Bankless

Why Raising Rates Would Actually Calm Markets | Jim Bianco

1h 9min

Jim Bianco discusses the structural transformation of the Federal Reserve under new Chair Kevin Warsh, where the Fed now operates more like a Supreme Court with independent voters rather than a single leader. He explains that this shift, combined with sticky inflation and massive AI investment, could lead to higher interest rates that might actually calm the bond market. Bianco also criticizes the crypto industry for focusing on regulation and approval from Washington instead of building a decentralized alternative financial system.

Summarized by Podsumo

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✨ Key Takeaways

1

The Fed is now composed of 12 independent voters, as shown by a record number of dissents, including 3 members voting to raise rates at the July meeting.
2

Warsh is against forward guidance and the dot plot, aiming to reduce market dependence on Fed promises and encourage reactions to data.
3

Raising rates could lower long-term yields because it signals the Fed is serious about inflation, which would reassure bond investors.
4

Inflation has been above 2% for 64 months, and the Fed is more focused on inflation than employment, with several members ready to hike.
5

AI is the biggest technology since railroads, but it will eventually lead to a bubble and correction; we are likely in 1997-98, not 2000 yet.

💬 Notable Quotes

"If you are uncomfortable with the 30-year yield, don't scream for the Fed to keep cutting rates because they have been and it's been going up. Maybe if the Fed panicked a little bit about inflation, then the bond market would calm down."
"Never, ever, ever take your interest rate advice from somebody in the real estate business because everybody always thinks that interest rates should go to zero."
"If you want to get back to the old highs, build an alternative financial system. Don't be at Washington on bended knees for the Clarity Act."