Money & Politics with John Heltman from American Banker

Interest rates, inflation, and regulations around cryptocurrencies are today’s hottest topics, but there is much more to the role of the Federal Reserve in shaping today’s economy.  In this episode of The Yield, Peter Kerr, CFA, is joined by ​​John Heltman, Editor-in-Chief of American Banker Magazine, for a discussion examining the impact of money and politics on the American investor over the last two years.

Key Takeaways:

[1:15] John’s journey to American Banker Magazine and his podcast Bankshot. 

[6:27] American Banker’s mission and the evolving journalism landscape. 

[8:23] The biggest stories in banking politics that probably aren’t on consumer radars. 

[17:07] Cryptocurrencies and the government- where and when do they intersect?  

[23:36] The independent and dependent nature of the Fed. 

[34:05] Inflation, interest rates, and how markets are absorbing the current fed rate path. 

[37:13] There is so much more to focus on with the Fed than just inflation and interest rates. 

[41:24] Details about the $600 IRS proposal.

Presidential administrations come and go, and with them, it seems, often a slew of financial rules and regulations.  But what level of these trending financial changes are political, and which are merely a reflection of the changes in today’s financial landscape? Are the rules and regulations forming around cryptocurrencies a product of the Trump or Biden Administration, or are they simply an evolving intersection with the current administration regardless of the Fed’s stance on them? 

According to John, financial issues are always political issues to some degree. Crypto is still considered the wild west of digital banking, and greater clarity is needed from the people who own coins.  And just like any other regulation, the debate comes with a philosophical divide surrounding it’s standing amongst stable coins and bitcoins and what kind of regulatory structure needs to be established around it. And because the government tends to lag the market, it is taking a good long time to get the definitions and regulations in place. The rubber will meet the road when things start getting more specific and banks want to offer crypto for sale.  

The Administrative Procedures Act requires a long and specific process that will ensure that comments and opinions about any potential law are acknowledged and responded to. The only thing that is certain at this point is that any rules made with regards to cryptocurrencies, just like any other law, are going to take a long time. Given all of these requirements, investors can be sure that it’s going to be a while before we actually have a real sense of where this administration’s approach is toward crypto generally.

Investors also need to consider the independent and dependent nature of the Fed. John refers to it as the duck-billed platypus of federal agencies, with a unique blend of a centralized bank in Washington DC and regional banks around the country with boards of directors who vote on the Federal Open Market Committee, thus assigning interest rates.  But despite it’s unique construct and operations, John thinks one thing is certain- given the “never-ending presence of the pandemic, markets that are jittery,  and supply chains that are weird”, the Fed is most likely going to be particularly unified in the next year about what they have done. 

John and Peter also cover inflation, interest rates, and how markets are absorbing the current Fed rate path. And with CPI as such a faulty measure of inflation, why is it still so heavily relied on? You can ask any member of the Fed about rising interest rates and the answer will be the same- ‘I don’t know but I’ll let you know when we do’. Every aspect of the Fed has one thing in common- it’s guaranteed to be a slow moving process that will not provide many answers anytime soon.  But for more advice on which steps investors should take next, join the conversation at www.yieldstreet.com

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