How the Fed Sees Bitcoin: An Insider’s View

Published on
November 26th, 2019
Duration
32 minutes

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How the Fed Sees Bitcoin: An Insider’s View

The Interview ·
Featuring Simon Potter and Roberto Perli

Published on: November 26th, 2019 • Duration: 32 minutes

Simon Potter is the former head of the New York Fed’s Markets Group and former manager of the Fed’s massive System Open Market Account — the $3.5 trillion trading vehicle used to execute US monetary policy. He joins Roberto Perli, co-founder & partner at Cornerstone Macro, for a deep dive into cryptocurrency from the perspective of a central bank senior policymaker. Potter provides his unique take on money, markets, and digital currencies. Filmed on November 6, 2019 in New York.

Comments

Transcript

  • zd
    zhen d.
    1 December 2019 @ 23:56
    some truth, but some lies too anyway, BitCoin is the future that the global money SHOULD go........
  • sc
    sung c.
    1 December 2019 @ 20:33
    The more I listen to people entrenched in the Central Bank system the more two things are apparent to me: 1) They are against BTC not because of what it can do for the world, but because of what it might do to the Central Bank's loss of control which they now yield over the people. 2) The Central Bankers really are very limited in thinking and on ideas of how to get out of the increasing negative rate problem which is growing around the world. If their solution is to turn towards digital assets in order to increase the use of negative rates, and they think this will force people to spend their hard earned money and thus force the economy upwards, they clearly are not understanding what has happened in Venezuela. Forcing people to spend money by decreasing the purchasing power in the future is exactly what astronomical inflation rates in the Venezuelan economy is going through and you don't see Venezuela improving, you only see it getting worse. Digital government controlled currency to force people to spend by decreasing rates and decreasing purchasing power is only digging the hole deeper without actually fixing the problem. How sad that this is all the solution they are contemplating.
  • JS
    John S.
    30 November 2019 @ 02:15
    Burn it down! Long BTC, Short Bankers
  • VV
    Vanessa V.
    29 November 2019 @ 02:22
    We pay income tax for what we earn, we pay goods and services tax for what we buy, we pay land rates, utilities rates etc for the privilege of living in our own homes. We live under the impression that what is left of our earnings is ours to invest, save or do with what we want. And now Central Bankers want to rob us of the savings and wealth we have left. Negative interest rates in my opinion is morally wrong and the long term impact on society is being underestimated.
  • RM
    Russell M.
    28 November 2019 @ 16:17
    What most of us want is a transparent free market to efficiently allocate resources and constrain government back door taxation through debt money printing by central banks to support it. But government cannot control their spending and therefore can never allow their fiat currencies to be replaced. That is why the US went off the gold standard and why crypto currency, though gaining in, popularity will never be allowed by governments to supplant their fiat currencies.
  • KW
    K W.
    28 November 2019 @ 02:55
    They are terrified of Libra because if it is successful they can kiss their idea of negative rates goodbye
  • JS
    Johannes S.
    28 November 2019 @ 00:59
    This was a very dissapointing interview. There were so many opportunities for the interviewer to poke and challenge the Simon Potter. If this is really how the CBs think, it is quite obvious that they are seriously underestimated both the utility value and the impact of Bitcoin in the long run. Making national fiat money digital won't do much to improve them, except that it will pave the way for an total surveillance state. As another commenter wrote, a digital dollar will come, but it will have to compete with Bitcoin, and the stats of each currency's strength don't like good for the USD (digital or not).
  • JM
    John M.
    27 November 2019 @ 21:25
    Digital cash with negative rates - crazy, unworkable idea. You probably would have street protests. IMO it would become political real quick! Again it's this same arrogance that they know best. They really know what I should do with my cash?
  • TC
    Thomas C.
    27 November 2019 @ 20:47
