In September, we proposed a theory of the Fed and suggested that the FOMC will soon worry mostly about financial imbalances without much concern for recession risks. We reached that conclusion by simply weighing the reputational pitfalls faced by the economists on the committee, but now we’ll add more meat to our argument, using financial flows data released last week.

We’ve created two charts, beginning with a look at cumulative, inflation-adjusted asset gains during the last seven business cycles:

powell change 1

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Last month, the good people at Focus Economics asked me for my thoughts on cryptocurrencies, allowing either a general outlook or my answers to two specific questions:

  1. Could cryptocurrencies supplant traditional currencies or are alternative currencies a bubble that will eventually burst?
  2. Could a central bank really issue its own digital currency in the near future? How could this affect the world economy and financial markets?

I went with a general outlook, although I might have used a different format had I realized my response would be printed verbatim alongside twenty others. In any case, it was interesting to see the diversity of views. A few respondents even sounded as though the crypto craze made them angry.

Here’s the link:

Rereading my own contribution, I should have written that “the vast majority of cryptocurrencies will fail” instead of “many cryptocurrencies will fail.”

And in case you missed it, Bitcoin topped $15,000 this morning.