This week, Kevin Warsh began his tenure as Chairman of the Federal Reserve, replacing Jerome Powell. For the first time, a majority of the Federal Reserve Board is (somewhat) pro-Bitcoin.
Why does that matter?
The Fed is best known for setting monetary policy through interest rates and money creation. But it also plays a major role as a banking regulator.
With 16 of the 25 largest banks in the U.S. already building Bitcoin products, the Fed could have a major impact on Bitcoin’s role in the financial system.
Under Warsh, the Fed could promote Bitcoin adoption through policy changes such as encouraging banks to custody bitcoin and offer Bitcoin products, and develop a Bitcoin-specific regulatory framework that distinguishes Bitcoin from crypto and stablecoins.
Inflation hits multi-year highs
Warsh is taking over at a difficult moment. Inflation just reached a multi-year high of 3.8%, and it is not expected to fall anytime soon.
But those are only the official numbers. The reality people feel every day is very different.
Compare the real cost of everyday life since 2000 to the official inflation rate. It’s not close.
Why is this the case?
Official inflation is measured by looking at the prices in a broad basket of goods. It’s frequently updated and adjusted, which is a dangerous power to give to people who want the economy to look good.
Instead of sticking with the same items, some get swapped out for substitutes that are less affected. For example, if steak becomes too expensive and people buy tofu instead, economists justify that by treating it as ‘adaptation’. The rising cost of steak doesn’t fully show up in the inflation data as a result.
The only true measure of inflation is the expansion of the money supply. This is because over the long term, all inflation is ultimately downstream of money printing.
The chart below shows the difference between the rate of money printing and the “official” inflation we’re told.
If people understood the true rate of inflation, there would be riots in the street. It is more comfortable to keep up the pretense of consumer price inflation, so that the government can continue to print money to cover its budget deficits.
This is the largest theft of the American people ever, and precisely why saving money that can’t be printed is critical for your future. This is a huge reason for Bitcoin’s popularity, as people are increasingly waking up to the fact that CPI is a lie.
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