Home Depot’s Sales Fall Short on Lackluster Housing Recovery

Summary

Bloomberg Intelligence

Episode: Home Depot’s Sales Fall Short on Lackluster Housing Recovery

Date: May 19, 2026
Hosts: Paul Sweeney, Scarlet Fu
Guests: Drew Redding (US Homebuilding Analyst), Riley Griffin (Tech Reporter), Brendan Greeley (Author & Currency Expert), Amit (Tech Commentator), Caroline Hyde (BTech Co-Anchor)

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Episode Overview

This episode delivers a deep dive into Home Depot’s recent financial performance, highlighting the drag from a stagnant housing recovery, rising interest rates, and hesitant consumer sentiment. The discussion then pivots toward the AI transformation across tech and its impact on jobs, the explosive growth in data center infrastructure (with a focus on Meta’s massive Louisiana project), and a rich historical reflection on the power and evolution of the US dollar, including its global influence and how new technologies like stablecoins fit into the landscape.

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Key Discussion Points and Insights

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1. Home Depot’s Quarter and the Housing Market

[01:52–04:41]

• Neutral but Stable Results:
  • Home Depot’s latest quarter was “relatively neutral,” maintaining a “theme of stability” as demand remains in line with last year.
  • Slight miss on same-store sales, but management upheld full-year same-store sales guidance (0 to 2% growth).
• No New Catalyst in Sight:
  • High mortgage rates (~6.7%) and low consumer confidence are weighing on home improvement demand.
  • Drew Redding: “What the company is missing is kind of that next catalyst. And it’s really housing that continues to remain frozen due to elevated rates.” [02:42]
• Stuck Market Dynamics:
  • “We’ve been bouncing along a 4 million unit annualized rate in the housing market for a couple of years now.” [03:42]
  • Most homeowners have locked-in, low mortgage rates and aren’t incentivized to sell or move.
• Builder Tactics:
  • Homebuilders are “very aggressive” with rate buy-downs and other incentives and will need to “continue to offer those concessions to move inventory.” [04:09]

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2. Technology, Artificial Intelligence, and Workforce Shifts

[07:22–12:27]

• Meta’s Job Cuts and AI Investment:
  • Massive AI-related layoffs: “Meta…tomorrow folks are staying home…to learn as to whether you’re one of the 10% who are losing your job. That’s about 8,000 people…reassigning 7,000 to more AI focused work.” [08:09]
  • Move toward “flatter ecosystem,” smaller, more specialized teams in response to AI productivity gains.
• AI’s Impact on Productivity:
  • Paul Sweeney shares anecdote: Teams “are much more productive. Not 10% more, not 20% more. Three times, five times, 10 times more productive on some of their output metrics.” [09:36]
• Google and Blackstone AI Cloud JV:
  • Announcement of a major joint venture: Blackstone investing $5B in AI cloud infrastructure with Google, totaling up to $25B with leverage, building vast new compute capacity. [10:46]
  • Move is seen as “expanding out that Google cloud offering” in a capital-intensive, competitive field.

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3. Epic Scale: Meta’s $200 Billion Louisiana Data Center

[15:30–21:15]

• Unprecedented Investment:
  • Riley Griffin describes Meta’s $200B project: nearly 4,000 acres, 10 new natural gas plants for power—“about the energy consumption of New York City on a winter day.” [16:15]
  • “One of the largest private capital deals ever assembled is funding its development.”
• Impact on Rural Community:
  • Northeastern Louisiana’s Richland Parish is experiencing a “textbook boomtown” effect as 7,500 workers flood a community of just 20,000 people. [17:39]
• Agriculture to Tech Transition:
  • Local farmers struggle with unprofitable crops; Meta’s arrival brings hope and tension. “The promise of the land has been broken for a lot of folks.” — Dustin Morris, local farmer (via Griffin) [18:28]
• Why Louisiana?
  • The state’s abundant energy and political will: “Energy Louisiana, the utility…has told Meta: ‘Use all you want, we’ll make more.’” [19:15]
  • Rural, regulation-light regions are now preferred over suburban areas that resist data centers.
• Outlook:
  • The data center won’t open until 2028. “This is a story at its beginning.” [20:46]

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4. The Dollar: Past, Present, and Digital Future

[24:37–34:43]

