Danielle DiMartino Booth: The Fed Is Under Fire! Scandal, Succession, Inflation, Taper & CBDC (PT1)

The Fed is Under Fire

Perhaps no single institution has more impact on the global economy than the US Federal Reserve.

And the $trillions in stimulus it and the other major world central banks have released since the COVID pandemic hit have made the system even more dependent upon its actions.

Which is why our financial markets are understandably obsessed with a single question:

What is the Fed likely to do next?

To help us answer that, former advisor to the Federal Reserve Bank of Dallas, Danielle DiMartino Booth, returns to the program in this brand-new interview.

And she drops some head-spinning news, including the warning that in all her years of working at and tracking the Fed, she’s never seen such destabilizing political infighting at the top as she does now.

When the world’s most powerful institution is at war with itself, will we all become collateral damage?

Transcript

Adam Taggart: No single institution impacts the global economy more than the US federal reserve which is why we all better pay close attention when former insider Danielle DiMartino Booth notes that the Fed is concerningly off balance destabilized by a flurry of internal and external challenges to an extent she’s never seen before.

Danielle DiMartino Booth: I’ve never seen anything of this drama inside the Fed.

Adam Taggart: Welcome to Wealthion. I’m Adam Taggart, founder of Wealthion, welcoming you back for another week of making sense of money and the markets so that you can make better informed decisions about building your wealth. Perhaps no single institution has more impact on the global economy than the US federal reserve and the trillions of dollars in stimulus that it and the other major world central banks have released since the Covid pandemic hit have made the system even more dependent upon its actions which is why our financial markets are understandably obsessed with a single question: What will the Fed do next? To help us answer that I’m thrilled that Danielle DiMartino Booth is returning to the program. Danielle’s CEO and chief strategist for Quill Intelligence and she was a former advisor to the federal reserve bank of Dallas so she knows the Fed as well as the people who run it. Danielle, thanks so much for joining us today.

Danielle DiMartino Booth: So happy to be here. Really excited. Once again, every time we meet it’s such a boring backdrop but here we go.

Adam Taggart: I want to delve deeply into the Fed with you because there’s so much in the news these days about the Fed but very quickly I want to ask you the question I like to ask all of our guests just at the outset. What is your current assessment of today’s global economy and financial markets?

Danielle DiMartino Booth: I think that today’s current economy is catching up with the economy that existed prior to the pandemic, and that was a period of slowly slowing down. The process is more expedited here in the United States. The difference that I would assign in terms of the end of 2019 versus where we are today is the specter of inflation which has been created by an overly aggressive fiscal and monetary response. So again, that cannot take away from the fact that prior to all of the fiscal and monetary stimulus that was pumped into the global economy with the Fed of course in the lead, the global economy itself was slowing. We’re seeing similar slowing trends in world trade which is extremely crucial to where the global economy, you use the word global economy, is headed at a time when risky asset markets are as overvalued as they have ever been. It doesn’t matter what tenor you look at right now in the US junk bond market. They’re all yielding negative when adjusted for inflation and we’re in absolutely uncharted waters in the history of the financial markets.

Adam Taggart: Yeah, isn’t that ridiculous that junk bonds are yielding less than the current rate of inflation, so your point the actual real rate is negative which is just crazy. So look forward to delving into that. I think you said unprecedented moment in history. I want to dig into that too but before we get more into the markets let’s start with the Fed. As I said in the introduction that seems to be the axis around which everything is spinning right now. So let’s start with the taper. We have been so used to the Fed intervening in the markets really ever since the global financial crisis coming out of that crisis. The Fed and the other world central banks have been there through multiple QE programs and now sort of QE eternity where they’ve just been sort of pumping 120 billion a month into the system and that’s after the massive stimulus injections that they did back in 2020. So Powell is now saying that we’re actually going to start tapering, we’re going to try to bring that to zero between some point soon in the middle of 2021. So I guess first question for you is: Do you think it’s going to happen and if so is that a realistic timetable?

