YouSaid · the spoken record

David Beckworth

lines on the record: 74
first: 2025-07-16
most recent: 2025-07-16
sittings or episodes: 1
sources: podcast

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“So we're so far ahead and the size is so, so embellished. So here's what I think. I think stable coins will actually expand that network. And as you know, network effects are very important. The more other people are using the dollar network, the more you'll use it. So I think stablecoins not only can displace some accounts, they're going to create new demand as the network grows. And so I think that I think it's fair to say that stable coins are truly going to enhance dollar dominance. So, you know, I've been someone who's been critical of Trump's trade wars and it was destabilizing. And oh man, what are we going to do to the dollar's role? Which I still think is a concern. But I think his push for stablecoins is going to far more than offset that problem.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Incons and that debt securities not going to banks themselves, but going to the non bank public. And for the US, the total global amounts of dollars, I should say, is around 88 or close to $90 trillion. The next largest one is the euro in terms of euro credit, it's around 30, I think mid-30s last I check. So we're more than double. And then the yens the third.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“National transactions cross border payments, which deposits don't give you. If you have funds in a bank, it's still expensive to go across country. So I think there'll be new demand from that. And then depending on marketing and use, there may be additional growth around the world from the growth of the dollar network. And this is something I have thought a lot about. I've written in the past about the global dollar system, it's not just about US treasures. It's about corporate bonds. It's about bank accounts. It's about repo. It's any kind of dollar-denominated asset. In fact, there's a great statistic from the Bank for International Settlements. They have this measure they called global liquidity indicator, GLI. And they actually track the total amount of credit in each of the major currencies. And in this case, they look at...”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“There will be though some net new additions that will take place. Number one, I think of many places around the world that are unstable. Now, they might be using some physical cash in those places, but places around the world that need something that's stable compared to what they have in terms of money domestically. And this is truly, stablecoin is truly a transaction asset. I mean, it truly you can do things with it and everyone has a phone has digital wallets now. So I think there will be, you know, beyond just traditional bank people in the banking system, people who actually need some kind of stable medium of exchange, some stable form of money. Now, how big that is? I'm not sure. I also think though, in addition to just, you know, people who need more certainty, less volatility with their money assets, there's also going to probably be growing demand from folks wanting cheaper internet.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“So I think on the first question you ask about the laws not allowing these money market, these digital money market funds to pay interest, I think there's other ways to pay the customer, better services, maybe cheaper access to your digital asset. There is ways to get around the interest that the prohibitional interest on that. Now, that'd be my first point. And maybe at some point the law changes too. So who knows where we end up on this? But I would just say right out the gate, there's ways to work around that. There's been, this has been done before. You can arbitrage the regulation in a way that people would love it. A second question that you ask is, is there going to be net new demand for treasury bills or for these stablecoins? And that's a great question because, you know, banks are worried that it's going to basically steal their business, right? Their depositor franchise is going to shift into stablecoins.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“I think about stablecoins is effectively it's like a global version of a money market fund effectively but then on the other side of things is it's a global money market fund but if the genius act passes we're not going to allow interest to be passed through to the owners of those money market funds it's going to stay with the issuer so I'm curious your thoughts around that dynamic and if you actually see flows going there if they don't actually get interest and in that same vein I'm curious if you've looked further into who would be the net marginal buyers of these stablecoins because if it's if it's just coming from bank deposits or existing money market funds and flowing into those is that a net new increase or does it come from you know foreign holders of physical us currency or does it come from foreign owners of foreign currency and then they sell that to buy us dollars and then buy stable coins i'm curious how you think about all that”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Of fiscal pressures. Ted Cruz is another example. He recently came out and called for eliminating interest on reserves. And I don't think that would actually create all the savings he wants it to, but he was motivated by concerns about fiscal pressure. So all these stories are all pointing toward policy changes, regulation changes, so that we can better afford the growing stock of debt that we have. So going back to this paper by Olivier Jean, he has these three stages. And he says we're in stage two. We're beginning to see pressures on the balance sheets of financial firms, stage two. Stage three is when we're just outright fiscal dominance, where it's clear the rates are low. It's clear that we're buying up debt to help the government. And we're going to see probably higher inflation and then softening of the Fed's inflation target.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“He saw it, his too late, Mr. Too Late not getting to cut the rates in time. I think Trump may have had a point in 2018-2019, but in 2018, 2019, it was all about just getting the economy going, make sure the economy is robust and healthy. Now, if you listen to Trump, it's explicitly tied to the cost of the debt. In fact, Trump is making these claims. If Powell would do what is needed, our financing costs would go down by almost a trillion dollars. I mean, Trump has in mind really low costs, which I don't think is possible. I don't think rates can go that low. But the point is Trump is explicitly tying his pressure on the Fed to the cost of the debt. That's fiscal dominance rhetoric. It's hard to get away from that. And so what we're going to see, I think right now we're in stage two and what we're seeing is more pressure to do this. I think the tax on the Fed are a part of a broader network.