Tin Foil Hats, Economic Reality and the Total Perspective Vortex

Russia Begins Piloting Digital Gold System for International Settlements​

The program, currently in its pilot stages, is part of a test to examine the feasibility of using gold assets for finalizing international exchanges involving Russia. Capital Lab partner Evgeny Shatov stated that digital gold assets can help the nation bypass sanctions and reduce its dependence on the dollar.
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These digital gold assets are blockchain-based tokens whose value is pegged to the price of gold in international markets and backed by real gold stored in vaults. The pilot, which is intended solely for testing purposes, includes the purchase of digital gold assets for rubles and a subsequent repayment scheduled for May 2025.
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The dollar is at risk of losing its traditional status as a safe haven for global investors following a tariff backlash, a European banking giant has warned.

German-based Deutsche Bank said: “This needs to be acknowledged as a possibility” after the speed and scale of geopolitical uncertainty accelerated the dollar’s turmoil.

The concerns were shared in a note to clients by the bank’s global head of FX strategy George Saravelos, first reported by Bloomberg.

The note said: “It is hard to over-estimate the scale of change taking place in global economic and geopolitical relations in a matter of days.”
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International Banking Cartel: The Head of the Snake Is the BIS in Basel, Switzerland.​

De-Dollarization to Speed Up As U.S. Retreats from Old Alliances | Taylor Kenney of ITM Trading.​

searcher said:

From Grok:

The "Mar-a-Lago Accord" is not an officially documented agreement with a single, definitive original source citation like historical accords such as the Plaza Accord or Bretton Woods Agreement. Rather, it appears to be a speculative concept or term coined by analysts, commentators, and financial experts to describe a potential economic strategy associated with Donald Trump’s administration, particularly in his second term starting in 2025. It is often framed as a hypothetical plan to restructure U.S. debt, weaken the dollar, or reset the global financial system, drawing parallels to past international monetary agreements.

Based on available information, the term has been popularized in discussions by figures like Jim Bianco of Bianco Research, who has described it as a "concept" rather than a literal event tied to a specific document or meeting at Mar-a-Lago. For instance, Bianco’s discussions, as noted in sources like Bloomberg and MacroVoices in February 2025, suggest it encapsulates ideas from Trump’s economic team, including tariffs, debt restructuring, and dollar devaluation—ideas partly traced to a November 2024 paper by Stephen Miran, Trump’s nominee for the White House Council of Economic Advisers. That paper, titled "A User’s Guide to Restructuring the Global Trading System," outlines strategies to address dollar overvaluation and reform global trade, but it does not explicitly use the term "Mar-a-Lago Accord" or present itself as an official accord document.

Other sources, such as commentaries on Substack (e.g., by JD Breen or Anthony Pompliano) and financial analyses from outlets like Forbes and ZeroHedge, further speculate on this concept, often linking it to Trump’s broader economic rhetoric and actions like imposing tariffs or leveraging gold reserves. However, no primary source—such as a signed agreement, government press release, or official transcript from a meeting at Mar-a-Lago—has been identified as the "original" citation. The term seems to have emerged organically in financial discourse around late 2024 and early 2025, inspired by Trump’s estate and historical naming conventions for economic pacts.

Critically examining this, the lack of a concrete original source suggests the "Mar-a-Lago Accord" remains a narrative construct rather than a formalized policy with a citable origin at this point. It reflects market speculation and interpretation of Trump’s intentions rather than a documented event. If you’re seeking a foundational text, Miran’s November 2024 paper is the closest associated document, though it’s more a proposal than an accord itself. Without an official primary source, the concept’s legitimacy hinges on ongoing developments and whether such a plan materializes into a tangible agreement. For now, no singular "original source citation" exists in the traditional sense.

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The head of Europe’s insurance watchdog said the US Treasury market’s recent volatility is bringing into question its status as a safe haven.

Petra Hielkema, the chair of the European Insurance and Occupational Pensions Authority, made the comments last week as part of a presentation on behalf of EU financial supervisors, according to people familiar with the matter.

The striking assessment at a closed-door meeting hints at some of the nervousness about Treasuries, which have served as the world’s ‘risk-free’ asset and act as collateral for trillions of dollars of lending a day. While there’s no indication that European regulators are taking any concrete action yet, the comments underscore how quickly the world’s perception of Treasuries has changed in the span of a few weeks.
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"With its protectionist policy pivots, the U.S. is giving investors worldwide an occasion to rethink long-held assumptions about the U.S. investment landscape," Marc Seidner, chief investment officer for non-traditional strategies, and Pramol Dhawan, head of emerging market portfolio management at PIMCO, said in a note on Thursday.

"The U.S. has long enjoyed a privileged position, with the dollar serving as the global reserve currency and Treasuries as the go-to reserve asset. However, this status is not guaranteed," they said. "If global capital flows into U.S. assets dwindle, it could point toward a more multipolar world with a diminished reliance on a singular reserve currency."
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Hello one, Welcome to the Gold, Goats and Guns podcast for April seventeen, twenty twenty five. My name is Tom Lawonga. We have a lot to talk about. It is episode two thirteen, and I have the great pleasure of having my good friend Caitlyn along back to discuss.

Well, I'm not really quite sure what we're. Going to need to discuss today because we never quite know what's going where Caitlyn and I are going to go, but it's always a stimulating conversation where I usually get interviewed as much as I interview her, and so I really appreciate having that kind of pushback on the podcast. So Kitlyn, good afternoon, Thank you for taking the time and all of that. So how are you.

Yeah, awesome to see you doing well things. Yeah. No, I actually when you reach out to me, I said, look, I want to interview you because I've listened to a couple of your most recent podcasts, and you know, the world is changing so fast that you get something out a day or two later, and the world has changed by interviewing events, and so what I would really love to do is ask you, and I warned you about this, yes to give the elevator speech version of your view of the world and as if nobody has listened to you before. Oh wow, Yeah, that's going to be a that'll be a tour.

Well, let's start with the beginning. It's actually a lot clearer than it used to be. And I recommend everybody take to listen to the interview I did last week with Tommy Harrigan on Tommy's podcast with Ian Berling Game, because I think Iam did a really nice job of putting in the historical context a lot of the arguments that I've been making about Davos, the city of London, and all of that stuff, so in ways that I had not really fully considered, because I do not consider myself for his story and in any way, matter, shape or form. And my partner Dexter.

White reminds me of this on a ni weekly basis as a matter of fact, being history, being the actual historian in the group. So what I think ultimately. Was as things play out right here right now, is that Donald Trump is attempting the first real decoupling of the American financial system of someone of broaden that as wide as you want from the old colonial European system that if you if you think, if you look over the history of the of the United States as it pertains to money since our conception since as I've liked this said said many times since Cornwall is surrendered at Yorktown, we have never really had financial independence in the United States. And if you don't have financial independence, you don't really have political independence either.

So it's in a way it's a again, it gets into that thing that I've said before. You know, how do you feel about the American Revolution? Well, I thought a very Chinese view of it, and say, well, it's too early to tell, right, We're see here we are two hundred and forty nine years since the American Revolution was declared, and we're still fighting the vestiges of that system. So now, but over the colors of the. Past few years with the advent of sofa, the secured overnight financing rate, and the end and the true end of libor on March thirty first, because while libar ended on September thirtieth, the six months anthetic libor contracts that were floating around out there, they didn't mature and end until March matured until March thirty first.

And then, interestingly, can I pause you there and explain the difference between cipher and libor and why that means the US is taking power back from London. Sure, because the one because the librar rate is an unsecured rate decided upon by eighteen City of London banks, only one of which represents your American interests. In many people's parlance, JP Morgan does not represent America's interest at all. And it's only the JP Morgan's Undon office that there are a subsidiary that sits on the sat on the board of libor, the secured overnight financing.

And so what this means's before I move on to so for so, libar was a way to price offshore dollars without ever having to really post collateral because you could just like pass lib or contracts and rehypothegate the macromonks themselves and everybody and the And we had this massive growth of the shadow banking system and the euro dollar market over the last sixty or seventy years. Because there for people who are just starting to listen to this for the first time and underscore that meant the London banks set the most important interest rate in US dollar markets. And which then would be the most important markets in the world. Correct, Okay, great, now onward Okay.

So now that we have that established, and that was and that and that the libar system was codified in nineteen eighty four when librar was was kind of unaff. Established as the US dollar rate around the world. Interestingly enough, we had the G five get together in nineteen eighty five and create the positive core to now break currency markets. And then that system really kept.