Danielle DiMartino Booth: So there are certain things that are not being discussed right now in the broader financial media, one of which is it is against the grain of the Fed’s policy making function to make major shifts when there is any politicking going on in the background. There’s a massive debt ceiling overhang that was never resolved by the ex-date of October the 18th. Instead it was extended out to December the 3rd so for the Fed to make a major policy move at its November the 3rd meeting would be extraordinary against the backdrop of Fed history. In addition to that, the Fed does not typically make major policy shifts in the month of December so as to not appear to be the grinch that stole the holidays. So is it possible that we’re gonna see a taper announced on November the 3rd? Yes. It will not be a comfortable moment for federal reserve officials because again, this goes against tradition and they could be appearing to be trying to help out the GOP by putting the democrats feet to the fire in terms of saying we need fiscal austerity, the United States sovereign debt was downgraded in 2011 because we hadn’t addressed entitlement spending, medicare, medicaid, social security, had the United States on watch for a similar situation if none of these entitlement spending runaway programs are addressed and here we are at the opposite end of the spectrum with the democrats wanting to spend 3, 4, 5, 6 trillion more dollars. Again, this is not an environment into which the Fed normally steps and says, “Okay, we’re going to tighten policy,” as well broadcast as the taper is. But to your point, and I’m sorry that I’m drawing out this answer, they’ve let the inflation genie get out of the bottle and apartment leases aren’t one or two or three months. They’re not transitory contracts. They’re 12 to 18 months in nature and we saw that rental inflation is rising at the fastest pace that it has been since I believe 2005, maybe it’s even 2001 in the most recent consumer price index report. That print’s not going away, the housing inflation is going to continue to, with a lag, bleed into the CPI data and on top of that, the supply chain disruptions have yet to be rectified, though it looks like we’re starting to see the beginning of a turn, but that’s neither here nor there because again, the the sticky parts of inflation appear to be manifesting and the Fed might be in a position to where it needs to do a hurry up tech taper. Not just a taper. Not just, “We’ll gradually do 10 billion dollars a month in tapering of treasuries, 5 billion a month in tapering of mortgage-backed securities,” but actually be forced sometime in 2022 to get through the taper and start hiking interest rates.

Adam Taggart: Great, you just combined answers to several questions I was going to ask into that answer which was great. So I want to put up a chart here super briefly. This is a chart of the Atlanta Fed’s GDP now graph where they track GDP in real time and it shows a precipitous drop where they were projecting over 6%GDP as recently as the end of August. It’s now plummeted to 1.2%. So this goes to your earlier point, Danielle, about sort of returning to an era of slowing growth. I mean that’s a ridiculously quick deceleration at least in terms of expectations for GDP.

So I think that’s one more factor that makes it hard for Powell to want to taper because the economy seems to really be slowing, but then there’s all these other factors you’re talking about and I was going to ask you about inflation but you already went there. So I guess the question is sort of that old question of unstoppable force meets a moveable object, when you have a slowing economy like this but you’ve got rising inflation, which wins? Which do you think will win policy-wise? Do you think the Fed will have to taper and maybe raise or if the economy slows enough can they just not do that? It’s just not politically palatable?

Danielle DiMartino Booth: So one of my savviest clients who’s been kind of in the trenches in the bond market for ever noted a few days ago that the spread between the 10-year treasury and the -year treasury has been compressing and that normally is a sign that the tenure is going to come down and that the economy is slowing which is going to be reflected in your longest maturity, long bond 30 years and the stock answer to the question which you’re asking is, “Is the Fed going to commit a policy error?” And the answer is yes. No matter what they do the answer is yes. You cannot tighten into an environment in which you have all of these zombie firms that rely on the high-yield markets, the capital markets staying wide open for business just to keep the lights on because their cash flow doesn’t cover their interest expense so they have to constantly turn over their debt. So you cannot hike rates into such an environment. You cannot hike rates in an environment in which the United States debt load is pushing 30 trillion dollars and yet you cannot not hike rates when inflation is out of hand as it is. Companies are trying to deploy mitigating efforts, which people don’t really understand, to get wage inflation under control and I think the biggest risk right now to the economy that nobody is talking about is the specter of millions of jobs having been eliminated forever, permanently automated. The idea of accelerated automation is not being discussed enough by the broader media inside of the macroeconomic community and circle and people just seem to think that because their time has come, employers are going to roll over and play dead and just pay up and screw the shareholders. It’s not really how things work. Is there a massive divide and disconnect between how corporate c-suite executives are compensated and how their employees are compensated? Absolutely. Should the minimum wage have a seven handle? No, it should have a 10 handle. We get that. 15, not so much in Mississippi or Texas where I live. So there are major disconnects between employers and employees and I get that but we would see more dynamism in the labor market. We would see more job creation. We would see more of, “Oh my god, there’s 10 trillion job openings. The sky is absolutely falling.” Wages are going to the moon.” We would see more of those openings being filled if companies truly had the need unless there was a separate factor going on in the background which is very apparent when you look at what companies are spending on IT and on automating and it’s right there in the GDP figures, right in front of your very eyes. So people cannot appreciate that there may be millions of jobs that were lost in the post-pandemic era that are gone forever.