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“It's a necessary step, the supplemental leverage ratio given them on a debt we're generating. Also, stablecoins. I love staple coins. I love what they're going to do for dollar dominance. I think it's wonderful. But one could also cynically look at this and say, hey, the US government is pushing stablecoins because they know they're going to expand the market for treasury bills. People are going to, you have to back with treasury bills. And so these are all just examples. And then other things we can talk about in stage two, which I haven't mentioned, is the rhetoric, which is what I get to in the post. President Trump, as your listeners will know, has been beating up on Jow. And it's interesting to compare his rhetoric today against JPAL compared to, say, 2018, 2019. Very similar. He was on social media both times. Both times he was criticizing the Fed and directly PAL's slowness.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Supplemental leverage ratio, which allows it lowers the capital cost on banks. And there's great arguments for it on very sympathetic to it. I would even say I support it. But you could view this as a form of financial repression or a form of fiscal dominance. What it does is it allows big banks to be able to hold more treasuries on their balance sheet because the capital costs have gone down. And that's been the primary driving motivation to do this. And you could ask this question, what if we didn't have all the debt? What if we didn't have all the pressures in the treasury market? Would we even be having this conversation about the supplemental leverage ratio?”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“And we begin to see the, and he puts the range for stage two, and this is just an estimate and be clear. The margins might be a little gray. But he says when debt gets in the range of 100 to 120% debt of GDP. This is based on his empirical work in this paper. But it's a model-driven exercise. And when you get to that place, he calls it balance sheet financial repression. So whether it's the commercial banking system, money markets, the central bank itself, but all financial firms, balance sheets are going to be summed up. They're going to be drafted of sorts and they're going to be forced to either face lower profits on the spread, maybe shrink that spread, force them to buy more treasuries through regulations. I mean, I mentioned in this post, something that I support, the lowering of the”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so you're referencing a paper by Olivier Jean. He's an economist. And what he did is go beyond the normal commentary, you know, what was us, fiscal dominance. And he tried to model some stages. And in fact, he uses the term, what is optimal financial repression. So financial repression is what happens when you have fiscal dominance. force rates lower you penalize banks savers and such and so it sounds kind of perverse what's an optimal form of financial repression but he's like look given the constraints that we face given we have high debt and given that we're not willing to make tough political choices which seems to be the reality there are phases one can go through a nation can go through on the path and and hopefully before we get to the last stage we make some tough choices but the first stage would just be like normal times monetary dominance where we are being responsible things are okay but we get to stage two”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Periods, but we're in peacetime, we're at full employment, and yet we run $2 trillion deficits over the next decade every year. That's just unimaginable and unsustainable.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“I mean, any way you slice your diocese, we're going to probably see debt to GDP reach somewhere over the next decade, 120 to 130%. Some of this depends on whether the temporary provisions in the new one big beautiful bill become permanent, which is likely to happen. So the point is we're going to have a big increase on the total amount of debt to GDP. It gets more and more expensive to pay interest on it. It's harder to roll that debt over. And I guess your question is, how did we get here? I just think we've avoided making tough choices because the financing costs have been low. And it's just been easy. We've been able to get by with it so far. The appetite for our debt has been strong. I just think going forward, it's not going to be so. And again, a defining feature of this time and place is that we're running large deficits. We're running $2 trillion deficits outside of a wartime, outside of a recession. Those things are understandable.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Sustainable, but we've gotten to a place where our stock of debt is so large, it's about 100% of debt to GDP, that any little increase really raises the cost of interest on the debt, any change in the interest rate itself also increases the amount of debt we have to pay. And so how do we get here? It's accumulation of past choices, I think starting in the 2000s. We did tax cuts, we did spending increases, we had two major recessions. We had the global financial crisis. We had the pandemic. And the stock of debt has built up to a place now where it's 100% debt to GDP. And it's only going to get larger. I mean, this is, you don't need me or you to tell the audience this is well known. Well, there's just no other way forward, whether you're looking at CBO or you're looking at the tax foundation or the committee for a responsible federal budget.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Well, currently, it's just the inability for the body politic, the public and politicians to make tough choices. And I think part of that has been enabled by the fact we've had low interest rates over the past few decades. Now, I'm someone who subscribes to the view that those low rates were generated by global demand for safe assets, for treasuries, for U.S. dollar-denominated assets in general. So it made it easy for us to kick the can down the road. I don't think there's anything nefarious about this. I just think the dynamics were such that the global economy was in a place where they really wanted a lot of safe, liquid assets. So everything from repo, US check-in accounts, treasuries and such drove down our rates, which allowed us to kind of kick that can down the road. In economics, we have this idea that as long as the real interest rate is lower than the real growth rate, you can not worry so much about your debt. You can deficits.