It was in play all the way up until I think the global financial crisis of two thousand and eight, and that's when systems started to break. That's when the whole system started to break, really broke. And then since then I've said for years that after that that period from around twenty eleven, when the central banks all got together and created swap lines amongst all the major G seven banks, the Bank of Japan, the Bank of England, the Fed DCB, they all got together and they coordinated monetary policy. And that's actually what broke the last gold bull market, if you remember, that was at that moment in time.

Was in that period that gold peaked. Then there was the announcement of the coordination of central bank policy. Central bank policy, we were dealing with the potential of gregsit at the time, meaning Germany leaving the Euro at the time. That stabilized the markets by the time we got into October November of that year, and then that in my mindset, created the that was the end of the quote unquote dollar reserve standard.

Now we weren't the central bank coordinated policy standard. And I think that that ends with twenty twenty one and Jerome Powell beginning stealth tightening of the dollar. He didn't start the process of tightening interest rates until his reconfirmation in March or twenty twenty after his reconfirmation in March of twenty twenty. Two, but in June twenty twenty one.

When he raised the payout rate on reverse repo contracts five points about the test funds rate to stabilize the dollar funding markets. He was able to do that because we had moved off of libor in the United States to the secured overnight financing rate, and the secured overnight Financing rate SOFR or otherwise known as SOFA, is a secured rate per its name, which takes its which is which is settle on a daily basis of and the rate is determined in a market sense by what's going on in US rebail markets, in US money markets, and so and so, since it became the law of the land for all US new US debt to be denominated or or index to SOFA starting in January one of twenty twenty two. The timing here January twenty twenty two. Powell's reconfirmation in February of twenty twenty two is the second term starting.

And then I'm starting to raise interest rates in March of twenty twenty two. All in a row. That began the shift away from Euro dollar futures being the mechanism by which the tail that could wag the global dollar market dog to the SOFA futures market, the three months sofer futures market being the thing that determines the cost of dollars over the course of you know, on a daily base. And just to put you there, can I underscore for those who are not financial market people, the libar market librar touched everything.

Libor is the rate at which, or was the rate at which hedge funds targeted their returns. It was the floating rate for corporate floating rate debt, of which there is not much but the vast majority of corporate bonds were swapped into floating because of the steepness of the yield curve in normal times, so they swapped. The interest rate swap market was driven by that. So basically, and of course there's the mortgage market which was also very driven by libror.

Right, So you basically had at the core of the huge fixed income markets, which are far far bigger than the stock market in the United States, you had the most important interest rate that underpinned all of the fixed income market being set by a cabal of London banks. And there was a libor pricing scandal. Guess what they were fixing the rate and that was having a huge impact on the US economy. Yes, and so walk us through from a history perspective and talk about John Williams the role that certain people had in trying the control over the US economy out of the London City of London banks.

Sure, so when Trump comes in office in twenty seventeen, he's got the opportunity to create a new FED, to nominate a new FED chair Wall Street, which at that point his first term was dominated by Goldman Sachs, Steve Manuchen and others were so it was really a Goldman Sachs administration, but they recommended to him Joam Powell. Now Powell, as we know from Daniel die martinoz Boot's expos on the FED, her book which everybody should read, we go to come to find out that Jerome Powell was one of the few members of the FMC that was actually a hawk, was one of the few people who was against Bernanki then Bernaki making the two percent inflation target, the role of the new FED mandate along with its standard dual mandate of full sable prices and full employment. And Powell was extremely angry with all this and never and never was never down with it. He was always at odds with the inflation nieces like Jenny Allen and others, and Bernachi himself.

So when Trump comes to power, they recommend Jerome Powell, Trump takes his, you know, Trump takes their recommendation. Powell becomes FED chair and then he immediately starts trying to tighten monetary policy. Janet Allen again when she was FED chair, left the left us in a terrible position. She was doing QE, she was doing operations, Yeah, she was doing well.

She was doing yield. Cirk control. They really the Jenny Allen can be sub can be sub summed up in yield curve control. She's always trying to suppress the long end of the curve and support the short end of the curve, like she's always playing that game.

And that's all She. Spend money like a drunken sailor, and incredible spending on the fiscal side. Correct. Agreed, Absolutely agreed, and so Powell.

The first most of Powell's first term is him trying to begin the process of extricating us from that. But here's the problem. The problem is Libel. We're still in control.

So really, the European the offshore European banks, the London banks, were really in control of our monetary policy. And on this point, for years, Jeff Snyder, when he worked for Alamba Partners before he started Year Dollar University, had made that point extreme again. He did it, really, he did it. He did Yeoman's work on this.

I happened to disagree with Jeff now because he thinks that Libor is still somehow in control. I don't agree with him at all on that. But in twenty seventeen, the first thing that happens when Powell is confirmed is they they pulled this idea off the shelf that's been at the FED as a white paper since the librar scandal of two thousand and eight, which is we need to move away from lib or to the securit overnight Financier's just some version thereof. So the FED had already done a decade's worth of work on how this would be implemented.

John Williams, who is the head over at the New York FED, was the guy who was the champion of this. So Williams has moved immediately from the Atlanta FED to the New York to the all important and all powerful New York FED. And then SOFA is implemented immediately as a pilot project with a five year rollout plan from twenty seventeen to full implementation SOF by January twenty first of January vers of twenty twenty two. That's the history.

And then SOFUR is en rolled out in stages as various aspects of the American The domestic American markets are shifted away from lib Ork towards SOFUR. But it's really when all American at all new debt. It doesn't matter what it is. A credit revolver, a car loan, a credit card, anything.

It's all now index to SOFA and it's not indexed to libor. So now we have a full Now we have the ability to decouple. We have the beginnings of the d coupling. Of course, the.

World, well, the New York gets control, right, Bread gets control markets as opposed to London banks. Sure fair enough. And and look, you know, you know my libertarian slash Austrian roots. I'm not crazy about that.

We're dealing with that. But that's still better than it being City of London because there we have fundamentally different rules for how capital has handled the United States than they do in London. We can't infinitely re hypothecate correct, Okay, we can't do infinitely hypothication of securities. Is basically in New York.

For those who are not familiar with the word rehaproflication, which is a big scary sounding word to put that in in Layman's terms, There you can create an infinite amount of money without any backing for it. That's what unlimited rehap application is. This is the reason why Lehman Brothers had most of its two thousand and eight derivatives exposures in London, not in the United States. Because they could create an infinite they had a literally a perpetual money machine.

The problem is that when they dancing stops and I'm mixing all kinds of metaphors here, Warren Buffett says, when the water goes out, you see who's swimming naked, And they were swimming naked and they failed. But that's because they were enabled by the rules in the City of London to put infinite amounts of leverage. In London, right And in fact, what they were allowed to do is they were allowed to take a security pledge it as collateral, and they take one hundred percent of that pult and then the person who has that contract as collateral could pledge one hundred percent of the value of that contract against a different contract. So you could write a euro or end swap.

Then you could write again dollar swap, then you could write it, then you could write an insurance contract. Then you could write this. And it's all. Built on the same little pile of money that was originally there, but there's all these derivatives and then they sell it to us as well.

The net value of all. These derivative contracts is you know, forty billion dollars, forty million dollars and it's not really that much money, yeah, as long as everybody can pay. And then when when somebody doesn't, the daisy chain of defaults begins and you get a financial crisis. Well, and then what what I always like to say is that, you know, there's the notional value of all of these derivatives.

And then people talk about the notional value value of these derivatives all day long. They say six quadrillion dollars like yeah. And and the bankers will tell you that, well, it all norms out to like forty billion dollars, yes, as long as everyone can pay. But notional becomes net when the other guy can't pay.

Correct, That's the important problem. All of a sudden, it's you know, will you owe me about don't have the money? Well, you know, go get it from that guy, and you got to go get it, and you can't, and so the whole thing then just collapses. And then what happen and then the central bank has got as being is effectively being blackmailed into bailing everybody out. So the fundamental shift for the layman in the audience is that we moved from an infinite rehypothecation system where there's no underlying collateral to all of these contracts, to a secured system where someone has to post some amount of collateral and that's it.

And so there's a limit to how much leverage you can build into that system. And that limit is determined now not by London, but by New York. And is it fundamentally more stable? Have we more have we stabilized the financial system compared to what it was pre libor, I mean pre sofer. Let's let's fast forward to last week.

