Thread: 10 Thoughts On Macro + Crypto
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Are we headed for economic collapse?
Or will the 'Powell pause' usher in a renaissance in meme stocks and monkey jpegs?!?
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๐งต
Are we headed for economic collapse?
Or will the 'Powell pause' usher in a renaissance in meme stocks and monkey jpegs?!?
1/x
The Fed finally paused yesterday after nearly a year and a half of interest rate hikes...
And we currently find ourselves in a truly fascinating situation macro-wise (to say the least).
Here's some random thoughts on all the craziness...
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And we currently find ourselves in a truly fascinating situation macro-wise (to say the least).
Here's some random thoughts on all the craziness...
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One: The economy has fared far better than expected.
I can't think of any macro commentators from 18 months ago who thought the Fed could hike this high without totally blowing things up, but paradoxically the economy seems to be humming along (at least thus far).
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I can't think of any macro commentators from 18 months ago who thought the Fed could hike this high without totally blowing things up, but paradoxically the economy seems to be humming along (at least thus far).
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Two: It seems that the ultimate lesson of this hiking cycle might be that the Fed is increasingly powerless to overcome the effects of vast and ever-increasing US government fiscal spending (relevant chart below).
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As @hkuppy and @lukegromen have both pointed out, the Fed paying 5% on T-bills ends up being stimulative in its own way, as all the excess money the government drunkenly spends still enters the economy, just in a different manner vs zirp and QE.
youtube.com
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youtube.com
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Indeed it seems that the rest of this decade might just be an increasingly creative dance between Fed and Treasury re: how to monetize our rising budget deficits/sovereign debt:
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Three: It also appears a lesson of this hiking cycle is that we are in a new period of structurally low unemployment, primarily due to demographics (Boomers all retiring + precipitously dropping birthrates in US and globally the last 40 years)...
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Obviously the official unemployment rate is a bit of a tortured data point, but there's no doubt labor is in growing demand and wages are (rightfully) going up for first time in 40 years, due to both demographics and societal factors (see below):
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Four: Commercial real estate (specifically office) looks absolutely horrible, and not just because of the obvious high interest rates >>> higher cap rates >>> equity destruction process, but even more so because of the switch to remote work...
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Five: Remote work is here to stay.
Its increasingly clear that a) cubicle farms are utterly anachronistic... & b) there has been a widescale cultural shift from "a preference for remote" to something approaching visceral hatred of in-office work..
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Its increasingly clear that a) cubicle farms are utterly anachronistic... & b) there has been a widescale cultural shift from "a preference for remote" to something approaching visceral hatred of in-office work..
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It is extremely hard to overestimate the significance of this transition to remote.
The US has been defined by vast economic migration into urban cities for 150+ yrs, during the industrial then office eras, and this arguably represents a 180* shift in the other direction.
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The US has been defined by vast economic migration into urban cities for 150+ yrs, during the industrial then office eras, and this arguably represents a 180* shift in the other direction.
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Five: The big question in the short term seems to be what effect the debt ceiling resolution/TGA refill/etc will have on liquidity conditions and therefore risk assets...
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The consensus has been bearish, but I think the below thread from @concodanomics presents a much more nuanced view on the question:
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Six: Similarly, on the medium term horizon, it still seems like energy prices are the big variable to watch, as they are the one thing that could start spiking inflation back upward.
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Seven: Crypto has been absolutely beaten to death for the last year and a half...
However, both on-chain defi and Bitcoin are still chugging along, and anyone who seriously uses both tradfi and on-chain rails realizes the latter is 100x more efficient.
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However, both on-chain defi and Bitcoin are still chugging along, and anyone who seriously uses both tradfi and on-chain rails realizes the latter is 100x more efficient.
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Eight: With that said... it still seems very early for crypto, and there's still a lot of innovation that needs to take place- especially on the privacy and UX fronts- to enable normal stuff like payroll, AR/AP, etc to fully move on-chain:
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Nine: Much of the risk for crypto the rest of this year seems to be idiosyncatic (regulatory, Binance, Tether, etc type stuff).
All the liquidity and capital has already left the space so its hard to see any macro contagion affecting it too horribly.
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All the liquidity and capital has already left the space so its hard to see any macro contagion affecting it too horribly.
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Long term tho, as the generational cycle progresses, I don't see how the arc of economic history doesn't bend toward crypto, as even its critics admit it has attracted vast intellectual capital, & I don't know any otherwise successful young people not wildly bullish on it.
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Ten: (In conclusion)
Despite the Fed's ostensible success at hiking rates and generating disinflation, it might very well look futile when one zooms out in the years ahead... (cont.)
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Despite the Fed's ostensible success at hiking rates and generating disinflation, it might very well look futile when one zooms out in the years ahead... (cont.)
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...The US still has the same massive debt:gdp ratio and unfunded Boomer entitlement problems, and the last 18 months may very well just end up like one of the violent dips on the famous 'gold in Weimar Germany' chart:
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Conclusion:
If you found the above interesting please RT/share your thoughts below/etc!
And as always I am a redacted ape statue pfp so take all of the above with a grain of salt!
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If you found the above interesting please RT/share your thoughts below/etc!
And as always I am a redacted ape statue pfp so take all of the above with a grain of salt!
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Tagging some macro/crypto enjoyoors who may appreciate:
@JLabsJanitor
@CurveCap
@arndxt_xo
@crypthoem
@Dynamo_Patrick
@CryptoKoryo
@jake_pahor
@Route2FI
@_FabianHD
@DeFiMann
@zerototom
@alpha_pls
@defi_naly
@SimplifyDeFi
@JiraiyaReal
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@JLabsJanitor
@CurveCap
@arndxt_xo
@crypthoem
@Dynamo_Patrick
@CryptoKoryo
@jake_pahor
@Route2FI
@_FabianHD
@DeFiMann
@zerototom
@alpha_pls
@defi_naly
@SimplifyDeFi
@JiraiyaReal
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Linking back to first tweet below.
Again, please RT if you found interesting! ๐ช๐ซก
Again, please RT if you found interesting! ๐ช๐ซก
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