What we’re reading (9/23)
“Fed’s Intentions On Rates Remain Muddled” (Wall Street Journal). “Getting to zero [in monthly asset purchases] is important to Fed officials because they effectively see completing the tapering process as a precondition to raising rates: They don’t want to find themselves in a situation where they need to hike while they are still purchasing assets. But they have tried to frame this as merely providing them with an option to tighten, a decision that will ultimately hinge on how much progress the job market has made, and how sticky the recent bout of inflation ends up being.”
“Fed Chair Powell Says He's Powerless To Protect The Economy If Congress Lets The US Default On Its Debt” (Insider). “The Federal Reserve won't come to the economy's rescue if the US defaults on its debt, Jerome Powell, the chair of the central bank, said Wednesday. Congress is, once again, coming dangerously close to a debt-ceiling crisis. Lawmakers have until mid-October to either raise or suspend the borrowing limit, or allow the US to default on its debt. The latter outcome would freeze spending on several critical public programs, spark massive job losses, throw financial markets into chaos, and likely plunge the US into a self-inflicted recession.”
“Beyond Evergrande’s Troubles, A Slowing Chinese Economy” (New York Times). “Global markets have watched anxiously as a huge and deeply indebted Chinese property company flirts with default, fearing that any collapse could ripple through the international financial system. China Evergrande Group, the developer, said on Wednesday that it had reached a deal that might give it some breathing room in the face of a bond payment due the next day. But that murky arrangement doesn’t address the broader threat for Beijing’s top leaders and the global economic outlook: China’s growth is slowing, and the government may have to work harder to rekindle it.”
“Crypto Equated To Toxic Pre-Crisis Swaps By Banking Watchdog” (Bloomberg). “The U.S. agency that had once been the great hope of the cryptocurrency world is now issuing strong warnings to the industry that it’s in danger of echoing the toxic culture before the 2008 financial crisis. Michael Hsu, the acting chief of the Office of the Comptroller of the Currency, argued Tuesday that cryptocurrencies and decentralized finance may be evolving into threats to the financial system in much the same way certain derivatives brought it near collapse more than a decade ago. Notorious credit default swaps were engineered by math wizards in much the same way crypto has emerged, he said. ‘Crypto/DeFi today is on a path that looks similar to CDS in the early 2000’s,’ Hsu told the Blockchain Association in a webcast.”
“Crypto Faces Existential Threat As Crackdown Gathers Steam” (Bloomberg). “Cryptocurrency firms are fighting for lobbyists and fielding subpoenas in what could be an existential fight over how the multitrillion-dollar industry should be regulated…[a]s the cryptocurrency industry gears up for a regulatory battle, some lobbyists, who asked to withhold their names to discuss client matters, said they were so deluged by crypto firms looking to hire them in August that they had to turn down some potential clients. Some of the crypto firms said they were being targeted by or expected to be targeted by regulators, the lobbyists said.”