Adam Taggart: Okay, so this, Danielle, is something I’ve actually written about for years and wasn’t planning on talking about it in this conversation but I’m just thrilled that you brought it up.

Danielle DiMartino Booth: The light bulb went off above your head. I said, “What did I say?”

Adam Taggart: Yeah, yeah. A report I wrote a few years back was called, “Automating Ourselves to Unemployment,” so given a lot of thought to this because the Austrian school of economics talks a lot about now investment. We have provided a big mal incentive out there for our corporations to replace human labor with automated labor or automation and there’s Keynes and you can like him or not but he actually used to write about this. It’s called technological displacement and he basically said that when you can replace human labor with something better, with innovation, great. You should do it, but you got to be careful about the pace at which you do it. If you do it so fast that you displace the labor and you can’t put it to a more productive use, you end up creating a social crisis that’s larger than the cost savings that you were trying to get by the transition. I see you nodding here as I say this so it sounds like you believe this as well. So we’re creating this very scary potential for millions of people to be permanently unemployed in a lot of — I mean we’re now automating much further up the skill chain than folks ever thought possible. I mean there are many more and more white color jobs that are getting displaced either by AI or whatnot but the meat of this is really in those those entry level jobs where people sort of on-ramp to employment and starting their careers and then growing from there so we’re kind of killing the on-ramp as well. So look, I don’t have a solution to this except just to say that to your point, nobody is thinking about the permanent problem that we’re creating here.

Danielle DiMartino Booth: I’ll give you a piece of anecdata. I was discussing the fact that I needed to do a small edition and I was concerned about the large fee that an architect might charge and I was speaking to a group of builders and they said, “Here’s a card of some guy. I’ll send his contact information. He’s in India. He’ll do it for an eighth of the price and it’ll come back better and it’ll be all specked out. You just hand it to the contractor. You’re good to go. You’ve just excised 80% of the cost of the architect that it used to be,” and we’re also starting to see nobody’s talking about it offshoring has accelerated in the past nine months and we’re seeing more jobs go to India as well and the biggest problem that you bring up with societal disruption and Keynes’s theory that could very well play out before our very eyes in the united states of America is that our educational backbone and our vocational skills training backbone, they’ve been broken for generations. So we don’t have children coming up behind, we don’t have generations coming up behind those who will be displaced who can necessarily quickly climb up that innovative ladder that you describe as opposed to other countries that have never stopped focusing on the next generation of whether it be vocational or technological education.

Adam Taggart: Okay, well said, and Danielle, I gotta have you back on to delve really deeply into this because I have way too many other Questions.

Danielle DiMartino Booth: It’s a huge subject. It really really is.

Adam Taggart: Well I would love to talk about it more with you and just try to get more smarter minds than mine out there in the world beginning to address this but real quick just before we leave what we were talking about earlier, so if I heard you right you’re basically saying Fed’s between a rock and a hard place, whatever they decide to do they’re going to do they’re going to be damned for it. So I guess at the end of the day, what is worse? Is it all of the horrors of — I’ll say runaway inflation, maybe it’s not exactly going to be that bad but certainly the price increases that we’ve seen over the past year have been scary and if they can if they continue like that there’s a large part of America that’s just not going to be able to afford its existence but to your point that if they start to hike with this zombie economy that they’ve created where they’re just so many overleveraged organizations out there that need these basically near zero interest rates to stay alive, if you think if rates go up, I mean there’s going to be so many defaults there that that’s going to a ripple into the financial markets, destroy a bunch of paper wealth but companies are going to die and it’s going to exacerbate the job situation. A bunch of jobs are going to go away because the companies themselves die. So if you’re Powell and you’re trying to pick right or left, fire or ice, what do you choose?