Okay, I was just got off the phone with a patron who is very, very sophisticated, and because he's worked in these markets, he was trying to explain to me actually what was going on. So in all the. Podcasts that I did last week, I identified what was what I thought was happening in the sovereign det and currency marks. When we heard, well, it was China selling treasuries and because they were angry with Trump over the terrors.

And then we heard that the basis trade, the new the treasury market basis trade was blowing up. And then we heard that it was Japan that was selling because one of their pension funds was blowing up. And then we heard and then we heard them. We heard.

But I'm like, I'm looking at the market on Wednesday morning of last week, which is like April ninth, I'm looking at it and I'm like, the US bond market is off twenty basis points, the German market is flat, and the euro is up five percent, the Canadian dollars up five percent, the British pound is up five percent. I'm like, oh, well, was clearly what's happening here is that the selling is not coming out of China. It's coming out in Europe. It's coming out of one Brussels and Ottawa, and they're dumping treasuries onto the market.

They're forcing the long end of our yield curve up because they all have they've all gorged themselves on trillions of dollars since since the tightening, since Powels began tightening, they bought collectively over one point one trillion dollars. With the US treasuries all long dated stuff. We're not talking about T bills here, We're talking about via the US International Treasury International Capital Report. It's all long dated stuff.

So it's all fives and sevens and tens and thirties. It's not six month t bills. Okay, it's not one year, it's not one year notes. So what they did was they were selling the long end of the curve to push that up, and then when they sell that, the yield goes up, the price on the bond goes down, and then they can wander.

Now they have to. Deal with that trade. So you sell a treasury, you buy dollars. You then sell the dollars and buy your local currency in order to convert your local currency into your local debt if you want to try and keep cap the price on the on your debt.

Because if the US market is selling off and everybody's worried about a recession, and everybody's worried about this, the general market response is going to be sell all debt, sell all treasuries, and everybody get the cash. Get sell equities, sell bonds, sell everything, because we're now were you out a global recession slash depression, Go to cash. So the tell was two things. The German butdn't market not moving at all yep, and which is the safe have in trade of which is the safe haven asset of Europe? And the Euro rising sharply, which would be the biggest and deepest currency market in your other than maybe the British pound.

The British pound moved with the British guilt market moved with the US treasury market because it was already at a it was already at a at a limit, a premium like guilt are already trading. It's such a spread to the United States market that it couldn't go any higher. Okay, So why were those tells and what what does the significant Okay? So if you break it down like I said, you sell treasuries, you buy dollars, you sell dollars, you buy euros. You then pow money into the German bunt right, yep, So who's selling? Who's got enough treasuries to sell? China? The Chinese yuan didn't move at all.

Chinese bond markets didn't move at all. The Japanese end didn't really move. There was some buying of Japanese government of Japanese government bonds, so they were able to absorb any flows any any aftershocks in Japan. It would always show up in the currencies.

The currencies were to tell. Because the German market is big for Europe, but it's not big compared to the US treasury market. So you sell, for example, say you sell fifty billion dollars worth of US treasuries in order to bomb the market. And then you start cascading effects of unwinding basis trades and sofer spot trades and all this other weird stuff, all this other esoteric stuff that even the guys who trade it don't understand.

Yeah right, yeah, literally. And then you you're going to take that money and then you're going to wander through that that machine that I said, from treasuries to dollars, from dollars to euros and duros to German bunds. But if you don't want to move the German bund too far without moving price, you can only there's a limit that you can do to that. So there will be two tells.

The two tells would be in the central bank world, the currency rises on the central bank are on the sovereign world, ye, so euro currency rises. And in the private markets that are trading in sympathy with this, gold goes ballistic. Yeah, gold with ballistic and gold. Going ballistic makes perfect sense as well, because the guys are getting out of all these other trades, and they're like, well, where am I going to go in this market? I don't know what the hell's going on.

I'm going to gold. Well, let's come back. Why is it significant that the euro rose and the German boon yields it didn't move much. It's it's it's that's indicative of who was doing the selling, because okay, who else who else would buy German buns under this under this arrangement other than the European Central Bank or the Bank of England or or or I mean, no one else wants that deck because on a daily basis, they're those markets themals are constantly being manipulated.

Christine Leguard has yield curve control programs in place that she's been using for years. It's it's the German market has not been allowed the German ten ure has not been allowed to go above two point five percent for any length of time for four years now. So link is back to Trump. What's the significance to the US? Oh sure, the significance to the US is that what you're now trying to do is you're trying to signal some markets that Trump is breaking the world.

The world doesn't want the chaos that Trump is engendering by selling the long end of the yield curve. It's feeding the narrative that Trump has breaking the world. And meanwhile the German buten stays flat and everybody's like see. And then literally Bloomberg writes an article and publishes an article that morning, same time this is all going on, says hey, if the if the German, if the US treasuries are no longer a safe haven asset, I shall I shall present to you the German Bund as an alternator.

Is literally, they were literally telling you what they were doing. Yes, but here, now let's come back to that's the story that Bloomberg wrote. The real story, and you pointed this out in your in the podcast you refer to is that the US had no problem with the ten year bond auction, which tells you there really wasn't underlying chaos in the market. Sure, you had some some some correction in the stock market which obviously was overvalued in and run up too far.

But they tried to create chaos. They tried to create a financial crisis, and they couldn't. Am I understanding your thesis correctly? Yes? Because look what did they do? They moved the US. They moved the US.

Thirty year from like four point five percent to four point nine percent, and everybody went. Everybody else went, oh Tasur sales bye, and they went the lot. And then we had a stellar ten year auction that day. We had a stellar thirty year auction the next day, and by the way, we had a stellar twenty year auction on Monday.

So Scott, best one is that your yes? That would be ye? What's that? Yeah? Absolutely? I think he I think he won ultimately. And then in my discussion with my with the with my patron this afternoon, in preparation, by the way, for this conversation, you know, he was telling me he's picking me. A couple of days ago, he said, the real inciting incident for all this you're He's like, Tom, I think you're correct about all of this, but that's not the inciting incident of the story. That's kind of like a movie speak.

That's plot point number one. That's act that's the middle of act one through act you know, through act three. The inciting incident was that because there was He's like, there was no real movement in the basis trades. It was all in the sofa.

It was all in the sofa swap trades. And zero Hedge even noted that in the article Yes down this road that so what was happening is that these guys were all along US treasuries and they were short in the sofa and they were they were short the sofa futures curve all the way out from like six months out to three years out. Say they were. Long US treasuries on a three year market, and then they were and then they were they were short.

How he put it, the strip from the cross the entire sofa futures curve. And if you go back in. And you can do this, you can go to the cmme's website and you can go look at so for futures curves. I have that thing bookmark.

As a matter of fact, I have a tab of the Sofa Futures Curve open in opera twenty four to seven on every computer in. My house and my iPad. It's there because I look at it all the time. And you can go in and you can go look at the and you can look at the trading data and you can see it on those days, the size and volume of the trading bars.

I was looking like a two year a two hour chart, so or one in a two hour chart. And I was looking at the intra day market action and it was it was crazy. What was happening. It was, you know, the sofa market.

If it moves to five basis points in a day, that's a lot. Huge, right, Yeah, because of the trillions tied to it. Yeah, three basis points is a good two to three basis points is a normal day. Five basis points would then be a two sigma day, and forty basis points is a twelve sigma day.

Yeah, you know mathematics. Well, and what did we have last week? And we had something like that. We had we had one hour bars that were literally to twenty and thirty basis points. And they were all timed with either of the New York Open, the European Clothes, the the They were attacking at different times.

They were attacking on the Sydney Open at five pm New York time, vers at six pm New York time. They were attacking at three am, which is the opening in London. They were attacking at eleven o'clock, which is a close in Europe. They were attacking it and in different days and it and you can watch a crescendo over the course of a week.

It started a couple of days before that, and then it reached its peak on April ninth, and then it's fallen off since then and over the last couple of days. So for futures market has been stabilized quiet, and so it was the US treasury market. So okay. So the aha of all this is that this is a culmination and an actual break of the US financial system being controlled by London banks and by the European Central Bank and the Bank of England, and the US has now rested control of its fixed income market back definitively.

Is that your conclusion? No, it is not what it is, okay. What it is is telling you that we have now defined the who the real enemies are. Now I'm going to take you back to September twenty nineteen when we had the Sofa crisis of twenty nineteen, when so was in a liquid market and so blew out to like twelve eleven percent or something on other day, and that forced the FED to come in reopen the standing reboul facility for US. Banks, standing reader and men, and they.

