BREAKDOWN: Money Reimagined... Why the Dollar Has Never Been Stronger or More Set up to Fail

Two of CoinDesk’s most popular series, NLW’s The Breakdown podcast and the Money Reimagined newsletter by chief content officer Michael Casey, come together for a special podcast microseries in the run up to Consensus: Distributed, our first virtual big-tent event May 11-15. The Breakdown: Money Reimagined builds on themes Casey explores in his newsletter to tell the story of key arenas in the battle for the future of money -- from the incumbent dollar to the aspirational DCEP to the insurgent bitcoin -- in the context of a post-COVID19 world. The four-part podcast features over a dozen voices including Consensus: Distributed speakers Caitlin Long, Matthew Graham and more. New episodes air Fridays starting May 1 on the CoinDesk Podcast Network. Subscribe here.

This episode is sponsored by ErisX, The Stellar Development Foundation and Grayscale Digital Large Cap Investment Fundhttps://grayscale.co/coindesk

Even before COVID-19, 2020 was poised to be a big year in the battle for the future of money. 2019 had seen: Fed intervention in overnight lending markets; the launch of Facebook’s Libra; an acceleration of China’s central bank digital currency; growing acceptance of bitcoin as digital gold and more.

When Coronavirus hit, however, it fundamentally altered the context in which this battle for the future of money would take place.

In late January, China issued a lockdown for the city of Wuhan in Hubei Province. Over the next few weeks, that lockdown as extended to more than 200 million people. China-based blockchain investor Matthew Graham called living through it “the craziest thing I’d ever seen.”

Yet despite such a chaotic blow to the economy of the supply chain capital of the world, US stock markets continued to mint new highs, with the Dow Jones Industrial Average reaching an all time high on February 12th and the S&P500 following suit exactly one week later.

On Monday, February 24th the damn started to break. Caitlin Long, founder of the crypto bank Avanti and 22 year Wall Street veteran said that COVID-19 was “starting to overwhelm the ability of central banks to solve this…You can’t solve a pandemic with liquidity. It’s just not going to work.”

That week would get messier still. By the end of the week, which completed a 10% drop from just 10 days earlier, crypto trader Scott Melker said “This is a historic drop. This is something we haven’t seen since World War II.”

By the first week in March, the Fed sprang into action, calling an emergency weekend meeting to announce a 50 bps rate cut. Unfortunately, the market did the opposite of what the Fed might have hoped. Delphi Digital macro analyst Kevin Kelly put it this way: “What last week’s rate cut did was confirm to equity investors what they didn’t want to admit to themselves: that this was a real risk and something the Federal Reserve was watching as a real threat to economic activity.”

As true fear crept in to markets, stage was now set for a torrent of action and intervention.

In this first episode of Money Reimagined, we look at:

• Why US markets took so long to react
• How the stock market became a political utility
• Why, even before the crisis, “increasingly exotic forms of quantitative easing” were inevitable
• Why the bailouts have some investors accusing our entire market of being cronyism rather than capitalism
• What unlimited money printing means for the US dollar.

The key question explored in this episode is what happens to the US dollar next? On the one hand, monetary stimulus like the world has never seen suggests that at some point, we should anticipate an inflationary environment. On the other, the dollar has done nothing but grow stronger compared to other currencies. How can both of these things be true simultaneously.

For that, we turn to insights from Matthew Graham, Caitlin Long, Scott Melker, Kevin Kelly, Ben Hunt, Luke Gromen, Travis Kling, Mark Yusko, Anthony Pompliano, Jared Dillian, Dave Portnoy, Michael Casey, Preston Pysh, Peter Zeihan

Music by DJ J-Scrilla "Faith In My Money (Money Printer Go Brrr)" from the new “Sound Money” album.

Produced by NLW and Adam B. Levine. Edited, Scored and Announced by Adam B. Levine with production assistance from the rest of the team at CoinDesk.