How Cheap Credit Distorts Money with Joe Consorti - WBD572

The Peter McCormack Show

Peter McCormack

Politics, Society, Markets, News, Society & Culture, Technology, Inflation, Finance, Economics, Government, Power, Bitcoin, Money

4.7 • 2.8K Ratings

🗓️ 26 October 2022

⏱️ 89 minutes

🔗️ Recording | iTunes | RSS

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Summary

Joe Consorti is a Market Analyst at The Bitcoin Layer. In this interview, we discuss Austrian economics, Credit Suisse & the risk of large scale defaults, price distortions and how Bitcoin fixes this.

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When faced with economic turmoil, central banks have a few tools they can turn to, one of which is interest rates. Since interest rates are the price to borrow money, and prices are emergent, manipulating rates is an intentional distortion analogous to fixing prices. Rates instead should be a factor of the supply and demand of credit, risk of default, and a reflection of opportunity cost.

However, during the financial crisis in 2007/2008, the US federal reserve had little option but to step in and repeatedly cut rates. They did this in an attempt to prevent complete collapse and to restart the credit-seized economy. Rates went to basically zero (and even negative in some countries), and since 2008, we have been in an era of cheap credit.

Now, we are potentially in the midst of another financial crisis. Countries across the globe are battling with inflation issues for a raft of reasons, including supply-side constraints, excessive money printing during covid, and war in Europe causing energy shortages. To battle this, central banks are raising rates in an attempt to regain control.

So does cheap access to credit really boost the economy and stimulate growth, or has it prolonged an artificial bull market in equities, over-financialised assets, incentivised mal-investment, added to the growing wealth divide and played a key role in near double-digit inflation?

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Transcript

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0:00.0	The rates have been locked at, you know, let's say one, two or three percent.
0:08.8	It's completely distorted the way that people allocate capital, whether it's human capital, whether it's
0:14.2	physical capital, they've gone ahead and done things specifically because the
0:18.6	money is essentially free rather than pursuing them because they'll go ahead and
0:22.4	provide a real economic value.
0:24.0	Hello there, how are you all doing?
0:27.0	Welcome to the What Bit coin did podcast, which is brought to you by Gemini.
0:30.0	The only place I'm using for buying Bitcoin. I'm your host Peter McCormack and today I've got Joe
0:35.3	Consortium making his debut on the show. Now if you don't know Joe he is working with Nick Bartier on the
0:40.9	Bitcoin layer and his work has seen him see massive growth on
0:44.6	Twitter which have been really cool to watch. So when I had the show book with Nick
0:49.4	me and Danny talked about it and said well let, let's get Joe on at the same time.
0:52.7	Let's get him on a talk about a little bit of macro.
0:56.0	Now, this was recorded before all the shit show of the UK politics turned into even more of a
1:01.4	shit show, so you'll have to ignore the reference to Liz Truss and
1:05.4	quasi quatang and the fact that Liz was appearing in the background on our screens.
1:10.2	Well that was quite ominous I think for poor Elizabeth.
1:13.0	Anyway I hope you enjoy this if you do have any questions about this show any show anything
1:16.6	else please do hit me up it's hello at what Bitcoin did dot com and I do try and
1:19.8	reply well it's not I don't even just try I do reply to to everyone. So if you do have anything, do get in touch. It is me who answers, it isn't Danny. All right, hope you enjoy How are you man? I'm well Peter. Thanks for having me
1:37.3	Your second podcast you've done. That's right. I heard you absolutely crushed it with Preston. Thank you. I appreciate that. I haven't heard it it with Preston.
1:43.0	Thank you. I appreciate that.
	...

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