Did, and we had our reboult crisis at twenty nineteen, and that is also very similar, by the way, to the rebolt crisis of two thousand and seven. And at the time, I don't know you and I were speaking back then, but no, I when when we were, when I was, when I was watching that play out in September twenty nineteen, I said, well, if it, if it echoes what happened in two thousand and seven, six months from now, we're going to have a real financial crisis in the United States, because that's what happened in two thousand and seven. We had a rebook crisis. By March of two thousand and eight, bear Stearns vaporized, failed as the commodity markets moved moved against their bets, and bear Stearns was gone.

Six months after that, we had Lehman Brothers. So now in September twenty nineteen, the FED comes in stabilized as the market, we had a we had a sofa crisis, and then March of twenty. Twenty, twenty twenty crash and the. Treasury market goes bidless and the FED is forced back to the zero bound.

And now I blamed on COVID, but you're saying that there were deeper financial plumbing implications. Are you predicting that six months from now we're going to have a repeat or because it was more stable this time, this was not actually a s I am a battle. What I'm saying now is we have have If this is if history repeats and rhymes, then is this the inciting incident? And are we going to have a bigger one three to six months from now? Remember in this In this one though, in two thousand and seven we lost Bear Serns and the Lehman Brothers had the worst financial crisis since the Great Depression. In March of twenty twenty, they had to like bump Covid on us.

They had to have the price of oil. Over a weekend from Friday's close to Mondays Open, where oil went from eighty dollars a barrel and then opened to forty and blew the markets open, right okay, and took down the world. This time, the Fed didn't even have to come in and do anything right. But to the earlier point, yes, okay, equity markets have had a correction, they were overdone.

Sure, the rest of the market hasn't actually had that big of a correction. There are pockets of it, of course. But the perception if you read the headline is that the world's falling apart, correct, But that's not the reality when you look at the market internals. I So that's what I would That's that's the way I would put it.

And then if you're if you're Europe, if you're let's just let's just call space space, if you're the Rothschilds, and you still want to control the world from behind the scenes. Not that I'm a big fan of the whole roth Child. Yeah, yeah, I'm not a big fan of that, but I think they're part I think they're players. And that's a.

Proxy for that. That that tinfoil hat theory is a proxy for. Europe, of course. It's a proxy for the old colonial banks of Europe that have been, you know, moving markets for five hundred years since.

And have control of US interest rates literally until March exactly. Now here's the big question, you know, if you're them right, and you're staring at Trump remaking the entire global financial system based on going back to lower leverage, tariffs, lower income taxes and everything else, and literally starting the process of breaking the world up into currency blocks and potentially even Oh my god, having an actual, you know, hard asset back currency system of one one form or another, not today, not tomorrow, but let's say five or ten. Yeah, heading in that direction. If this is that infunction point, would you not set off every financial nuclear weapon to try and stop that? If you're Europe, yeah, if you're your motive means an opportunity.

All I'm doing is acting like Colombo here. I even have the cigar like even have the chief Cigars, and. They've got the financial press right, because the financial press in particular is very anti Trump. But what is interesting about the existing market backdrop is just how steady a hand Scott Bessett has proven under pressure.

And there are two things that I wanted to ask you about and shift the discussion a little bit, because you haven't talked yet about the change that we now know is coming in the supplemental leverage ratio and the impact that that's going to have on the US Treasury market. And then I also wanted to talk about the fact that the stable coin bill is creating a dichotomy between offshore US dollar stable coins and on shore US dollar stable coins. And I believe this is the first time that the US will officially sanction a difference between the offshore dollar and the onshore dollar. Let's start with the supplemental lever.

Okay, so this is really fascinating because this is actually I would rather hear. I would actually really rather hear what you have to say about this, because I've only just started to dive into this. Those two things. The stable coin bill is incredibly important.

I just read a standard charged report on it this morning. As a matter of fact, I had a friend of mine send it to me, and the supplemental leverage ratio, which I don't quite under stand, was actually noted by my patron that I discussed all the sofa basis, the sofa or swap trade this morning. So I'm happy, I'm smart. I'm happy to throw it back to you on this ok have you talk about it, and then we'll go from there.

One other thing I want to add to this discussion when we get there, which is isn't the US moving towards clear central clearing of all US treasury trades. It is it is which is taking some of the dealer balance sheet constraints out of the treasury market as an attempt to increase the liquidity and functioning, daily functioning of the treasury market and take the fed's balance sheet out of having such a significant role in it. But here's the ahha. Just in the past two days, even since I listened to your podcasts, it has been confirmed.

Even I think yesterday Powell confirmed it during the speech team made that they are going to be relieving the supplement. Leaboratory show that you know, I started a bank. You know I come from investment banking and capital markets background and also Austrian background, Austrian School of economics background. Okay, to me, it has never made sense that the banks had to hold capital against what is deemed to be in this current financial system, the risk free asset.

You and I both agree it's not a risk free asset. The US of course has default risk, but we call it a risk free asset in air quotes and those. Actually, the risk free asset is really the different side of the same coin, which is a deposit. A bank deposit, a bank reserve held at the Federal Reserve is risk free because it's dollars held at the core of the financial system, where the FED can just print more in order to make sure it never defaults.

And the US Treasury. Martin Armstrong was the one who who got me to see this, maybe fifteen years ago, that the US Treasury is just a dollar that pays interest. It's the same thing, and except it's an interest bearing dollar, that's all. So it's really again different, different side of the same coin.

It doesn't have credit risk. So the notion that the banks had to hold capital against this at all always to me was an enathma. If the FED and the capital set setters of the banks wanted to reduce the leverage on the bank's balance sheet for the things like infinite rehabpapication we just talked about a few minutes ago that they can do in London if they really wanted to fix that, putting a capital requirement on a risk free asset made no sense to me ever at all, And so it was that supplement a leverage ratio. During the repo market hiccup and the March twenty twenty correction the crash were the FED stepped in with its balance sheet, but also they temporarily removed the supplemental leverage ray show, which was a capital requirement that banks had to have.

And then there's the e enhanced supplemental leverage ratio for the largest banks in the world. Okay, so here's what's going to happen. Powell and Governor Bowman and multiple FED governors have said in very recent days this is going to change. So now you get these giant bank balance sheets in the United States that have so far had to hold capital against treasuries.

And what do people have in market runs of treasuries? Right? We saw huge rallies and treasuries. Banks owned a lot of those because they pretty much have had to own a lot of those, and especially the regional banks went and loaded up on them during COVID, when the FED flooded the field with all this new money and told everyone that inflation was transitory. What did all these community and regional banks do. They went and bought long term treasuries so they didn't have to hold capital against them.

They weren't subject to the supplementary leverage ratio as a constraint on their balance sheets. So their attitude was, hey, let's just clip the coupons, take a little interest rate risk, but the FED will always backstop us on that. And then lo and behold, the Fed raised rates and they got whips'd, and now it's something like three hundred billion of unrealized losses in the small and medium sized banks in their treasury portfolios, but the FED has not really cracked down on those. We obviously saw some of the banks that got them, that had rolled that dice and played the immaturity transformation mismatch game fail in the spring of twenty twenty three.

But the bigger aha is that the banks are loaded to the gills with these treasuries and they don't have capital, especially the large banks. The dealers don't have balance sheet capacity to increase their intermediation in the treasury market. And there's an obvious way to bring a new buyer into the treasury market, and it is to relieve a supplemental labora trade show. And I believe that a lot of the fixed income market rally has been front running that trade.

And you will see more front running that trade as you start to now that I'm putting you on this, as you start to hear fed Governor's talking about it, you will see even more front running that trade. But Tom, this is a big deal because your dollar market and foreign buyers that are reported through the TICK report that you've referred to, where you're tracking the offshore buyers of treasuries, and you realize China's not as big as as everyone thinks, but the banks are and they they're about to have a lot of treasury buying capacity unleashed. This is one of the tools that gott Besent has to support the US treasury market, and it's an important one. Now, how he sequences this, it is huge.

How he thinks sequences this and how you know at what's the time period? Is did all it once? He can't do it all at once because then there's just be this rush to treasuries, right, So I think the details are really going to matter on that. But my point is, of course the US treasury market isn't going to come on glued because you have this huge guaranteed buyer that is right now constrained, that's about to have its capital requirement relieved. And the FED has control over the timing of that. That's fascinating and that's awesome, and I'm so glad you went through it because I had no idea about any of that.

So it's another I really appreciate them. So now else shot too soon? But you know what a shock two days started two days after synthetic Liboor ended and Trump, I think Trump decided that a liberation day would be April second for a reason. It's interesting I had not made that connection. Because remember now that because remember now.

