In this episode, Senior Research Fellow at Mercatus Center and host of Macro Musings David Beckworth breaks down the rising risks of fiscal dominance—when the Fed prioritizes government solvency over price stability. He explains the historical context of fiscal dominance, the warning signs we’re seeing today, and why current debt levels, persistent deficits, and political gridlock are pushing us closer to stage three. Beckworth also dives into the mechanics of stablecoins, the Treasury’s issuance strategy, and potential reforms to the Fed’s operating system, including balance sheet management and NGDP targeting. He warns that without serious structural change, the Fed’s independence and credibility may be at risk. Enjoy!

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This Forward Guidance episode is brought to you by VanEck.

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Timestamps:

(00:00) Intro

(01:27) Major Regime Shift

(05:00) Last Era of Fiscal Dominance

(08:13) Ads (VanEck, Aptos)

(09:35) Fiscal Dominance Catalysts

(12:29) Phases of Fiscal Dominance

(18:37) Can Stablecoins Help?

(23:51) Active Treasury Issuance

(26:44) Ads (VanEck, Aptos)

(28:06) Is the Endgame YCC?

(31:29) Crossing the Rubicon

(33:23) Fed Monetary Policy Framework

(38:18) The Ideal Fed Reaction Function

(45:18) Rethinking Forward Guidance

(47:52) Balance Sheet Goals

(52:13) Realistic to Offload Duration?

(54:38) Should We Remove IORB?

(01:13) Final Thoughts

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Disclaimer: Nothing said on Forward Guidance is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are opinions, not financial advice. Hosts and guests may hold positions in the companies, funds, or projects discussed.

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