Danielle DiMartino Booth: That’s why the Fed cannot tighten but the Fed has to tighten.

Adam Taggart: Alright, they’re going to have to destroy the village in order to save it basically.

Danielle DiMartino Booth: But this is a bed that they made and people have asked me and for heaven’s sake, I’ve said this before out loud many times, I was the founder of the J Powell fan club and I was so proud of him on his first day in office when the market crashed and he didn’t say a word and he went to congress and he said it’s not the Fed’s job to backstop the stock market. I said we finally got an adult in the house. This is so exciting. It’s going to be so refreshing, so wonderful, and on March the 23rd, 2020 he grandfathered in triple B rated companies right above that rung of junk that if they were downgraded that they would be grandfathered in and with his approval they would remain with their investment grade standing. So it is right at the doorstep of J Powell that though the post pandemic flash — I call it a flash recession because it was two whole months. The flash recession could have been worse. Maybe it could have been three months. Maybe it could have been four months instead of two whole months but had he not grandfathered in the weakest links, right now we wouldn’t be carrying this massive weight into this dilemma and decision that they’ve got but we shouldn’t try and paint it as being something that’s not of their own making because they’re the ones who made it.

Adam Taggart: Alright, well I couldn’t agree more on that and you and I have felt this way for a long time. I would say the average person has it. I mean when they don’t really follow monetary policy as part of their daily life but —

Danielle DiMartino Booth: Maybe they [Inaudible], Adam. What do you think?

Adam Taggart: Yeah, and I think they tend to think of, “Oh Fed, that’s the guy that steps in and gives us gives everybody money when they need it to get out of these these problems we’ll get into,” so they still think of the Fed as the hero in the story and of course that’s what the Fed is out there portraying themselves at but confidence in the Fed is now cracking. We’ve finally seen it made into the mainstream media where they’ve been picking up stories of these Fed executives that were doing these insider trades that really look pretty specious. They really look pretty self-serving. For guys that were setting policy and knew where policy was going to go they’re making many multi-million dollar trades that they benefited from those policies. So I guess the question is: How damaging is all this for the Fed? Is it something the Fed can shrug off or the fact that Rosengren, Kaplan, Clarida, and now Powell’s trades themselves were leaked the other day and we’ve got senator Warren out there calling for an SEC investigation of the Fed? Is this going to stick?

Danielle DiMartino Booth: I hope it sticks hard enough to go all the way to the SEC also investigating congress since Nancy Pelosi herself has an investment club that follows her investments.

Adam Taggart: Hallelujah, sister.

