BREAKDOWN: Will the Fed Shift Policy Due to Increasing Inflation?
CoinDesk Podcast Network
CoinDesk
4.8 • 689 Ratings
🗓️ 16 June 2021
⏱️ 15 minutes
🧾️ Download transcript
Summary
More sense of the changes coming ahead of today’s FOMC briefing.
This episode is sponsored by Nexo.io and Bitstamp.
On today’s episode, NLW looks at the Federal Open Markets Committee briefing coming up this afternoon and discusses what it might signal in terms of future monetary policy. The discussion includes:
- How the Great Financial Crisis inspired “the largest monetary policy experiment in history”
- 2013’s “Taper Tantrum”
- The return to GFC era policies during COVID-19
- The insurgency of meme traders
- Why inflation is a self-fulfilling prophecy
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Transcript
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| 0:00.0 | They believe it to be simply transitory inflation or base effect-driven inflation. |
| 0:04.2 | If everyone thought as they do, they would have no issue. |
| 0:07.4 | But people don't think as they do. |
| 0:09.4 | People are observing prices go up, and enough of these prices going up that there is fodder |
| 0:13.8 | for this inflation narrative. |
| 0:15.8 | The thing is, inflation is a self-fulfilling prophecy. |
| 0:19.3 | When people believe that inflation is going to increase |
| 0:21.7 | the price of goods next month, they buy what they can now. That new demand creates the pressure |
| 0:26.9 | that actually pushes the price to go up. And bingo-bango, transitory base effect inflation becomes |
| 0:32.6 | real inflation. Welcome back to The Breakdown with me, NLW. |
| 0:39.8 | It's a daily podcast on macro, Bitcoin, and the big-picture power shifts remaking our world. |
| 0:45.9 | The breakdown is sponsored by nexus.io and bitstamp and produced and distributed by CoinDesk. |
| 0:53.3 | What's going on, guys? It is Wednesday, June 16th, and today's episode is all about rumblings |
| 0:59.6 | of a shift in macro policy, specifically about what we might hear at this afternoon's |
| 1:05.7 | Federal Open Market Committee briefing and what people think it might mean. So let's briefly set the stage. You have to go back |
| 1:13.3 | to 1971, and no, I'm just kidding, at least for this episode. But in point of fact, let's go back to |
| 1:18.9 | the great financial crisis. In the wake of that turmoil, the Fed sets up a raft of new facilities to |
| 1:25.1 | better support the market. And by support, we know we really mean |
| 1:28.5 | not let markets fail. This includes reducing interest rates, quantitative easing, i.e. purchasing |
| 1:34.2 | bonds and other assets to get money into the system, etc. The next few years are rocky. On the one |
| 1:40.4 | hand, there is a sense from some corners that the Fed hasn't done enough, that |
| 1:44.4 | recovery was too sluggish. |
... |
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