    This is the answer to all those on YouTube (Gold and Crypto) etc acting like the currrent monetry system is as good as done for. The main takeaway is 'Central banks are far from ready to give up control, power and their wealth creation engine. Making the case the CB are protecting us and that we need them to organise us is amazing. The change to a Crypto monetry system can only happen if the public majority want it - then it can't be stopped. But first the public needs a little more understanding and education wrt the current system and how it makes them poorer and stops them from getting ahead
  • SV
    Santiago V.
    27 November 2019 @ 20:01
    There is a silent revolution occurring in the backdrop that's not being mentioned here, and that is the systematic elimination of counter-party risk into decentralized ecosystems. This revolution is underpinned by blockchain / distributed ledger technology and is far greater than open/permission-less systems like Bitcoin. What I'm talking about is the Internet of Value (IoV), which is far larger, and dwarfs the abstractions of any single value ecosystem. The IoV facilitates the flow of value as easily as the Internet facilitates the flow of information (the true internet, not walled gardens). The IoV as an abstraction is a system designed to facilitate P2P transactions without an intermediary, and more notably, without everyone having to agree on the adoption of a single universal unit of account. If one considers that CBDCs are national, sovereign instruments then they should ultimately be reflective of a nation's GDP, not as a centralized issuer of a reserve currency. Similarly, crypto currencies like Bitcoin represent supra-national alternatives for world citizens in search of alternatives to mismanaged central bank policies. They both have a role in the coming Internet of Value, as do many other value ecosystems that will arise from the digitization of all human assets (equities, bonds, commodities, precious metals, property, etc.). Consider for a moment that the "far" future will be defined by a simple base layer protocol for value exchange, something akin to the Interledger Protocol (ILP). This is analogous with how TCP/IP facilitates the transfer of information through any device or network (broadband, fiber, cellular, wiFi, etc.) and is device/network agnostic. One can use TCP/IP with any email provider with the assurance that if I send an email from a Google GMail server it will arrive at an Apple email server, or Outlook or whatever. The same is true with a Layer 2 protocol like ILP. With ILP any number of participants can exchange value using micro-payments between pools of liquidity in any network. The sender can send $ and the receiver can receive it in any denomination (or combinations thereof) with little to no FX volatility / losses. If I wish to receive in ETH or Euros or Chinese CBDCs, ILP allows for that. More importantly, ILP allows for higher level abstractions (businesses) to be built on the Internet of Value in the same manner that businesses like Facebook and Google were built on TCP/IP. This is done via "connectors" that act as market makers between ecosystems to provide a service to ecosystem participants. These market makers, or connectors, maintain liquidity in each ecosystem and compete for value transfer at the lowest price with other market makers / connectors. The connectors are chosen via path finding algorithms to ensure that the losses of conversion are in the micro-basis point range. The larger point I'm making here is that it is not a zero sum game with respect to currencies and there certainly won't arise one global currency to replace them all. In fact, it is becoming increasingly clear by countries around the world that a reserve currency is inherently hegemonic, and therefore not desirable in the long run. Countries wish for monetary sovereignty as much as geographic sovereignty and no one is enjoying the weaponization of the US dollar. In the end, it won't be Libra, or the US CBDC, or Bitcoin that "wins" the value race, it will be the Internet of Value that facilitates all of the above on a level playing field so that each ecosystem accurately reflects the network effects, incentives, and monetary policies that the participants supporting said ecosystems has chosen. Competition of the likes no one has imagined. Interoperability of all assets, true P2P value transfer. What precludes me from sending some US $ to a small farmer in Bangladesh in exchange for digitized labor or farm yields? Why the intermediaries? The friction, and the parasites, will be shed over time, just like technology is disintermediating most of Wall Street, banks, etc. Central bank CBDCs will need to compete with Bitcoin, ETH, XRP, digital Yuan, etc. among other value pools (like digitized real estate) that will become extremely liquid. What need is then there for a reserve currency or further yet for centralized monetary policy. In the interim there will be a "melt up" in dollarization, but in the long run the Internet of Value will swallow up the world's value as a whole and as it should be. Prepare yourselves.