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“I want to contextualize further some of the catalysts that drive us towards fiscal dominance. So you've mentioned a couple times this idea of war or crises. And I'm curious if you see any other catalysts that drive us to that point. Is there, you know,”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“We were fighting a war of sorts, a pandemic outbreak, a health war, a global health war. And the Fed stepped in and bought most of the newly issued treasuries. It kept rates really, really low. And again, you might argue those things were called for given where inflation was, where the economy was. And I think that's fair. When the economy first tanked in 2020, you could argue this is another zero lower bound environment. The Fed has to be aggressive. But by 21, late 21, early 22, I think one could argue that there was a bout of fiscal dominance. Again, I think you could say it was warranted. Maybe we did too much and a little excessive, but that I would argue was another case of that. Although, again, most people at the Fed would contest that.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Money supply prices are going to take off unless you do something like price controls. Of course, once that was released at the end of the war, man, prices take off. The Fed gets worried about inflation again. And then you have the famous Fed Treasury Accord 1951. So in periods of emergencies, it makes sense for the Fed to step in, kind of become subservient to the greater good, the greater need. So it makes sense we would have fiscal dominance during wartime. And I would argue during most wartimes that's the case. World War I, even the Civil War, if you go back to the Civil War, which there was no Fed, but price stability kind of got put on hold. You can think of that same responsibility. We had really high inflation to fight the Civil War. And so it's a pattern that's repeated through history. And I would submit, and I know people at the Fed would argue with this, I think 2021, maybe a little bit of 22, but mostly 2021 was a brief period of fiscal dominance.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so that's the clearest cut historical example, the most recent one, although I'll give another one in a minute. But that was a case where the government was fighting a war, the country was fighting a war. So massive expenditures. And so the Fed was kind of called on to do his patriotic duty. The Fed kind of said, yes, we will support the war. And what that meant was one lowering interest rates effectively did yield curve control, short-term treasury people rates were pegged and long-term ones were pegged. And you mentioned the substack. I have a picture there where I show you can see it crystal clear. These lines are relatively straight and they're straight from about 1942 up about to 1951, the treasury accord. So the Fed was buying up the debt and it was keeping interest rates pegged. And then something else that was going on, this isn't really part of the story we're talking about, but there's also price controls. Because if you start buying up debt and increasing the money.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Running such amount of debt, so many deficits, and the Fed kind of lets go of price stability and lets the Congress take over and the Fed takes over solvency. So fiscal solvency. So again, the two roles, just maybe make this crystal clear. Who's determining the price level and who's determining fiscal solvency? And monetary dominance, it's the Fed that does price stability. It's Congress that does fiscal solvency and those roles get flipped. And the danger is we're getting awfully close to those roles being flipped. And that's what I'm worried about”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“It's the active initiator. And fiscal policy is working in the background to keep the government solvent. And when you dig into macroeconomics, you see that the two are linked. You can't truly separate monetary policy from fiscal policy. And whenever we talk about the Fed doing its thing, it's assuming that in the background Congress, Treasury, tax policy, spending policy has its act together. So monetary dominance, again, is the Fed takes the lead. It aims for price stability or some inflation target and then Congress and fiscal policies in the background trying to keep the government solvent. It doesn't mean you have to run a balanced budget every year. It means to over the business cycle, you're evening things out. Now, fiscal dominance, you flip those roles. Now the Treasury in Congress effectively determines the price level or inflation, which seems crazy, but because they're.”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Let me start with a real simple explanation, then I'll flesh it out a little bit more. But essentially fiscal dominance emerges when the Fed has to subsume its responsibility for price stability and instead focus on keeping the government solvent. So its focus is shifted and it's forced to shift. It really has no choice. Now, maybe a little more precisely, I would say you can think of two roles. One role is price stability, one role is fiscal solvency. You can also think of who takes the lead and who follows in terms of monetary policy, fiscal policy. Currently, I think we're still in a regime of what we call monetary dominance, which contrasts with fiscal dominance. In fact, most of us assume we live in a world of monetary dominance. We are both of the age we grew up in a world of monetary dominance. And that is a world where the feds job is to focus on price stability. And it takes the”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT
“Running two trillion dollar deficits outside of a wartime, outside of a recession. Any way you slice or diocese, we're going to probably see debt to GDP reach somewhere over the next decade, 120 to 130%. Trump is explicitly tying his pressure on the Fed to the cost of the debt. That's fiscal dominance rhetoric. One way or the other, real resources have to be gathered to pay for the expenses we've heard in the past. And the danger is we're getting awfully close to the”
2025-07-16 · Forward Guidance · We’re Entering The Final Phase Of Fiscal Dominance | David Beckworth · IDENTIFIED FROM THE TRANSCRIPT