• Origins of US Dollar:
  • Brendan Greeley explains the “dollar” began as a Spanish coin made of Mexican silver with a German name, not a distinctly American creation. “At its founding, the United States did not have control over the dollar.” [26:14]
  • Word “dollar” originated from Jocham’s Thaler (Bohemia, 16th century), used in English before the country was founded. [27:34]
• Path to Monetary Sovereignty:
  • The US achieved monetary sovereignty slowly, through several panics, regulatory changes, the creation of the Fed (1913), and national deposit insurance (1932). [29:04]
• Digital Money & Stablecoins:
  • Greeley argues stablecoins are “just a bank…with the same fiduciary responsibility,” only without the regulation. [29:50]
  • “Every time I hear…‘we’ve got the first private decentralized money,’ my answer is my dude, you just invented a bank.” [30:28]
  • Regulatory frameworks are needed for stablecoins, or “monetary sovereignty” will “erode.”
• Big vs. Small Money:
  • Larger-value coins are cheaper to produce per unit, a pattern that replicates in banking: “Banks…would rather deal with big loans, big deposits…than small…because the back office costs are higher.” [32:09]
• Commodities, Global Dollar Use, and Petrodollar:
  • US tolerates the offshore dollar (“Eurodollar system”), which supports global commodity pricing.
  • “The US dollar is unique in that since the 60s we’ve been willing to tolerate…offshore activity…there are $14T Eurodollars…$19T domestic dollars. They’re comparable in scale and still growing.” [34:10]

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Memorable Quotes

• Drew Redding (Home Depot analysis):

  • “The company is missing is kind of that next catalyst. And it’s really housing that continues to remain frozen due to elevated rates.” [02:42]

• Paul Sweeney (AI impact):

  • “His people with AI now…are much more productive. Not 10% more, not 20% more. Three times, five times, 10 times more productive.” [09:36]

• Riley Griffin (Meta data center):

  • “Meta is planting a $200 billion data center there. What that looks like is nearly 4,000 acres…building 10 new natural gas plants just for this data center alone. That’s about the energy consumption of New York City on a winter day.” [16:15]
  • “The promise of the land has been broken for a lot of folks. They’ve held land in their family for generations…unable to break even right now. So enter Meta.” [18:28]
  • “As one person said, we will move heaven and earth to make this happen for you.” [19:51]

• Brendan Greeley (Dollar history):

  • “At its founding, the United States did not have control over the dollar. It was very clear…they saw it as a silver coin.” [26:14]
  • “Every time I hear like somebody in crypto say, ‘we’ve got the first private decentralized money,’ my answer is my dude, you just invented a bank. We know how those work.” [30:28]

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Timestamps for Important Segments

• Home Depot & Housing Market: [01:52–04:41]
• Tech Layoffs, AI Transformation: [07:22–12:27]
• Meta Louisiana Data Center: [15:30–21:15]
• History and Power of the US Dollar: [24:37–34:43]

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Structural Table of Major Topics

| Time | Topic | Guest(s) | Key Takeaway | |--------------|---------------------------------------------|------------------------------------|-----------------------------------------------------------------------------| | 01:52–04:41 | Home Depot, Housing Market | Drew Redding | Stable but no growth, no catalyst without housing recovery | | 07:22–12:27 | AI in Tech, Workforce, Cloud Infrastructure | Amit, Caroline Hyde, Paul Sweeney | AI-driven layoffs and productivity, Google-Blackstone cloud JV | | 15:30–21:15 | Meta’s Data Center in Louisiana | Riley Griffin | Rural boomtown, shifting from ag to tech, unprecedented energy/land use | | 24:37–34:43 | US Dollar’s Global Power, Digital Threats | Brendan Greeley | Dollar’s non-American roots, sovereignty through regulation, stablecoins |

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Tone and Style

The episode is analytical, fast-paced, and rich in real-world context, shifting from detailed sector/company analysis to macroeconomic and societal implications of both old and new technologies. Speakers blend expertise with clear, relatable storytelling and doses of dry humor.

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This summary captures the breadth and primary insights of an episode that weaves together earnings news, technology disruption, transformative infrastructure, and the enduring—and evolving—power of America’s money.