    • PG
      Petter G.
      2 December 2019 @ 20:36
      I like your enthusiasm, but the only thing worth investing in today is Bitcoin.
  • VS
    Victor S. | Contributor
    27 November 2019 @ 12:54
    IF GOVTS CONTROL CURRENCY VIA DIGITAL CURRENCY WITHIN 10 YEARS YOU'LL HAVE TYRANNY THAT WILL MAKE GENGHIS KHAN LOOK LIKE A PIKER.
    • PG
      Petter G.
      2 December 2019 @ 20:22
      That's why Bitcoin is important.
  • UG
    Unai G.
    27 November 2019 @ 10:37
    "Facebook would have for their international currency wouldn't necessarily match the goals that you would have for societies as a whole, because Facebook is a private sector" Oh, right. FED is not a private entity? Does the FED always aim for the goals of the societies "as a whole"? Ludicrous
  • PL
    Peter L.
    27 November 2019 @ 09:46
    Great to hear from a central banker but interviewer asks no critical questions? Especially since a lot of the interviews on Realvision evolves around central bank responsibility, printing money etc. - why dont we get some critical questions on these topics and maybe the central banker could defend their thinking and make us all a little bit wiser!
  • wj
    wiktor j.
    27 November 2019 @ 09:33
    buy gold. You can always exchange that to anything.
    • JM
      John M.
      27 November 2019 @ 21:33
      Even when USA outlawed ownership of gold, gold survived.
    • JB
      James B.
      30 November 2019 @ 19:38
      It survived in government vaults. Gold owners that didn't surrender their gold to the government went to prison. Not saying gold is bad. The government has behaved badly in the past and continues to act in ways that are not in the best interest of society as a whole.
  • AS
    Anthony S.
    26 November 2019 @ 22:40
    Do you think he could've commented/talked about the current repo situation or the 'non QE?' I really would've been interested in this.
  • DL
    Dan L.
    26 November 2019 @ 22:07
    It's infuriating listening to someone pontificating the possibility of mass theft of wealth and the total destruction of savers. I suppose savers would find a better asset to save their wealth in (PM's / BTC / ect), But that would be the next move on the chess board for these creeps. Outlaw anything not approved by the central planners. These people want nothing short of total control over our lives.
    • NS
      Nathan S.
      1 December 2019 @ 04:30
      Gulliotine them all 👍
  • BS
    Brian S.
    26 November 2019 @ 21:19
    Please, no more central bankers on RVTV!
    • MP
      M P.
      26 November 2019 @ 21:32
      Central banks are now heavily distorting the markets. Regardless of what one thinks of their policies, it is useful to have an indication of what these people are thinking.
    • JB
      James B.
      30 November 2019 @ 19:39
      Know thy enemy
  • MP
    M P.
    26 November 2019 @ 21:13
    I really appreciate this interview and I think all bitcoiners ought to be delighted if this is truly the CB's view on Bitcoin - very complacent!
    • AW
      Andrew W.
      27 November 2019 @ 12:02
      Worse than complacent. Just a total lack of understanding that a gov't and its money should be two separate things. But I guess this complacency is widespread and indeed it means we're still early bitcoiners.
  • BC
    Brian C.
    26 November 2019 @ 21:00
    What did Zuckerberg expect? He wanted $Libra to be based NOT ON THE DOLLAR! Backed instead by a basket of currencies. So, actually, he wants to be a BANK! Next, I suppose he'll want HIS OWN COUNTRY!
    • BC
      Brian C.
      26 November 2019 @ 21:07
      Really need an "edit" button. Did anybody else notice that abolishing physical cash and issuing negative interest debt is just another way of implementing A WEALTH TAX!? Warren would be delighted!
    • PW
      Paul W.
      27 November 2019 @ 16:02
      Not a wealth tax--a tax on the rich, the middle class and the poor. A tax on everyone.
    • JB
      James B.
      30 November 2019 @ 19:42
      Regressive tax. Affects only cash holdings not hard assets so lower and middle income people are affected more than wealthy people.
  • RM
    Russell M.
    26 November 2019 @ 19:46
