Guest
Kevin Warsh
Ten31 Timestamp: Mr. Warsh, I Don't Feel So Good
- US-China geopolitical tensions: High-level meetings between US administration and Chinese leadership yielded limited concrete outcomes; discussions included Taiwan, trade openings, and Iran leverage, but resulted in a "holding pattern" with unclear progress. - Bond market deterioration: Treasury yields across the curve are rising sharply—the 30-year US Treasury broke 5% for the first time since August 2007, and the 10-year exceeded 4.5%. Long-term technical charts suggest structural rates may remain elevated ("higher for longer"). - Inflation prints driving policy debate: Hot CPI and PPI data (both above expectations, core inflation well above consensus) shifted market focus from Strait of Hormuz logistics to monetary policy uncertainty. The debate centers on whether the Fed can cut rates or must hike to control inflation. - AI productivity narrative vs. inflation reality: Administration figures (Treasury Secretary Benson, potential Fed Chair Warsh) are framing inflation as transitory, driven by supply shocks, and arguing AI-enabled productivity gains will provide room for rate cuts. This parallels the failed 2021 "transitory" narrative but differs in that real economic acceleration in certain sectors is more visible. - Treasury and Fed coordination: Potential new mechanisms emerging—including the Treasury potentially lending its own cash reserves into the repo market against Treasury collateral—represent creative, unconventional tools to manage long-end yields and keep financial plumbing functioning. - Iran's Bitcoin insurance scheme: Credible reports suggest Iran's IRGC is demanding Bitcoin payments for a state-sanctioned insurance product ("Hormuz Safe") for vessels transiting the Strait of Hormuz. This appears driven by Tether's earlier freeze of $344 million in IRGC-linked stablecoins, demonstrating Bitcoin's censorship resistance.
Bitcoin: The Hidden Cost of Institutional Adoption
- SEC chair appearance at Bitcoin conference: Paul Atkins became the first sitting SEC chair to keynote at a Bitcoin conference, signaling a shift from enforcement-focused regulation toward regulatory clarity and proactive frameworks. - Institutional capital influx: Significantly more institutional money and investment banks are engaging with Bitcoin, seeking to understand the technology and explore participation in the ecosystem. - Regulatory compromise and innovation: Some provisions like stablecoin interest payments may be left out of frameworks like the Clarity Act, but this opens doors for innovative structured products and yield strategies built on Bitcoin. - Machine-to-machine transactions and AI integration: Lightning Network and Bitcoin are emerging as critical infrastructure for trustless machine-to-machine transactions in an AI-driven "agentic economy." - Federal Reserve leadership transition: Kevin Warsh (crypto-forward) will replace Jerome Powell as Fed chair, while Powell remains on the board—an unusual arrangement that could create tension over interest rate policy. - Iran's Bitcoin demand: Iran's request for Bitcoin as payment for oil under sanctions illustrates Bitcoin's censorship resistance and validates its use case as a borderless store of value independent of frozen assets.