That because is over. Now they have to go and they got to go get collateral. Yeah, yeah, they got to go. They got to use bank reserves to pledge.

They got to use treasuries as bank reserves to go pledges collateral to get access to the US repol market. And they got to pay our rates for it. And they got to come to the FED or they got to come to US banks. We're going to charge them sofa for it.

So and they got to post the actual collateral and. They have to post the actual collateral. Yes, yeah, So now it's which is a. T bill or a treasury bonds? Sure, something along those lines.

And that's and these are and these are assets that they were using as reserves to offset their savings. Now now you know why the European Union is talking about how do we mobilize the savings or more appropriately, how do we confiscate the savings so we can prey our banks from having to keep all this keep all these these assets is reserves this is I think part of the other part of the story. And again a. Little bit about offshore dollars.

Sorry, go ahead, but. Then no, no, no, no, because I want to bring something else in here, which is Basle three. Yes, Jamie Diamond has complained bitterly about BOSLE three. I have heard from a number of different people that BOSL three in the United States is dead.

And the reason why BOSLE three is evil from an American bank perspective is that it's asking American banks to hold something like thirty percent more capital than European banks, as as as excess reserves in order to make sure that we don't have a systemic problem. And Diamonds like, absolutely, no, you're disadvantaging us. And does that tie I don't Maybe. I don't know.

Is that tie right into the the SLR the. Well, because it was, it would have been in addition to the SLR. Yeah, exactly. It was a big increase in capital.

Again, my point though, is it was it was fighting the last war. It was fighting the wrong war. If you want to reduce leverage in the GESIPS, which I think is a valid goal, I've always the financial system is too leveraged. It's fundamentally unstable, and especially now with technology increasing the speed of capital turnover.

Right, we're reducing settlement cycles. You don't have as much fault tolerance from an operational systems point of view because your settlement cycles are speeding up and your return on capital as a result of speeding up your settlement cycles should increase, but your risk of problems also goes up because you just don't have that fault tolerance of hey, I can solve this tomorrow in the system, okay, And so everybody's going to have to deleverage anyway, But how do you do it? Do you do these crazy things like putting the e supplemental leverage ratio requirement capital requirement on a risk free asset, or do you actually get to the real sources of risk in the system, which is all the leverage and credit risk and interest rate risk. I would much prefer to see it done with the latter. It was a blunt and trument.

It was designed, ironically to try to reduce the size of the big banks. But what happened during the big during the Biden administration to the big banks they got bigger or yeah, so it actually so, as with so many government policies. The the intention is good, but the actual outcome is the opposite of what was intended. And uh and and you know, they handed First Republic to Jamie Diamond by giving him an exception to the ten percent limit on deposits.

I P. Margan Chase has now more than ten percent of the US deposit market, and they gave him an exemption to be able to buy First Republic. They are there's there are, there are. There's a lot of smoke around those four bank failures from the spring of twenty twenty three that there were.

There were shenanigans in every one of them. And one of the one of the eyebrow raising things was how First Republic was was handled and why Jamie Diamond was able to get the exception to the ten percent deposit limits. I digress, but look at the look at the outcome. The big banks got bigger and and and the medium sized banks got squeezed.

And that was not what the intention of the bank regulators was. I digressed, but what they were. Trying actually, I want to I want to stop you there for a second, because I live in a world that's far more cynical than that. I'm sorry.

I just like I just look at that. I say to myself that that that sound. That looks like a bug. But it may have been a feature.

Well, are you saying Elizabeth Warren and the Warrenites are actually big bank defenders? No, I'm not. Yeah, yeah, I'm not. Especially had total control of the Bible financial regulators right of It's now not even a secret. It was an open secret for a while, but it's not even a secret anymore that it's even the financial historians are coming out and acknowledging she was the de facto president of the United States on these matters.

Yeah, we had to total control over financial and economic policy. Biden seeded that to her. It was a deal the two of them made when she dropped out of the twenty twenty presidential race and endoorse Fiden. So okay, So, but the funny thing is they say they don't want the big banks to get bigger, And your point is that was that may have been actually what they wanted.

Or or that. I don't even believe in any way, matter, shape or form, that was with Warren works for the United States. I don't think she even works for the big banks on Wall Street. I think she works for so I think she I think she works for Europe.

I think she worked at the City of London. I think she works for Brussels and Davos and all the rest of those people. Everything about her, her, everything about what she does that screams that and that any way that you can create a so I look at like First Republic, for example, I know we're digressing away from where we wanted to go, But I mean there comes a point. I'm not saying that I believe this.

I'm just like, we're going to throw it out there, which is that maybe we had to deal with those four banks in the way that they did, and they had to break some rules in order to break some of the other funding cycles that were happening that were we don't even know about. I I I you know, you and I talked during that. We did a podcast during the blow up of Silicon Valley and the Signature Bank and all that. We talked about all of this, and I thought that those were public executions by the Federal Reserve in order to break the San Francisco Fed's a challenge to the New Yorks Dominance.

And I think and I still I still stand by that, But I'm happy to be wrong about it, and if. We go back and look at it. But because I don't trust Mary Daily at all, I don't I don't trust any Allen. I don't trust any of these freaking people because clearly, clearly there's something going on there.

And then there's probably a China angle that nobody even the freaking knows about. But let me throw your curb. I don't know if you saw Nick Carter's Pirate Wires article. I'm told by DC insiders there wasn't anything new in it, but there was a lot new to me.

And Nick was able to get people to talk and he said, listen, yes, there was a lot of desire to kill crypto, which is why they wanted to kill the crypto banks. But what was really going on was Silicon Valley Bank had the bank run. It was triggered by the FED forcing silver Gate to quote unquote voluntarily liquidate, and the next day everybody was like, oh my god, look at the balance sheets of these banks. They had huge unrealized losses in these treasury portfolios that we just talked about that they were because of all the money that was flooded into the banking system during COVID.

It had to go somewhere, and there were the short term treasuries paid zero yield and so the bonds. So the banks went and bought long bonds. They invested in tenure bonds because they had no capital charge. Again, they weren't subject to the supplemental leverage ratio.

That was not their constraint and as a result, they didn't have to hold capital against it, and they could clip the coupons and take the yield the problem. And they were looking at the Fed wink wink, nod, nodding, saying this is where the money should go. And then they got rugg pulled by the Fed raising rates, and all of a sudden they had huge unrealized losses. And that's not a problem if the bank stays liquid, but if there's a bank run.

Oops, And that's what happened, okay, and that happened at Silicon Valley. But here's what Nick's report said. That was enlightening and I think plausible that Silicon Valley was failing. You had all these Silicon Valley startups that had all of their corporate cash on deposit at Silicon Valley Bank and they were going to go under Nancy Pelosi made a phone call on that Friday of that of Silicon Valley Bank runs bank run, and she made a phone call to the White House begging the White House to guarantee all uninsured deposits.

In other words, there was not going to be a cap of two hundred fifty thousand dollars that most of us operate under, where the FDIC insures up to two hundred and fifty thousand. She wanted every uninsured deposit to be capped. The problem was, this was a San Francisco power play over New York. And what happened in order to justify invoking the systemic risk exception, the FED needed a New York body to counter the San Francisco body, and they took down Signature Bank on that Sunday.

For those who are in the banking world, that is extraordinarily rare, because banks go down on Fridays and the FDIC comes in and sells them, and then they open first thing on Monday morning with a new owner and all the deposits guarantee, the two hundred fifty thousand dollars deposits guaranteed, and then everybody else is to take a haircut. Well, that's not what they did with Silicon Valley Bank. But in order to justify paying off one hundred per cents on the dollar to uninsured depositors, they needed a scalp in New York and that was what enabled them to invoke the systemic risk exception. And Barney Frank was screaming at the time, and screaming even louder now that that bank was solvent, that bank was liquid, that bank was shot.

Signature Bank was shot on purpose by the Fed, he alleges, and he even talks about how he called J. Powell. Barney Frank, as a director of Signature Bank, called J Powell. Jay Powell said, you got to talk to Michael Barr, the Vice Sheriff for supervision.

Barney Frank said, I talked to Barr, said I'm on it. I'll call you back. And then bar never called Barney Frank back that night, and that was Friday night. Signature had collateral parked at the Federal Homeland Bank.

They just needed, he said. Barney Frank said, they just needed a trip already agreement to be able to move their collateral from the Federal Homeown Bank to the FED discount Window, and the Fed wouldn't call him back, and so they just started moving collateral and the FED kept rejecting it. Wow, these banks were shot on purpose, is the allegation. And there's an awful lot of smoke.