Transcript

[Paul Sweeney]

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[Paul Sweeney]

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[Podcast Host/Announcer]

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[Paul Sweeney]

All right, Mildada mentioned Home Depot, so let' get a deeper read on what's going on there and check in with Drew Redding, our US Homebuilding analyst, to recap Home Depot's results. And I mean Drew, this company is just, no matter what, tethered to rising borrowing costs and consumer sentiment. And both of those are kind of working against it right now.

[Drew Redding]

Yes, it was a relatively neutral quarter for Home Depot. I think the theme is really stability. You know, they mentioned that during the call that demand is relatively in line with where it was a year ago. They did have a slight miss on same store sales. But I think what investors will latch onto and get a little bit of comfort with is the fact that they maintained their full year same store sales guide. Now when they initially came out with that it was calling for growth of 0 to 2%. So I do think that they left themselves with a little bit of wiggle room to see how the rest of the year plays out. But to your point, you know, we mentioned stability, that is the case. But what the company is missing is kind of that next catalyst. And it's really housing that continues to remain frozen due to elevated rates. We're back up near 6.7% and that's after getting to a five handle earlier in the year. And then, as you mentioned, consumer confidence. You know, we've heard this pretty much across the housing ecosystem, and it's that consumers are worried about the outlook for the economy, the outlook for employment, and they're just pausing on these big purchasing decisions.

[Paul Sweeney]

What's your world, Drew? Your world of home building and all that kind of adjacent stuff? Let's assume rates are higher for longer. How does your world adapt? I mean, it just seems like if I'm a buyer, I'm a seller, I got it. At some point I got to throw in the towel and say, hey, it's been a number of years here. This seems to be the new world here in real estate.

[Drew Redding]

Yeah, it does seem like the level of demand that we're at right now is kind of a floor. We've been bouncing along a 4 million unit annualized rate in the housing market for a couple of years now. The new home market has been relatively stable for a couple of years now. So, you know, there is a certain level of churn that's going to happen regardless of where rates are. Things happen. You know, people get married, they have kids, they need to move. But to your point, I mean, there's still 70% of mortgage holders out there with a rate at 5% or below. So without any forced selling activity, there's not a lot of urgency in the market. Now, from, from the homebuild perspective, what this means is that they're going to continue to have to lean on incentives. That story has been well documented now that they've been very aggressive in their use of mortgage rate buy downs to kind of make the math work a little bit better for their buyers. You know, coming into the year, I think there was some hope that, you know, rates were going to come down, they'd be able to take their foot off the gas pedal a little bit. But it looks like at least over the next couple of quarters, they're going to have to continue to offer those concessions to move inventory.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this. If your finance team spends more time finding data than using it, if there's one entity here and one here and one here and one here, if scaling your business feels like starting over. You need the Intuit erp. Intuit Enterprise Suite is the AI native ERP solution that's powerful, painless and proven. Learn [e-mail] ERP support for the show

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[Podcast Host/Announcer]

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

[Paul Sweeney]

Let's talk a little technology. You can do that with Caroline Hyde Btech co anchor. She joins us live here in our studio. Meta Cutting some jobs. I'm trying to read through the story here. My personal opinion is AI is a Job destroyer, not a job creator. I'm going to stick with that one for until somebody proves me wrong. What's going on in Meta?

[Amit]

Well, interesting to prove to the point the one optimistic note I might on that last view of yours. MIT recognized a few years ago that if you look back over 60 years about I think it's even 40 years, only 60% of the jobs that currently are existing today didn't exist then. Okay, so there is hope, okay, that we find ingenuity in our lower value human capital.

[Podcast Host/Announcer]

Language matters. Language matters.

[Amit]

I'm afraid a CEO who's going to talk out about eradicating jobs up to 8,000 of them over at Standard Chartered and calling it lower value human capital. That's going to hurt for the people out there, I've got to say. But by the by, I mean I'm in a different type of communications but the communications that we're getting from Matter is that tomorrow folks are staying home. If you're working in North America, you sit at home because you're going to learn as to whether you're one of the 10% who are losing your job. That's about 8,000 people. But before ahead of that they're actually reassigning 7,000 people to more AI focused work. So it's sort of a reassignment of the resources that they've got right now saying that new jobs are going to be related to AI. So here's your new types of roles that you're going to be seeing more broadly, Paul. You're seeing people perhaps moving from the area of social media where they've lent into and of course we've known that they've been moving the more hardware related and augmented virtual reality play and it's going more into augmented reality glasses but into more apps and focus on artificial intelligence weaving itself throughout matters business model. So chief people Officer is just saying this is going to be a flatter ecosystem, this is going to be smaller teams. They think it's going to be higher value, more enjoyable work. We'll see what the talent think about that.