Danielle DiMartino Booth: I digress. What I find to be curious about this is the timing. The end of January is when Powell’s term comes up and I’m just going to lay a few things out there that are in the public purview. I’m not throwing anything out there that’s not public. In 2016 Lael Brainard publicly contributed to Hillary Clinton’s presidential campaign. That was very much frowned upon inside of the institution because it was a big no-no. A huge no-no. But of course that was under the presumption that she was making that she was going to be treasury secretary and then Trump won. So there were a lot of people inside the beltway when Biden was elected who said, “Well, he’ll make good on that democratic pledge,” and then it was Janet Yellen instead who was appointed to be treasury secretary just because we want somebody who’s totally market savvy in charge of the treasury in case anything goes wrong which is what a labor economist — how they’re defined. So Lael Brainard has been looked over not once, but twice. And the betting markets in vegas predicted dot org has a 92% probability as of September the 12th that J Powell’s going to be renominated. September 12th, 2021. That’s what his probabilities were and all of these trading scandals start to hit around that time. Now there is a committee inside of the Fed which you can find on the federal reserve board’s website that is in charge of monitoring the operations of all federal reserve district banks. The chair of that committee is Lael Brainard. In a recent CNBC interview my former boss Richard Fisher stated the following. In his capacity as president of the Dallas Fed in his past life the person in Lael Brainard’s position, her predecessor as head of this committee was the one who signed off on his personal financial statements that had been annually submitted. So because she’s been chair of this committee for longer than 2021, back several years, she’s presumably been seeing all of these same trading types of disclosures from the same individuals and yet now is when all of the revelations are coming. I just don’t believe in coincidence and a phone call to the federal reserve public affairs department asking for a description of what the committee does an actual physical phone call was stonewalled and there’s still nothing on the website. So again, these are all matters of public record but I find what’s going on inside the Fed today to be extraordinarily machiavellian. If you look, especially at Powell’s holdings, they tend to be index funds. That’s a requirement at the Fed. Those are requirements that are handed down from congress. So are the optics of what’s going on right now awful? I respect a lot of Kaplan’s hawkishness was the fact that he had individual holdings in stocks that were multiple millions of dollars each a no-no. It certainly was when I had class one clearance at the Fed. I certainly wouldn’t have been able to hold with those but somebody’s been signing off on these financial disclosure statements for years now and in theory the person who would benefit the most from having all of this dirty laundry aired happens to be the one Elizabeth Warren has checked as her chosen one to implement socialism as we know it in America. Again, I just don’t believe in coincidences. So the optics damning for the Fed? Very. Extraordinarily. Excruciatingly in the middle of a financial crisis in the middle of a pandemic, front running Fed decisions. Blah blah blah blah blah. I get it, but we’ve been in unconventional monetary bill since December the 14th, 2008 at last check. So it’s just too convenient timing wise for all of this to be coming out right now and by the way the senate’s not going to confirm Brainard. Good luck with that, Elizabeth Warren. And I’m not trying to take sides or not, they just understand that she would be a puppet for the progressive movement and help push through modern monetary theory universal basic income as we know it today, which by the way, we’ve just taken for a long test drive in America and it failed. The only thing UBI succeeded in doing was creating inflation and lots of it.

Adam Taggart: And potentially a disincentive for people to go work.

Danielle DiMartino Booth: That too.

Adam Taggart: Alright well, you do such a great job of anticipating my questions and answering them beforehand but just to recap a little bit, so it sounds like what you’re saying is yes it’s going to hurt the Fed. It will be more than just a flesh wound. Secondly, there seems to be a concurrent or maybe this is the causal reason for the leaks about the insider trades, but that there may be a kind of a coup underway inside the Fed by folks that want to get Lael Brainard the chairmanship. Sounds like you’re saying even if Powell gets so damaged here that Biden doesn’t choose him to stay on when his term expires, you don’t think that Brainard’s actually going to survive appointment. So does that summarize it all quickly?

Danielle DiMartino Booth: You summarized it very well. In fact, there’s a democratic member of congress who said good luck getting Brainard through. So if your centrists democrats are not going to be on board, you don’t confirm via reconciliation. You got to have the votes. It cannot be 50/50, straight party lines. Confirmations don’t work that way in the senate.

Adam Taggart: Okay, so just to ask you to sort of just postulate here, do you think Powell’s going to get re-extended or do you think somebody else besides Brainard is more likely to get appointed?

Danielle DiMartino Booth: I think the door has certainly opened to a third party to come in. I do. The betting odds right now are Bostick and Roger Ferguson who’s come out of the private sector but he was at the Fed before, so there are two other individuals who are theoretically, if you’re looking at Vegas, in the running. Their probabilities are low, but that being said, Brainard’s are still down at 20% as well so there is indeed the possibility of a third person but it has to scare the tar out of Biden because the most upsetting potential event for the financial markets at this point could be a change of leadership at the Fed, especially if they’re about to shift policy. There’s only so much you can do to upset the financial markets when they’re this fragile.

Adam Taggart: And markets hate uncertainty and uncertainty at the most important institution in the world, as I said in the introduction, doesn’t help the situation.

Danielle DiMartino Booth: Exactly.

Adam Taggart: Alright, so last question on this topic. Whoever it looks like may win out as we get closer. Would love to have you back on to give us a sense of what a Fed under their tenure might look like policy-wise in terms of differences from Powell, but since we don’t know yet the remaining question I just want to ask you here is: With the folks that we just lost due to this insider trading scandal, has that shifted the tenor of the Fed one way or another? More hawkish, more dovish?