I said there was. There've been allegations for a while that the whole thing started with the desire to take Crypto down. And it came out in lawsuit filings that the FED pressured Silvergate after it had survived a bank run. Everyone thought Silvergate went down because of a bank run.

No, it survived the bank run, and then the FED came in and pressured it and they voluntarily, in air quotes, shut down. And the next day, with all that jitteriness, the Silicon Valley Bank run began, and in order to justify invoking the systemic risk exception to bail out not just Nancy Pelosi, but her husband's business because he had mezzanine lending business, Nick goes through all of this right and and it would have it would have gone bust, he alleges had Silicon Valley Bank not been bailed out, And he points out that Silicon Valley Bank and Silicon Valley itself is Rocanna's congressional district not Nancy Pelosi's, but she was the one allegedly who made the call to the White House. So yes, there is an awful And by the way, now let's move forward to where we are today. Last week Governor Bowman, who is Trump's nominee to replace Michael Barr, who was obviously playing ball with the Warren crowd.

Again. Remember, you know, in order to get a job, a political appointment job in the Biden administration, Warren controlled it, all right, So who was she who were all these folks reporting to? It? Was her? Warren? So now Trump has nominated Bowman. Bowman dissented from the FED self assessment of its performance during the spring twenty twenty three bank run crisis. They within ninety days put out a self assessment and it was voted on by the Board of Governors.

Bowman put out she took the gloves off. Steve Kelly from Yale tweeted about this at the time that Bowman really took the gloves off because she said this was a self serving self assessment by the people who made the very mistakes that they were supposed to self assess, and that the other FED governors did not have access to the information and we're not able to comment on the report and were asked to vote it through, and she dissented because of that. Sure, now that speaks volumes about what really happened inside the FED, how siloed information was. Keep in mind, you know, my company was dealing with some of these very same people who were trying to kill us literally during that time.

Right. So, anyways, she announced that she will be reopening that she said will be examining whether the skill set matches the needs of the current market, and that she will be re examining the whole supervision and regulation apparatus at the FED. Now breadcrumbs, Scott Besson at Treasury has been saying, we need to restructure supervision and regulation rights. Right, banks are bristling under this supplemental leverage ratio, the big banks especially, but not just the jesips of the regionals too, bristling under that balance sheet constraint.

You can see where the deal's coming here. It's obvious where it's coming, and the banks are going to get capital relief. That's going to be good for the Treasury markets. That's gonna help Scott vessn't in what he very clearly wants to do.

And he keeps talking about is getting the tenure down because that puts money in people's tenure treasure yield. That puts money in people's pockets, in main Street's pockets, not Wall Street. So yes, big, big, you should read Nick Carter's Pirate Wire article, and I just gave you the bulk of it. But it was all about justifying invoking the systemic risk exception to be able to bail out the Silicon Valley depositors.

Excellent. Do me a favor and send me a link to the articles. I'll put in the show notes to the podcast. Yeah, I will do, so, I'll read it everybody else.

Yeah, just throw it in the in the chat and we'll take care of it. Let's go to stable Coin Bill next. Yeah. No, so the stable coin Bill is that's fascinating as well.

So now again, I mean this is so episode two thirteen, Caitlin Long takes over the podcast. That's what I which I adore. I think it's been I'm so happy. Are you kidding me? Like? This has been phenomenal.

I'm so very of each other and teaching each other. It's all good. It's all good. I do not I say that with the most amount of respect.

It's been great. So with that, with that said, yeah, let's talk about the stable coin because I've been I've been saying for a long time now, like I just just read the article or the research note from Standard Charter, and they're talking about a probable ten x expansion of the stable coin market now at least. Yeah, Now, let's talk about what I've been saying about tether for a long time. And and I don't think it's a hard argument to make, which is that and certainly USD coins works the same way, which is that they have to hold you know, there they affect the kind of like hot money sink or the heat sink for short term treasuries, like they are short term drudgery demand, especially against bitcoins, so trading against bitcoin.

So if they're talking now about a massive expansion thereof of the stable coin market, because that's then we again you're starting to see even more if I'm if, I'm if I'm picking up what you're laying down an even bigger argument for why we have now fully decoupled effectively the way the financial the way the financial system in the United States operates relative to the way dollars are priced around the world versus who's actually in control of that, So. Why don't you take it from there? And then we'll go and we'll go with that. Well, and what I introduced is that the stablecoint bill is going to create for the first time, a endorsed differential between an offshore dollar and an on shore dollar. The FED particularly because of the control of the European banks on the euro dollar market.

What is a euro dollar? Let's go back. It goes back to the nineteen fifties when Russia didn't want to hold during the Cold War it's dollars in a US bank because it was afraid they'd be confiscated. So it got the European banks to agree to take US dollar deposits. So there was this huge offshore market which is actually as big, if not bigger, than the onshore US dollar market.

It is big, and to your point, it hasn't been in control of the FED. Well, the FED it's now rested control over interest rates. The most important interest rate was until recently libar. It's now so for and it used to be unsecured priced in London, it's now secured price in New York.

Okay, now here comes Tether. Tether is a company that, for all the allegations around it related to money, luinering, et cetera, et cetera, the Biden administration did not shut it down. Let's stipulate that is a fact it could have in theory, especially when it found when it was disclosed that it wasn't just a broker dealer in the United States that was holding its US dollar reserves. It's a primary dealer.

It's Canter Fitzgerald. Okay, one of the twenty four primary dealers of the US treasury market is holding Tether's treasuries. So obviously there's a US nexus. The Biden administration could have shut it down if it wanted to, and it did not.

Okay, And frankly, I think it's not difficult to make the logical leap as to why it didn't because the CEO has now been talking about openly how much they're working with US law enforcement, and three letter agencies are all on board it. So the long story short is there's a foreign policy reason why Tether exists offshore. Now what's fascinating to me is that the is that Congress is about to ensconce this by saying okay, we are, you can have you can be an offshore issuer and you don't have to do all the same know your customer and anti money laundering rules that particularly that a bank has to do. Bank has to do what's something called c IP upfront.

You have to before you onboard a customer to a bank, you have to do all the Know your Customer and Enhanced Customer Information program upfront. FinTechs don't have to do that, and lord knows an offshore company does not. Okay, so let's also stipulate that banks have the highest level of compliance on that fintech's less. So although especially there they're subject to the same rules, but we know in practice they're not.

And then offshore again they say they're subject to all the same rules, but again we don't in practice they're not. Okay, so there's three layers. What what is Congress doing. They're saying, yeah, those offshore guys, we don't want to shut them down.

We're going to keep it just as is. So what is Congress doing? They're creating an incentive for stable coin issuers to leave the United States and to go offshore. Right now, is this something I don't know what Besson thinks about this, and obviously there's that there's the best in Lutnik friction, shall we say, that's been reported multiple times within the administration, best in controls Finsen, which would be the regulatory arm in the I R s, which would be the regulatory arm of a crackdown if it were to come on those offshore stable coin issuers. And then and and Lutinink obviously had the connection no longer officially connected to his firm Howard to Canter Fitzgerald.

So you see that that that access right there. I don't know how this is going to play out, but right now, the way the stable coin bill is drafted, and it's pretty close done, is that there is a the offshore stable cooint issuers do not have the same requirements as on shore. Now, let's stop and think about what that means for the US dollar because we've created a two tier system, and a two tier system on all these financial crimes compliance requirements, or I would argue there's a three tier system banks, FinTechs offshore, lowest requirements offshore. Is that going to stay in place? The whole idea is tether when Powell or do we know talks on podcasts about how that has created incredible resilience for the US dollar because Tether is pushing the US dollar out into emerging markets down to the communities that nobody has banked before because nobody could figure out how to bank them, and those communities bank them profitably, and those communities Tether did.

Hats off to them for doing that. They those communities have access to the US dollar for the first time, and in most of those emergency markets, they would much rather have a US dollar than their own local currency. And Tether has built this distribution channel and there is nobody competing with them, and they're pushing the US dollar out into the distribution channel, and they're recycling those tiny amounts of money from working class in emerging markets. And I think they have four hundred million users.

It's a stunning number of users. They're the biggest financial company in the world right now and just keep getting bigger. And they are recycling all of those flows back into the US treasury market. What is that doing because those are not going to be panic sellers.

