein in demand in their respective economies, since the driving force up is due to the supply shock.
The mediator is the message, as the saying goes. Although the goal of this event is to portray a united front of the global financial system, we pick several very important places where Powell and Lagarde disagree once we go a little deeper.
The European Central Bank and the Federal Reserve on inflation
Lagarde details the components of the high rate of change of the Eurozone CPI by saying that energy increased by 44% year-on-year and made up 11% of the index, another large part due to food prices – core CPI (excluding CPI) energy, food and alcohol ) by only 2.9%. I know that most people in the Bitcoin space don’t accept the importance of Core CPI and think it’s a trick to hide actual inflation. But in this case, Lagarde has a point. Most of the price increases in Europe are due to a self-imposed supply shock.
Powell talks about the US CPI differently. He acknowledges the supply shock side, but his main view on the supply side of things is that the US economy is too hot and the labor market is too tight. He has mentioned the labor market several times, claiming that supply cannot keep up with increasing demand, unlike in Europe where supply is reduced in relation to demand.
Kerrolls and I engage with the two central bank heads’ points of view.
sunset of globalization
We emphasize another very important exchange from the IMF Roundtable when the mediator asks about the decline in globalization. It’s entirely possible, Powell says, that we will see a reversal in globalization, while Lagarde “is making the case for Europe” just to reconsider the terms of trade.
I think this reveals a fundamental difference between these two economies and in the podcast we are taking the time to detail that in more depth. Suffice it to say in this article that the United States is more self-sufficient and ultimately less concerned with the fate of globalization than Europe. Europe is indebted to the global economy of customers and energy inputs.
Bitcoin’s answer to Lagarde and Powell
Being a Bitcoin presentation, Keroles and I took a lot of time to discuss how Bitcoin could fix the financial system issues that Powell and Lagarde talked about.
Rather than relying on central planners (who admit to following the market anyway), the Bitcoin system will remove much of the complexity from the process. We will not have the false impression that the expert class is the best and that people will not be constrained to list shortcomings and incompetence.
This he does for this week. Thanks, readers and listeners. If you enjoy this content, please subscribe, review on iTunes and share!
This is a guest post by Ansel Lindner. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.