Danielle DiMartino Booth: Yes, absolutely. So Rosengren was going to be a voting member in 2022. He was definitely hawkish. He was clearly advocating for a taper earlier on. That puts more of a highlight on Christopher Waller who is new to the federal reserve board, who is a hawk. I hope to see a governor descent in Waller’s position. He’s the one that I paid the closest attention to these days, believe it or not, so put him on your radar screen. Kaplan would not have voted until 2023. He was clearly hawkish .The most important loss, however, even though his term was coming up, is Randy Quarles and we have banking supervision and regulation right now that is effectively leaderless. Theoretically Bowman and Brainard are running that particular extremely important area of the Fed but his stepping down early, in my purely personal view, to put his backing behind Powell because the position that Brainard theoretically does not want is second in command which is head of banking supervision and regulation which I think Warren would take but I think Brainard wants the chair position really badly but I think that Quarrel’s stepping down early as if to say, “Here’s the chair, Brainard. It’s yours for the taking,” let Powell go on to his second term. I think the one that people are not discussing enough is the fact that Quarrel’s stepped away however they put it in the press release early on. I think that that is the most symbolic and again you don’t want to have bank soup and reg not supervised at least from my memory of what the Fed does supervising the financial system. I’m sure it’s nothing.

Adam Taggart: That’s actually a great segue into the next topic I want to talk with you about but very quickly, I’m guessing a lot of viewers here didn’t didn’t realize what degree of intrigue there was at the federal reserve. It’s like Game of Thrones you’re describing.

Danielle DiMartino Booth: I’ve never seen anything like it. Back in the Geithner days in the heat of the financial crisis and zero interest rate policy and do we have to go to the zero bound and quantitative easing. Would we ever buy corporate bonds at the time? The answer was absolutely not. Would we ever delve into municipal bonds? At the time the answer was hell no. So all of these things that played out in ‘08, ‘09, ‘10 that just brisked right through, I’ve never seen anything of this drama inside the Fed. I can just imagine how much and aggressively they’re going to have to be redacting the transcripts which should theoretically be against the law.

Adam Taggart: Wow. Alright, well look, maybe it’s the next engrossing Netflix series that goes on there inside the Fed. The next reality series. Last major question on the Fed and that’s CBDBs, central bank digital currencies. So the Fed has — every time they talk about it they seem to show that they are really getting interested in doing this, that they are planning —

Danielle DiMartino Booth: Whenever you hear that there’s a white paper coming that means that — check back with me in a few years and that’s Powell, by the way. That’s all Powell. That’s Powell dragging his feet. Brainard would expedite the process. You’re getting to the crux of the division between the two philosophically. Central bank digital currencies — I did a segment for NPR for marketplace. They do provide a conduit with which to provide banking to the unbanked in America who are swallowed by payday loans and overdraft protection fees and these are real things. I’m not discounting but centrally digital currency is also a conduit through which to legalize, make federal reserve liabilities legal tender and bypass the treasury or marry the federal reserve to the treasury so that you can print money and directly give it to individuals at their accounts held at the Fed and that is why there are democratic congress people in Montana saying, “Oh no,” to Brainard because that’s Elizabeth Warren, Bernie Sanders, that’s their vision for the future is — because we know that the IRS can direct deposit money. They just can’t do it very well. There’s still people waiting for their stimulus checks out there. What they’re looking for is a more seamless and elegant conduit through which to deliver money directly to the people and that is what a central bank digital currency would accomplish.

Adam Taggart: Yeah and I mean we could have an entire interview on this on its own and maybe we should but I guess the question I have for you here is: Do you see a US digital dollar as inevitable?

Danielle DiMartino Booth: Well, we’re already digitized. The word digital is always what throws me. I’m not trying to push back at all because we’re already digitized.

Adam Taggart: Let me just say a currency of the form you just described. Is that inevitable?

Danielle DiMartino Booth: I hope not. I am concerned that if we continue as a country down the road to proficy and that China inevitably rises in the wake of that and they set the standard in terms of having a CBDC such that we have no choice but to also have one in order to coexist in the global financial ecosystem then it’s an inevitability.

Adam Taggart: I know there’s a lot of nuance here that we’re not going to have a chance to get into. If we have one, I’m just asking for your opinion here, do you see it being able to coexist with the other sort of coins in the cryptoverse or is the Fed going to say once it exists they’re going to say, “Nope. All those other coins are for terrorists and criminals and we can only use this one.”?