What is that doing? That is increasing the resilience of the US treasury market. So this is he's right when he says that this is actually there's a strategic value to the United States for this. But now let's step back. We've got these on chart issuers who are trying to be regulated and break their way into the banking in stree and Custodia is one of those.

And then we've got these offshore issuers, and there is a difference in regulation between the two. But let's talk about it. For Visa VID the US dollar. The way that the said kept a different it kept par.

Saltan polls in our talks about this all the time that par is the most important price of money. That is ultimately the value of having a clearing account at a central bank is that you get a PAR guarantee on the currency. Par is what the central banks enforce. Why did the FED put swap lines with other foreign central banks to be able to enforce par in the euro dollar market.

Now we've just created a new euro dollar market called stable coins, and there's not going to be an enforcement of par because the state because there isn't going to be a swapline infrastructure up to enforce par. What is the significance of that. I have stile just I'm just I've been absorbing everything you've been saying. I will be I will, I will.

I'm going to plead the fifth on this one, Caitlin, I am because I'm not sure what this, what this, what this implies. I cannot I'm not gonna I'm not gonna be able to. I'm not going to try and fake it to make it here. I don't know.

I'm not sure that anybody knows. And I will That's what that's okay. I'm okay because I don't know the answer. That's why I kicked it over to you.

But what I will say is there are entire green fields for stable coins. A lot of people think crypto doesn't have any use I'll tell you the biggest reason. And by the way, Taylor created the killer use case, which is for the US dollar, and a lot of people look at it and say, why do you need a blockchain for that? That's an inefficient database. Yes, of course it's an inefficient database.

But what were they able to do create incredible network effects by having four ndred million users globally that's bigger than the United States. Yes it is, right, okay, in population, right, Okay, So now, incredible network effects, that's what we're tapping into what are the green fields. The biggest one is putting that into the regulated banking industry. Everybody right now is forced into fed wire ACH and a little bit of fed now, but that was such a controlled, closed system that it hasn't really taken off fed wire in ach.

Hell, stable coins are faster, cheaper, more auditable, more programmable, safer from an IT security perspective, I would argue for a whole host of reasons, this is a game changer to push that into the green field of the traditional banking system, which is what Custodia just did. But it's more than just that. Paulo or do we know, also talks about machine to machine payments. We are going to have our optimist robots pay our test lis going and filling up our teslas right right without human intervention.

Somebody's got to figure out how to pay. That is not going to be fed wire in Ah. That is going to be these these these digitally native forms of the US dollar, and that is also a green field. Tom These are huge market opportunities.

It's going to change. No, No, you're you're absolutely right. I'm beginning to catch up to you. You have fired at me like an unbelievable amount of stuff, and I'm and.

I'm eternally grateful for it. Don't go get me wrong, but I'm beginning to find I'm because in all of that, I'm trying to absorb all of this. Now. Now, let's now, let's go back and let's ask what I have to like, go back to first principles for me, ready, which is what current currency settles thirty percent of the.

World for x, it's more than the best dollar. It's the British pound. Uh huh okay, right, and nobody wants pound. Stable coins can go by the way they break in England.

Made a stupid decision too, to say that stable coin issuers pound stable coin issuers had to charge fees and couldn't earn interest. What does that guarantee? It violates that that. Christ Park rightly the dumbest thing imaginable. So you know, so I from the beginning, like all of this stuff.

I've been saying, I didn't really believe that Donald Trump when he was coming into office, had any real understanding And I still don't think Trump understands a lot of any ninety percent of it. We just he's got people around him he has people around espectually Scott, Yes. Right, exactly that, but he understands the real at the thirty thousand foot level, who the real enemy is, and he's poked that snake over and over and over and over over again. Europe and City of London and the City of London's Achilles heel.

Is that they want to protect that. Egregious advantage of having the ability to settle and and call and collect fees for the world's four x because those are the biggest those are truly the biggest markets in the world. We talk about the treasury market being big, we talk about the U sequity market being Oh no, no, it's all four X baby on a day, on a daily basis, it's an insanely large thing. So watching Bessent and Company and Trump come out and bless things like Ripple and and what he's saying is, we're going to have control over these stable coins.

They're gonna be in the US, and we're gonna give we're gonna give preferential treatment to the to the ones that we deemed made in the USA for lack of a better term, and we're going to use that as a means by which to we can. We can we can now program them to. Say yes, as you just said, we can now take that business away from London, who's also, by the way, shot themselves in the foot, from their other major business, which is ensuring the shipping around the world make most of their briging money. What do you think like they've already destroyed that.

The and the Iranians, I mean, the Russians are going to have their own you. Know, they shot themselves in the foot on this stable coin piece. Too, agreed because and Tether left Europe. Why bother? It's ninety nine dollars.

Anyway, exactly so you and moreover, on top of all of this, if you read, if you go back to what you touched on earlier, which we didn't really get a chance to talk about, and because you fire hosed a whole bunch of really good, really good. Stuff at us. Bessant and Powell have lunch every Monday, right, they're having lunch. The best came about the other day is that.

Do you talk to to the pet chairman. He's like, yeah, we have lunch every Monday. This week it was an away game. I went to visit him.

I went to visit him and he you know, I didn't hear that. And every other week they trade back and forth. They so they're clearly talking and co good. That's good.

I did not know that. That's great because Powell had said he hadn't talked to Trump. Right, he doesn't talk to Trump, but he talks to best all that that's necessary. So there's a fundamental difference between Powell and Yellen where they didn't talk at all.

Well, they were at they were at each other's throat exactly right. Yellen was trying to do qui through the Treasury General account and on behalf making Powell's job a lot. Harder harder and left him and left all of them with eight point nine trillion dollars which need to be rolled over. And yeah, yeah, we don't even want to get into that so clearly, well, but.

We just laid out some places though, Tom, we're not going to be difficult for to create some of that bind man. I agreed, and the right time, I agreed. But the thing that's important here is that what I've been positing for a while is it in order to finish there, they have a plan to recapitalize the United States, and I think they want to create a domestic dollar that is backed differently than the offshore dollar. And I think that that's what the stable point bills is.

That's where I'm going with this. And at the same time, or the business, the for X business off from from City of London control it. If City of London wants to move stuff around, you know in British pounds, you go right ahead. But you know, or what they know, what the Bank of England is doing is they're being subsumed into the DCD.

Clearly, that's what's. Happening here, is that there's a move now to consolidate power in Brussels and finish liquidating what's left of England. And you know, in a forty thousand one of the things we didn't discuss in the forty thousand foot overview of where I think the world is because you as we opened the podcast, which is that I firmly do believe that Trump is making geopolitical moves to say, okay, it's time to fully decouple us and to save not just the United States, but all the members of the Commonwealth that includes Canada, that includes the little Britain what's been left behind. And by extension, if you break the European Union in the process, then you also free against maybe even against their will, you free most of Europe.

We're doing this podcast on April seventeenth. Who is in Washington right now discussion biateral trade deal? Right, and you made this point last week. Yeah, that Trump is trying to break the EU stranglehold over tariff policy and trade by cutting bilateral deals with each of the European countries and literally and the longest plan ball. Yeah, and I'm literally saying I'm not negotiating with the European Union because I don't consider them a government.

I love this guy. I mean, we don't you know, Trump is many things. We don't deserve him when it comes to that, because that's like the most important thing imaginable. It's so very important.

It really let's go back to the foreign exchange market, because I think it's a good way maybe to wrap it up. Is historically, to your point, London was the financial center. Yes, of course New York was as well, but if you look at the most liquid foreign exchange acrosses until recent years, they were dollar yen and sterling, not dollar yen. In Europe.

Euro has obviously been making a big inroads into the sterling cross liquidity, right, And what I mean by cross is, let's say this is a real world example. One of my clients that we're in the Stanley, that Seagate Technology, which has a big manufacturing unit in Thailand. Time they needed to move their corporate funds from their Thai subsidiary to the mothership in Silicon Valley that would typically go through the Japanese yen on its way to the US. Why, because there's no liquidity between the US and the Thaie dollar and the Thai bot That liquidity is all in the region between the dominant currency in the region, which was the Japanese yen okay.

And by the way, it took them six days to move their own money around the world. Right, So actually this is in this is on my website from ten years ago. Why did Steagate make an investment in Ripple because they were trying to solve this very real problem, how do I move my own money around the world much faster? Right? And there's all this float just trapped in what the treasurer called comfort deposits. The comfort deposits are the money that you can't move because it's just waiting to be settled and when it takes six days to move their own money from one subsidiary to another around the world.

