The Breakdown

On this week’s “Long Reads Sunday,” NLW reads macro analyst Lyn Alden’s latest: “A Century of Fiscal and Monetary Policy: Inflation vs Deflation”

The article looks at:

• When monetary policy is effective versus when fiscal policy needs to take over 
• How short-term debt cycles add up to long-term debt cycles that have very different remedies
• Why long-term debt cycles inevitably end in default or devaluation 
• Why the conclusion of the last long-term debt cycle in the U.S. – the 1930s and 1940s – suggests that devaluation is the most likely outcome

On this edition of The Breakdown weekly recap, NLW looks at:

• DEXetition – Uniswap’s battle with SushiSwap heats up as the former dropped the UNI governance token in what some likened to a crypto stimulus check 
• The Fed has no clothes – After another FOMC meeting of “nothing new,” the mirage of Federal Reserve omnipotence is fading
• TikTok and WeChat banned from U.S. app stores – Is it just a negotiating technique? Whatever the case, people are not happy
• Kraken becomes a bank – What it means now that Kraken has been approved for a Wyoming Special Purpose Depository Institution charter

MicroStrategy made waves when it announced in early August it was moving $500,000,000 in treasury reserves out of cash. At least $250 million were to be moved into bitcoin. 

Earlier this week, the company announced its final bitcoin purchases totaled $425 million. 

In this conversation with NLW, MicroStrategy CEO Michael Saylor explains:

• Why he’s always treated the company with a long time horizon
• Why the asset inflation rate is the real inflation rate
• How he became convinced that bitcoin is the best treasury asset in the world 
• Why Michael believes some other companies will follow suit, but better do so quick
• Why the intensity of maximalists is actually part of the reason he grew conviction around the asset 
• Why he would buy every bitcoin if he could

Raoul Pal is CEO and co-founder of Real Vision, a platform fundamentally disrupting macroeconomics and financial media. 

In this wide-ranging conversation, he and NLW discuss: 

• Hot takes on the most recent Jerome Powell/Federal Reserve press conference
• Why central banks can’t do anything more until they merge with treasury departments 
• Why stablecoins are disrupting how we think about global reserve assets 
• Why traditional financial media missed an entire generation of investors
• Why all macro debates are boring

Today on the Brief:

• Kraken is the first crypto exchange to become a U.S. bank
• FTC preparing antitrust lawsuit against Facebook
• Gold-standard fan Judy Shelton doesn’t have the votes to be confirmed as Federal Reserve governor 

Our main discussion: The battle for the soul of finance. 

In this episode, NLW looks at the power competition between governments on the one hand and the decentralized network-driven finance alternatives that would reshape that power. Interestingly, in this competition corporations may play a role that benefits both sides at different times and in different ways.

Today on the Brief:

• MicroStrategy increases its bitcoin reserves by $175 million 
• The Oracle-TikTok deal starts to smell fishy
• The SEC is investigating claims of fraud involving Nikola Corp.

Our main discussion: The rise of zombie firms. 

A zombie firm is a company that can’t afford to service its debt from operating income. These companies are made possible by artificially low interest rates, and they drain resources from the economy. 

On today’s episode, NLW explains:

• Why there are more zombie companies than ever
• The negative impact they have on the economy
• How they could drive a new financial crisis

Today on the Brief:

• Crypto exchange volume sees highest month-over-month increase since February 2018
• Uniswap overtakes SushiSwap in total value locked
• What Coinbase vs. Apple means for the future of decentralized applications

Our main discussion: NLW looks at the business of geopolitical competition, including:

• TikTok, Oracle and the new politics of deal making in the “new Cold War”
• “Mulan” controversy around Uyghurs and Hong Kong police support 
• The real motivation for China’s digital currency

On this week’s Long Reads Sunday, NLW looks at recent statistics suggesting that, based on a comprehensive set of measures of well-being, U.S. citizens are worse off than they were a decade ago. 

One potential explanation is the U.S.’ “USD Dutch Disease” - a peculiar set of consequences resulting from the role of the U.S. dollar in the world. 

This week’s reading is “How to Diagnose Your Own Dutch Disease” from the Financial Times.

On this edition of the Breakdown Weekly Recap, NLW looks at:

• The “holding pattern economy” – why stocks, jobs and central bank policy seem stuck in place
• Why Joe Biden’s China plan shows that, no matter who wins the presidential election, U.S. economic policy towards China is likely to get more aggressive
• The surveillance state gets stronger as Amazon appoints a former NSA head to its board of directors
• The SUSHI saga and why there’s no capitalism more savage than the competition in open source networks 

Tavi Costa is a portfolio manager at Crescat Capital. In this conversation with NLW, he discusses:

• The credit exhaustion moment in the engines of global growth
• The race to the bottom for fiat currencies
• The explosive moment for precious metals 
• Where bitcoin might fit in this larger framework 

Find our guest online:

Twitter: @TaviCosta

Instagram: @TaviCostaMacro

Website: https://www.crescat.net