Episode 108

The End Game is Here

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November 12th, 2023

1 hr 12 mins 1 sec

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lightning enhancements bitcoin optech bitcoin education visa corporation ad spend kansas bank failure ftx creditors lawsuit crypto scams altcoins crypto transactions kyc uk exchanges privacy global banking system risks fed rate hikes bear steepeners us treasury auction germany recession economic growth el salvador tourism s&p rating salvadoran conference bull market planb indicator

About this Episode

Pre-Show

News

Adopting Bitcoin

  • Conference stats:

    1100 attendees
    350 Salvadoran
    Over 150 sessions

  • El Salvador’s Rating Raised by S&P on Local Debt Refinancing

  • Tourism, a major economic driver in El Salvador, plummeted during the 2020 pandemic but has increased sharply

    • 2023 numbers are also higher driven by hosting international events such as Adopting Bitcoin and the
    • 📈 El Salvador exceeded projections, welcoming 1.6 million visitors by June, emphasizing the impact of hosting international events on this achievement.
    • 💵 The country received approximately $1.6 billion in foreign currency by June, approaching the $2.9 billion target for 2023, contributing significantly to economic growth.

Economics

  • Germany, the beating heart of global manufacturing is already in recession and the rest of the world will follow
  • A US Treasury auction has just failed, welcome to the End Game
  • The Periphery
    • Bull vs Bear steepeners > When the recession or financial calamity occurs, short-end rates will fall quickly as the Fed aggressively cuts its policy rate in response. That is the “oh shit” moment. The yield curve un-inverts and then steepens (long-end rates higher than short-end rates), but it will do so while yields are generally falling. This is called a “bull steepener” and is the classic way the yield curve has moved in modern financial history. > > Right now, there is no US recession and no financial calamity. To the intellectually dishonest TradFi cheerleaders like Paul Krugman, the regional banking crisis doesn’t count; they will need to see a firm like Bank of America go bust to acknowledge the deep rot in the US banking system. Therefore, the market, aka bond vigilantes, expect the Fed to continue raising rates to fight inflation. But the Fed said rate hikes are paused, therefore the bull steepening scenario won’t occur. Then why should the vigilantes continue holding long-end bonds? They won’t, and they will express their view by selling long-end bonds at the margin.
    • Solution is for US Gov to cut spending and increase income, will exacerbate recession
    • Interest rate hedging means that higher short term rates bankrupt banks
      • Bear steepener bankrupts banks
      • Pre-payment of mortages bankrupts banks
      • All of these things mean selling treasuries > Underneath the veneer of record-breaking profits is a ticking time bomb hidden in the recesses of Too Big To Fail global banks. I’m talking about the likes of JP Morgan, Goldman Sachs, BNP Paribas, Nomura, etc. They sold trillions of notional worth of these products to desperate pension and insurance companies, and now will find themselves gushing losses larger than Three Arrows Capital. To hedge and stop the bleeding, these banks all must trade the same way. The more they hedge, the more they lose. All of this is due to the bear steepener, which is a direct result of Fed and global central banking policy. Talk about a TradFi human centipede.
    • The FED Raising rates is not about fighting inflation, its about preventing a Bear Steepener in the bond market that kills the TBTF banks, but at the cost of killing the regional banks

Already $780bn in loses ONLY on US Tbills, btw equity in the US banking system is only $2.2 Trillion

Privacy

  • Exchanges in the UK want to KYC every crypto transaction for Travel Rule compliance

    • Make using custodial crypto exchanges more onerous and dangerous
    • Will likely reduce crypto adoption but incentivize decentralized exchange

    "From 1st December 2023, Gemini may freeze and/or restrict users who are attempting to make inbound transfers to Gemini from a non-TRUST VASP. This is due to these transactions potentially missing the required information to ensure transparency of the transaction."

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