How Cheap Credit Distorts Money with Joe Consorti

Oct 26 2022 • 1hr 25m

Show Notes

“The rates have been locked at 1, 2, or 3%...that’s completely distorted the way that people allocate capital; whether it’s human capital or it’s physical capital, they’ve gone ahead and done things specifically because the money is essentially free, rather than pursuing them because they’ll provide a real economic value.”— Joe ConsortiJoe Consorti is a Market Analyst at The Bitcoin Layer. In this interview, we discuss Austrian economics, Credit Suisse & the risk of large scale defaults, price distortions and how Bitcoin fixes this.- - - - When faced with economic turmoil, central banks have a few tools they can turn to, one of which is interest rates. Since interest rates are the price to borrow money, and prices are emergent, manipulating rates is an intentional distortion analogous to fixing prices. Rates instead should be a factor of the supply and demand of credit, risk of default, and a reflection of opportunity cost.However, during the financial crisis in 2007/2008, the US federal reserve had little option but to step in and repeatedly cut rates. They did this in an attempt to prevent complete collapse and to restart the credit-seized economy. Rates went to basically zero (and even negative in some countries), and since 2008, we have been in an era of cheap credit.Now, we are potentially in the midst of another financial crisis. Countries across the globe are battling with inflation issues for a raft of reasons, including supply-side constraints, excessive money printing during covid, and war in Europe causing energy shortages. To battle this, central banks are raising rates in an attempt to regain control.So does cheap access to credit really boost the economy and stimulate growth, or has it prolonged an artificial bull market in equities, over-financialised assets, incentivised mal-investment, added to the growing wealth divide and played a key role in near double-digit inflation?- - - - This episode’s sponsors:Gemini - Buy Bitcoin instantlyLedn - Financial services for Bitcoin hodlersBitcasino - The Future of Gaming is herePacific Bitcoin - Bitcoin‑only event, Nov 10 & 11, 2022Ledger - State of the art Bitcoin hardware walletWasabi Wallet - Privacy by defaultTexas Blockchain Summit - Nov 17-18, 2022 | Austin, TexasBCB Group - Global digital financial Services-----WBD572 - Show Notes-----If you enjoy The What Bitcoin Did Podcast you can help support the show by doing the following:Become a Patron and get access to shows early or help contributeMake a tip:Bitcoin: 3FiC6w7eb3dkcaNHMAnj39ANTAkv8Ufi2SQR Codes: BitcoinIf you do send a tip then please email me so that I can say thank youSubscribe on iTunes | Spotify | Stitcher | SoundCloud | YouTube | Deezer | TuneIn | RSS FeedLeave a review on iTunesShare the show and episodes with your friends and familySubscribe to the newsletter on my websiteFollow me on Twitter Personal | Twitter Podcast | Instagram | Medium | YouTubeIf you are interested in sponsoring the show, you can read more about that here or please feel free to drop me an email to discuss options.