Friday, May 3, 2024

stablecoins and sanctions, NFP errors, crypto lull, govt borrowing

“If the English language made any sense, lackadaisical would have something to do with a shortage of flowers.” – Doug Larson ||

Hello all, and happy Friday!! I hope you’re able to take a break over the weekend to recharge, look at trees, laugh with family or friends…

I have to pause the audio recordings for a few more days, apologies. I’m working on some new ideas on this front, and should have some news next week.

If you find this newsletter useful, would you mind sharing it with your friends and colleagues? ❤

IN THIS NEWSLETTER:

• Stablecoins vs sanctions

• Constructive criticism

• NFP errors

• Crypto lull

• Why does the US government borrow?

If you’re not a subscriber to the premium daily, I hope you’ll consider becoming one! You’ll get ~daily insight into the growing overlap between the crypto and macro landscapes, as well as some useful links. And there’s a free trial!

WHAT I’M WATCHING:

Stablecoins vs sanctions

Yesterday, I belatedly tucked into a recent article published in Brookings, written by former CFTC chair Timothy Massad. I’ve heard him speak at crypto events, and found him to be unusually thoughtful about crypto for someone so representative of traditional finance, but nevertheless, I approached the article with some reservations.

The title is “Stablecoins and national security: Learning the lessons of Eurodollars”, so I expected a screed about the need to control who has access to dollar-based tokens in order to prevent runaway growth and the potential financing of terrorism.

I was wrong: Massad does detail how the Eurodollar market grew to be so big that it could have become a threat but instead ended up extending the financial power of the United States. And he does point out that the decentralized transferability of stablecoins make them much harder to monitor let alone control. But rather than stress the risks in allowing the financing of terrorism, he focuses more on the potential disruption to sanctions.

This is especially interesting and relevant given the seeming desperation with which the US is throwing sanctions around, causing economic inconvenience but not necessarily crippling the target economies. It’s true that the thousands of sanctions applied to date have meant that Russian consumers, farmers, mechanics, entrepreneurs and others struggle to get US and EU goods; but the economy is not exactly on its knees and the war is well into its third year and tragically looks like it will continue for some time yet.

The US seems to believe that’s because it’s not wielding a big enough club: earlier this week, the Treasury department announced yet another wave of sanctions, this time with roughly 300 targets.

Only now the US is stepping up sanctions to non-US businesses for conducting trade with other non-US businesses; it feels empowered to do so even when the target jurisdictions are not exactly allies. The latest list includes dozens of actors based in or linked to China, that are accused of helping Russia acquire foreign goods. It’s a “we’ll tell you who you can do business with” vibe.