    Interesting to hear but totally predictable babble from a former central banker, one of the in-crowd of central bank monetary policies that has been the handmaiden of unconstrained government debt. For at least 20 years, the US, EU, Japanese and Chinese central banks have printed money to save the market from normal, healthy business down cycles to preserve the status quo. They can't abide a rocking boat when Congress and particularly the President is up for re-election. Potential market efficiency has been so undermined by central planning of interest rates and money creation that that economic growth is now anemic and becoming more anemic as time goes by. The capital markets are deformed that they cannot even withstand the Fed raising interest rate to the extent that treasury 10 year hit a little more than a historically measly 3% last December. In the past we have had better growth with the 10 yr at greater than 5%. But those were much more robust economic times. And, with the Trump $1 trillion tax cut with no spending cut, we now have another $1 trillion of deficit to cover which has forced the Treasury to recently issue more debt and the Fed to spew money more than $100 billion into the Repo market to purchase the government bonds because even the systematically significant financial institutions were overwhelmed and could not bid for them. What pickle. The central banks are trapped like heroin addicts who need more and more drug to keep things going with less and less effect. Mr. Potter is clearly a very smart guy so I imagine he understands the dynamic. He just can't admit it publicly. If he does, he will thrown out of the insiders club like the irreverent David Stockman. So I can't really blame Mr. Potter too much for not having those type of guts. He is only human. Not sure i would do any better if I were in his shoes.
    • AW
      Andrew W.
      27 November 2019 @ 12:00
      Either he can't admit it or he truly is representative of the whole lot of them that just don't get it somehow.
  • OC
    Otto C.
    26 November 2019 @ 18:29
    Proof that central bankers have no clue
  • FA
    Frank A.
    26 November 2019 @ 15:31
    A guy who continues to understand how the economy and monetary policy has affected/damaged global economies. Continued delusional expectations that haven't work globally in 30 years and in the US for the past decade.
  • DT
    Delvix T.
    26 November 2019 @ 11:13
    This is a really good interview. Potter explains his position very cogently and gives interesting insights. I don't agree with all of them, but (i) that is what makes markets and (ii) I think this is the sort of dissonant interview which is, and should very much remain, one of RV's raisons d'être.
    • DT
      Delvix T.
      26 November 2019 @ 11:44
      An edit button would be useful here... I should add for the sake of clarity that while I don't agree with all of Potters' views, I do happen to agree with him in some respects. He appears to have given the subject matter a lot of thought and it would be useful to have him back, because CBs will have to think more and more about cryptocurrencies.
  • HK
    H K.
    26 November 2019 @ 09:15
    Was a good interview. People don't always have to present a viewpoint which is aligned to the audience, this guest presents his in a clear manner and gives some insight into the way c.bankers think about these issues. That is the value derived from this interview.
  • YC
    Yu C.
    26 November 2019 @ 08:56
    My opinion is that if Simon was still in his position, we may not have the September Repo chaos. Btw, is Pozsar in your guest list yet?
  • AW
    Andrew W.
    26 November 2019 @ 06:35
    Incredibly annoying (yet important) to hear an ex central banker who either still doesn't understand his former institution is the source of all our current problems, or does understand but is living in denial. I knew everything about him as soon as he mentioned that a government should have control of its nation's money. He's not sure why people value BTC. Just unreal.
    • PP
      Peter P.
      30 November 2019 @ 18:39
      Mr. Potter never said he did not understand why people value Bitcoin. Instead Simon presented a number of reasons as rhetorical questions for you to choose your answer as to why you may value bitcoin, and everyone may have a different reason. Simon concluded with this “In economics, if people are putting value on things, and it is a different type of asset, so it pays off differently in different states of the world to the existing set of assets so there's a lot of discussion about that today, that has value in itself. That seems to be what we heard today, the main selling point for Bitcoin.” In Simon Potter’s position, unless you think his next role is outside the financial services industry, Simon answered more than he needed to. Wonderful interview & thank you RV.