Danielle DiMartino Booth: So as a former bureaucrat, this is my view on your question. When I was at the Fed, like so many of my peers in the aftermath of the financial crisis, the level of talent and brain power was enormous and then once the Fed did the big bailout then everybody who was really brilliant went back out onto Wall Street. I say that because if and when the regulators can finally figure out what these things are such that they can be regulated, because that’s where we are right now, we’re in no man’s land, they don’t know what they’re dealing with so they don’t know how to thereby regulate it. They don’t know what it is, but when they finally figure it out and do place regulations on it and when the G20 finds a way to globally regulate most of it, then we can begin to address the answers to the question that you just asked but until regulators figure out what they’re dealing with I think it’s very difficult to say.

Adam Taggart: Okay and I think that the crypto experts or passionistas that I’ve talked to basically said the genie is out of the bottle, there’s no way they’re going to be able to stop all this stuff, and the question I’m asking you —

Danielle DiMartino Booth: You can always tax something out of existence, right?

Adam Taggart: Well exactly and I’m going to ask the question in a slightly different way and then we’ll move on which is: Before the cryptos came around I was always struck by how completely intolerant the Fed and the treasury were to anything that could potentially be a competitor and this goes down to the guy banging out silver rounds in his own garage, he’d go off to jail. So do you think that if they have the ability to understand and feel like they can go after these guys, will they based on principle or do you think they are looking for a way to kind of co-exist?

Danielle DiMartino Booth: I don’t know the answer to that question.

Adam Taggart: Okay, fair. I don’t know if anybody does.

Danielle DiMartino Booth: The reason I don’t have an answer to your question is because the factions are so divided right now who are pushing against even the establishment of a CBDC, the establishment of a Fed coin because they’re looking at it through a political spectrum whereas you’re looking at it through a spectrum of a means by which to transact and it’s two completely different angles at which you’re coming at the same entity.

Adam Taggart: Fair point and like I said, I don’t think anybody really knows what’s going to happen in the long run here on this but certainly —

Danielle DiMartino Booth: But again, you can Always — taxes are taxes.

Adam Taggart: Right, and I think if, rat holding this for one more second, I don’t know enough to really have an informed opinion but my sense is that the genie probably is out of the bottle technologically, but what the government can say is, “You can trade those coins all day long but the minute one of those coins tries to see the light of day in a transaction that we can see we may just tax the bejesus out of it.”

Danielle DiMartino Booth: Yes, sure and of course. I mean and that’s why when you get into D5 and and other nuances, things get really complicated really fast because you’re talking about things that are in the public purview and can be seen, things that are transactable, and that’s when you’re like, “Wait a minute, if we’re not in the shadows and we’re in the light of day then ergo are we taxable?” which I think is your point.

Adam Taggart: Yeah, and I’m sure we’re going to get a ton of comments from all the crypto folks all over the spectrum.

Danielle DiMartino Booth: I’m so excited.

Adam Taggart: Very last question on the Fed topic before we get to markets. Danielle, I make you empress tomorrow where you can put forth any reforms, any changes at all to the current federal reserve system including abolishing it if that’s what you decide to do. What are the biggest changes you’d want to put in place early on?

Danielle DiMartino Booth: I’ve always been of the opinion that —

Adam Taggart: We hope you’ve been enjoying this discussion with former Fed insider Danielle DiMartino Booth. The interview continues in part two where Danielle provides her outlook on the financial markets, whether or not she worries about a correction, and which asset classes she favors for the road ahead. To watch part two just click on the link provided in the description to this video below or go to YouTube.com/Wealthion but before you go please don’t forget to hit the like button and then click the subscribe button below, as well as that little bell icon right next to it if you haven’t already. It only takes a second and it really helps us out as the more subscribers this channel has the more excellent experts like Danielle we can attract onto the program in the future and if you’d appreciate a free, no strings attached portfolio review by a financial advisor who can help manage your portfolio with the risks that Danielle has highlighted here, just go to Wealthion.com and we’ll help set one up for you. Okay, I’ll see you over at part two of our video interview with Danielle DiMartino Booth.

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