Now, granted, Timeland is an unusual example because it has capital controls, but it's not that far off from the real world problem the corporate treasurers face. Okay, so this is why stable coins are going to be a killer app. The biggest challenge is they haven't had legal, regulatory, accounting and tax clarity. That is all about to be solved.

Frankly, Custodia with what we've done with Vantage Bank, stay tuned. We'll be doing more. We announced the first tokenized US dollar bank deposit is shooed on a permissionless blockchain two weeks ago. Nice and that the incoming from that was huge, and we'll be doing more.

So the banking industry itself is the market opportunity here and it's great and a lot of the banks, believe it or not, are really interested in this because they see the problem and their clients see the problem, and they see this as a solution to solving that very problem that Seagate was talking about. So now back to the three dominant currencies in the world, dollar, yen, sterling, we see what's going on in Europe. It's retrenching the East. The euro has been taking some of Sterling's market share.

But the honest truth is they're going to continue to retrench. And the fact that nobody wants euro stable coins and and there's literally virtually no demand, and it was a free market. People were issuing them and asking for forgiveness later and the market didn't want them. And so much so the teather actually got out of Europe and isn't even bothering to get regulated under the MECA requirements right now.

Well, what's really interesting. Let me stop you there, just just to put a final point on what you're talking about. Europe shot themselves in the foot two ways. First, Martin Armstrong pointed out the eight years worth the negative interest rates.

But I'll take it one step further, looking at the at the Swift RMB tracker that comes out on a monthly basis where they track the percentage trade and settlement of you know, how trade is settled and whatnot in various currencies from the from the moment Europe put the sanctions on Russia and said we're not buying Russian oil and gas anymore. Through the percentage the euro was climbing, the petro heuro was happening with the Russian European energy trade. They were settling up until like thirty percent of non Eurozone trade around the world because they were buying so much in Russian oil, and that collapsed in the first year of the war twenty twenty two from thirty five percent to thirteen percent, and the US dollar took the entire freaking market share, and they so they shot themselves completely in the foot doing that, and all of a sudden, and I'm like, guys, were you were building the petri euro, you were building the they were building the thing that you could then force the Euro onto people, and you didn't said no, they didn't see it. They didn't understand it, and they didn't understand it with stable quins either.

It was a not invented here thing, and they did. Although ironically, the guys that run tether are Italians living, you know, Italian citizens, like people who were educated, grew up in Italy. This is no secret, right, so it was in their own backyard. I didn't even I didn't.

Know that it was that Italian. I'm like, oh yeah, yeah, yeah, yeah, yeah, oh. Yeah, oh yeah, absolutely yeah. In fact, actually yeah, Paula or do we know it was the currency? You know, he was the CTO came to the United States, visited the United States for the first time a couple weeks ago, and everybody was thinking, oh, he couldn't come on shore in the United States because you know, law enforcement would grab him and low and behold.

He's now made two trips to the United States and that has not happened. So again I come back to that is a company the US powers that be have decided is going to succeed, stay alive, continue to push the US dollar out into the hands of the billions of people in the world that are unbanked, and literally the traditional financial system can't figure out because the compliance costs are too high how to bank them. And tether is they're building kiosks in Africa where people don't have places to power their phones, where you can swap out batteries. It's brilliant what they're doing.

There's building this huge distribution network with no competitor, and the US has clearly decided, by simply not shutting it down, that this is going to be a channel to increase not just dollar demand, but the resilience of the US dollar system and moving away from London, which is why I wanted to bring in that supplement, a laboratory show discussion and the stable coin discussion, because these are all huge pieces of the puzzle. They really are. And I'm really glad that you clarified that for me, because this is something that literally came into my head like three hours ago, and now I'm like, I almost feel like I could actually talk about it like an intelligent human being. And that's so again, this makes perfect sense on this I'm really glad we did this because you can see why there's such panic now in Europe and why they're freaking out, and it tells me that their next move is going to be catastrophic.

They have to now literally go to war with the entire with what with what they have left of the of. Their their hooks into the American financial system and what banks they have on Wall Street that are in their corner. Remember we go back to my original piesis okay, so who's who's on the who's on the American side of the ledger, who's on the sovereign's side, and who's on the Davos side, Like so we'd have JP Morgan, We've got gold We've got Golden Sacks, We've got Morgan Stanley, and then we have both from Bank of New York, Mellon and a couple of others that we're not really sure about. And it's very We're gonna it's gonna be very interesting to watch over the course the next two years.

Who gets bought, who gets destroyed, who gets decapitated in this in this war? Very interesting. And but remember I don't know where city, I don't know where city prove it. Yeah, a good question for bank em and the FED has to approve it, right, and we know where the feed is. Exactly, So it's gonna be it is gonna be interesting from here.

And so what this is all coming down to is that the whole Trump I want to get ridy to roam Powell thing is complete. W W E k FA. Like he's just he's actually pushing Powell to not cut interest rates, to prove that the FED is independent. If you if you read what's happened in the last forty eight hours with Trump like screaming up Powell should.

Be I gotta get rid of this guy. He's awful. I'm like oh my god, can you be more obvious? Twenty four hours after you got. Bess says, no, I have five to one.

I have breakfast with Rome every Monday. You know, like we're working this out, like it's so funny. I'm like, and everybody's like, dude, Like, I'm like, no, there is clearly what he wants. Your thesis is really funny because it means because the FED is controlled by Democrats, it's four three democrats.

And your thesis is really funny because you're you're laying out that the Democrats are actually helping Trump. Or you know, has the definition of democrats? I mean, when at this level I think about this, everybody in New York. You know again, let's back up for a second. Jamie Diamond's a Democrat.

Yes, okay, but Jamie Diamond in the primary season back Nikki Haley now, and everybody went, oh my god, he's backing the Neoconnie's back in the Terrible. He's backing in the terrible. Waffle house waitress was out from Greendale. No, what he actually did was tell everybody on Wall Street it's okay to vote for a Republican in this Yeah, okay, okay.

And then he and then he came around and slowly but surely he started saying nice things about Trump, and then he kept saying, oh, yeah, we have to do this, and we got to open up. And then he goes to Davos and says, we're gonna drill, baby, drill. And then he goes to DABA and he does. Then he goes on CNBC and he says, I watched Diamond carefully, and it's clear that he's like been so at this level at this point in time, I don't think party matters.

I think everybody was nobody. Well, well, I'll let me lay out something. I mean that we said earlier, nobody will benefit more from a relaxation of a supplemental leverage ratio requirement than JP Morgan. Then JP Morgan.

So it's the biggest bank, it's the biggest bank. And I just think that there are are you know, with the with the ground shifting as quickly as it is, and with the game, with the game board shifting as quickly as it is. At the end of the day, I what used to be these alliances and these and these definitions, none of those things matter anymore. All of a sudden, like I'm looking at my copy of Done right over my shoulder, and I go yes, and and every and everybody's like, okay, it's time to make new alliances.

All right, let's learn what are we doing? Like you me, let's go in the background. Let's talk about this, like that's the game, Like and I and and on Wall Street, it's going to be about, you know, who makes the most money and how they're going to how they're going to protect their business. And you know, when it was in their fiduciary interests to go along, to get along with whatever the globalist wanted to do, That's what they did. And I and I just caution everybody when you say all the banksters are evil and this, I'm like, well, yeah, when evils ascendant, it's what they have to do, you know, when the world changes and we now have other opportunities to make money.

Like I've always said, like I don't think any of these guys care whether they build a pipeline across America or they build a pipeline across Russia. They don't care. They just want they just want to run the book on you know. That's that they don't care.

They're not they're not ideologically driven other than run their run their system, run they run their bank. So if you give a guy like Jamie Diamond, you give John Solomon and the rest of them the opportunity to run the book on recapitalizing America, and that's where the best is. They're going to go there. It's not hard, you know, and you don't have and you know you're not going to get.

You're not going to get an apology out of these guys like they're sharp, you know, shark for an apology, are you kidding? No, of course not. We shouldn't ask for one. So this has been fascinating. Yeah, we definitely went went along, but this was fun, and we do this every I don't know six months or so, so I think the world's going to be very very different than six months.

Let's put a pin in it. Whether they the precipitating event for a major market disruption is coming in six months. I'm I'm gonna put the pin down to say, they'll watch what happens with the supplemental leverage ratio. I think you're I think you're absolutely right, Kaitlyn Long.

It's been lovely to speak to you. As always. We'll do this again soon. You.

Sounds great, Tom Good to see you as always, As always make me think. Cheers, M.

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Financial Stability Report - Federal Reserve Board​