In This Article:
The first day at Consensus 2021 was packed with news and insight, from Ray Dalio speaking freely on the coming debt crisis to a Federal Reserve chair indicating that the central bank “wants a seat at the table” in the development of cross-border solutions. Here are the five need-to-know takeaways from Monday’s events.
This article is excerpted from The Node, sending twice daily this week to cover the biggest news from our virtual Consensus conference. Subscribe to receive the full newsletter here. And register for Consensus here.
1. Competition is driving CBDC research
Federal Reserve Governor Lael Brainard didn’t exactly give a forward projection for the agency’s policy this morning, but she did say the Fed is more interested in central bank digital currencies (CBDCs) than previously known. Brainard said it’s important to follow the rise of private money and CBDC pilots in antagonistic nations like China closely. “The issuance of a CBDC in one jurisdiction … does potentially have significant effects across the globe,” she said. To that end, the Boston Federal Reserve and MIT Digital Currency Initiative plan to publish a U.S. digital dollar white paper this summer.
2. Inflation will wane over time: Federal Reserve
Asked about inflation, Brainard cited April’s Consumer Price Index (CPI) report, showing a 4.2% increase in prices year-over-year. This is a worrying figure in-and-out of the cryptocurrency industry because it shows a real impact on everyday shoppers. Brainard poured cool water on the heated talking point when saying a rise in inflation was to be expected as the U.S. economy continues to reopen. This is a continuation of what Fed Chair Jerome Powell has been saying for months, including that the central bank will let the economy run hot. Brainard added these inflationary forces will “subside over time.”
3. Dalio prefers BTC to bonds
Ray Dalio, the founder of the world’s largest hedge fund, predicts that the U.S. dollar is on the verge of devaluation and could lose its position as the global reserve currency. Fearing rising inflation and the preponderance of debt in the economy, Dalio expects the Federal Reserve to resort to the new usual: more money printing to pay down debts. Under this inflationary scenario, the Bridgewater founder said he’d “rather have bitcoin than a bond,” if looking for an attractive hedge. What’s more, Dalio admitted for the first time he’s already a holder. In a bit of a Catch-22, Dalio also said “bitcoin’s greatest risk is its success.” Though it may be bitcoin’s time to shine (over gold) during a coming inflation rout, if it cuts into the government’s ability to raise funds through bonds, a swift ban might be expected.