Doc's Daily Commentary

Mind Of Mav

The Fed’s Foray Into Crypto

Today, the US Fed’s long-awaited report on central bank digital currencies dropped.

Framed as a discussion paper, the Fed notes in its introduction release that it “examines the pros and cons of a potential U.S. central bank digital currency, or CBDC.”

Let’s be clear:No the FED isn’t issuing a CBDC. They released a 35 page discussion paper which outline pros/cons. They’re accepting feedback until May 20th.

“It invites comment from the public and is the first step in a discussion of whether and how a CBDC could improve the safe and effective domestic payments system. The paper does not favor any policy outcome,” the paper continues.

Here’s more from the Fed release:

“Consumers and businesses have long held and transferred money in digital forms, via bank accounts, online transactions, or payment apps. The forms of money used in those transactions are liabilities of private entities, such as commercial banks. Conversely, a CBDC would be a liability of a central bank, like the Federal Reserve. While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides. They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance. The paper discusses these and other factors in more detail.”

The paper, long-awaited by policy-watchers and members of Congress, represents a significant foray into the Fed’s work in the realm of Central Bank Digital Currencies. However, the Fed has said that any movement toward an actual digital dollar lies squarely in Congress’ court.

Despite this, the Fed’s intentions seem to exist beyond that, and this raises a very relevant question for today: are they positioning for an ultimate power grab? Is this the most critical point they need to be stopped?

 It’s true that before 2008 people had critiques of the Federal Reserve. However, in 2008, the Fed upped the ante with bailouts. The most obvious instance of this was the Fed buying longer-term Treasury bonds and mortgage-backed securities.

This is a problem because the Fed owning longer-term securities is the Fed intervening beyond the “crisis”.

As you can see from the above chart, the Fed was buying a lot of assets in 2013 and 2014. Why?! That was way after the crisis in 2008! It’s not the job of the Fed to fix the economy. They are supposed to be the lender of last resort, not the lender of first resort.

The same thing happened in 2020. The Fed kept buying long-term Treasury bonds and mortgage-backed securities well after the crisis. They are still buying them right now! This is perplexing, to say the least. The U.S. Government needs to reduce the Federal Budget in “good times”. And concerning mortgage-backed securities, it looks like the Fed blew up another housing bubble. I’m not even really sure why they started buying them again in 2020 because 2020 was not 2008. 2008 came after a housing bubble, which was not the case with 2020. It’s not the job of the Fed to pick winners and losers in the form of favoring people who already own houses.

The Federal Reserve also did some other things during the crisis of 2020 that was disturbing. They started buying corporate bonds, including junk bonds. Luckily, they were able to sell out of their positions in 2021. Still, I don’t know why the Fed is propping up zombie companies or any company for that matter.

Solutions

Some have been calling for the Fed to be more transparent, but that’s only part of the issue. And after the Fed bailed out specific institutions in 2008, like AIG, people called for changes so that the Fed couldn’t bail out specific institutions again. And again, this is only a tiny part of the problem.

The biggest problem is money. Proponents of gold say we should have never left the gold standard. Therefore, we should go back to the gold standard because a lot of problems started after that. Others say that we need another form of sound money like Bitcoin. The simplest solution is that we should end the Federal Reserve. You can’t centrally plan interest rates/credit any more than you can centrally plan food production.

In the short term, I do think Congress should step in and limit what the Fed can do (with buying of assets). There should be time limits placed on the Fed so that they can’t keep buying assets after the crisis ends. In addition, the Fed shouldn’t be allowed to buy longer-term assets, because it’s not clear how they can ever get rid of those. This also means that Congress should make it where the Fed can’t eventually buy stocks directly or indirectly through a special purpose vehicle (i.e. BlackRock). The Fed doesn’t have the mandate to be insurance for the stock market, even though this has been the case since Greenspan intervened in 1987.

 
 
 
 

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)

Add your vote to the V3 Portfolio (Phase 3) by clicking here.

View V3 Portfolio (Phase 2) by clicking here.

View V3 Portfolio (Phase 1) by clicking here.

Read the V3 Portfolio guide by clicking here.

What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as
possible.

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

Move Your Mouse Over Charts Below For More Information

The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)

Add your vote to the V4 Portfolio by clicking here.

Read about building Crypto Portfolio Diversity by clicking here.

What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
To give an update on the position, each one listed in low to high relative risk:
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:

 

 

Move Your Mouse Over Charts Below For More Information

Our Discord

Join Our Crypto Trader & Investor Chatrooms by clicking here!

Please DM us with your email address if you are a full OMNIA member and want to be given full Discord privileges.