We are all depending on the ruling of 12 people. This will change.

The decrepit centralised manipulation of USD rates and the impending disruption coming.

Today, tomorrow.

Here we go again, we are close to the inversion of the USD 3 months - 10 yr interest rates curve. An inverted curve means that short term rates are higher than long term rates.

Jim Bianco writes: "If the Fed hikes 75 in July, and 75 again in September, it should be inverted in two months, if not earlier."

Long term rates are roughly a gauge of future economic activity. Therefore if long term rates are lower than short, it means that the market - in its inscrutable wisdom - foresees a recession.

The 12 people rule and its consequences.

Some eerie thoughts on what's going on before looking into the future.

1. This is a USD curve. USA is made of 50 states, with widely different economies. Still, this curve will have similar implications for all of them, in similar ways, no matter if a particular state is in recession, expansion or anything in between.
2. The short term rates are decided by a minuscule group of people, namely?the Federal Open Market Committee (FOMC) which consists of seven governors of the Federal Reserve Board and five Federal Reserve Bank presidents, 12 people in total. The FOMC meets eight times a year to determine the near-term direction of monetary policy and interest rates. That's it.
3. The consequences of a rate change are felt globally for the USD is (still) the global reserve currency which dominates trade & lending globally. Twelve people heavily influence the destiny of 50 states in USA plus another 194 States covering the whole Globe. This is uncompromisingly bound to change, but not in the short term. A global reserve status is a sticky, inelastic attribute which vanes much later than the soft and hard power of the once unchallenged leading global power. This happened before (for example, to the British Pound) and will happen again, this time to the USD.
4. Developed Europe is as well a clear victim here: with Italy's debt close to 150% of GDP, the EU doesn't have much room to increase EUR rates to react to USD's hikes. That's why we have seen the flippening of the EUR/USD exchange rate. And what that means, in an energy dependent Europe, is that inflation will run even higher, even faster.
5. As for the global reserve currency, in the mid-term we will probably move to a basket of currencies, with a more "decentralised" i.e. distributed power, rather than adopting a new single global reserve since there isn't a single, overly powerful country left on the global stage. In the longer run, a crypto currency will take over.
6. The USA has the highest inflation rate of the developed countries because it's the State that elicoptered the most money during the Covid crisis. And because the Fed waited an eternity before admitting what it probably knew, i.e. that inflation was not transitory, and before acting on this admission. The direct implication is that, besides disproving the once fashionable Modern Monetary Theory (MMT) of effect-less unlimited free money, we, onlookers on the global stage, are now hostage to a harsher monetary tightening as a consequence of the past US government ill-guided actions and Fed's mismatching policies.
7. 2/3 of USA inflation is supply side's, ie imported inflation. Which means it is out of reach for US policy makers. Which means that they will need to get serious at forcing a scorched-earth policy to eradicate inflation from the economy (the remaining 1/3) to get to any meaningful taming of it. Which means, more pain is ahead of all of us.

1. The first, telegraphed and spectacular capitulation to this 12 people rule to contain US inflation was 15.000 km away Sri Lanka's. It won't probably be the last. For those of us following the evolution of crypto, the irony was in plain site: Sri Lanka central bank warns against the use of cryptocurrency amid economic crisis. The same cryptocurrency which could have spared millions of people in the country from the worst consequences of their local fiat collapse, if they'd had converted their fiat in stables, was singled out as dangerous. Actually some did convert their fiat in time and are therefore in a much better position now.

So, where do we go from here?

The current financial, banking and regulatory system is not equipped to function properly in the new millenium. We have very different needs than in the XX century. Blockchain fully addresses those needs by being the basic fintech layer needed in this epoch.

The question is, will the legacy system be flexible enough to seriously question itself, its role and its technology, and adapt fast enough? Or will we see more Sri Lankas?

Change is coming anyway, and it is coming fast. As one might expect, it is accelerating faster in the countries that suffer most from the 12 people rule.

The 2021 Global Crypto Adoption Index Top 20

The table below shows the top 20 countries in the 2021 Global Crypto Adoption Index, as well as their rankings in the three component metrics that make up the overall rankings.

Which country is on top? Vietnam. That's right, the country which labels crypto as:

Bitcoin and other similar cryptocurrencies have been specifically designated by SBV as illegal and are banned for trade relationships.?

Unsurprisingly the top 20 list is made of countries that have much to lose from the 12 people rule and in several cases also from local policies. And it is made of countries that suffer the most from antiquated financial rails. rektdiomedes shares a post that's emblematic and illustrates the pain millions of people worldwide go through every day, which blockchain can easily address:

I'll paste here Boaz's thread too:

Boaz's tweets would be a fun read if they weren't so painful, and so real. And again this is not exclusive to the developing world, although there is where max pain is to be found.

In short, we need a new system based on:

• More decentralised decisions and policy making - no more 12 people rule
• Proper regulation of the crypto space
• A new global basked of currencies as global reserve's benchmark and eventually a crypto currency
• Diffused blockchain technology for agile, immediate, very cheap transactions
• Blockchain technology enabling frictionless micro transactions, micro loans and inclusivity of unbanked and underbanked people worldwide
• Blockchain technology enabling real ownership and control of one's coins

Look back at the Top 20 table. These changes are coming, with or without the local governments' support, because for many people it is a question of economic liberation. In some cases, it is even a question of survival.

We all need to wake up to this challenge and this massive opportunity for all humanity.