[Riley Griffin]

Yeah, absolutely.

[Paul Sweeney]

And I believe that there's this whole push towards smaller teams. Anyway, across tech land everyone's singing the praises of this idea of keeping things really focused and Coinbase said what Some

[Amit]

teams will just be one person.

[Paul Sweeney]

If you're an engineer, that's not really a team.

Speaking to a young fellow over the weekend, 29 years old, works in a very big tech company. He manages I think a team of like five or six people. He says his people with AI now this is in the last six months are much more productive. Not 10% more, not 20% more. Three times, five times, 10 times more productive on some of their output metrics. It's just crazy. It's amazing. He says. And I said okay, I get it.

[Amit]

I get maybe his. If you're a solo, a solo engineer, maybe your team is.

[Paul Sweeney]

And I'm just as a young investment banker for the first three or four years of my job, that can all

[Amit]

be done by high value human capital. Don't tell me that.

[Paul Sweeney]

But having done that, you know how the process works too. If you haven't done that before, like you're not able to go be a

high yield pitch book for company XYZ credit rating blank boom, two seconds later it's out.

Then how do you go through it and fact check it know, fact check

that make me a pitchbook for a high yield deal will take me two or three days now. It's minutes.

Yeah. Well the formatting will certainly be taken care of by AI. That's, that's the most painful part of those pitchbooks. Caroline, while we have you, I got to ask you about Google creating an AI cloud business with Blackstone. Is this a joint venture of some sort?

[Brendan Greeley]

It is.

[Amit]

And actually Blackstone is putting in most of the money, $5 billion in equity. You lever that up, it's going to be 25 billion perhaps. We're talking 500 megawatts of compute in the next few years. That's what is it. One gigawatt is about three quarters of a million homes in terms of energy. So this is a lot of compute. But this is as they really focus in on the TPU's. This is their tensor processing unit. This is their chip that has suddenly made that AI so much more powerful and really impressed the market with vertical integration. Now Google builds cloud, they build data centers, but that's expensive. It's nice to get a partner on side to be able to do, do that heavy lifting for you not to put it on your balance sheet. Is that expanding out that Google cloud offering and they're setting up basically a new Neo cloud. So watch the shares the likes of core weave of Nibius of these other neoclosed clouds out there because it's getting competitive out there folks.

[Paul Sweeney]

But Alphabet do they. Are they turning to Blackstone because they need Blackstone as a funding source or what? It's a cool deal for Blackstone. I'm wondering why Alphabet's doing it.

[Amit]

Yeah, I think it is the money side of things. Like Alphabet's already announced that they're going to be. Was it all told these four players, whether it's Amazon, Alphabet matter, Microsoft is spending up to $750,725,000,000,000, 3/4 of a trillion. Let's call it in 2026. Yes, people have actually applauded Sundar Pitcher's decision to up its capital expenditure plans. But still a lot of money. It's still a lot of debt that they got to issue. And so it's nice to know that perhaps the financing of even greater expansion is being taken on by some other players. This is just up, you know, managing to scale even further how much their TPUs and their chips are doing the work. I mean, I have to say it's a big move ahead of Nvidia's numbers tomorrow because just think all these other new clouds they use in video GPUs.

[Paul Sweeney]

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[Paul Sweeney]

All right, you know how much we love these big take stories on the Bloomberg terminal. They're really, really compelling stories. The reporters take a ton of time, a ton of resources to get to the really big details. And this one's a good one, particularly if you're a fan of this AI story and all the money that's being spent. Met is doing a data center down in Louisiana. Like 200. It's just gonna be a big thing. $200 billion. Something crazy down there. And our next guest has a awesome story on this. Riley Griffin, tech reporter for Bloomberg News. Of course, she peaked when she graduated from Duke University. Riley, thanks so much for joining us here. Talk to us about Mark Zuckerberg and Meta. They're building this huge facility down in Louisiana. Talk to us about that.

[Riley Griffin]

Yeah, I mean, the scale of this facility is truly unfathomable. Paul, I spent weeks going to and from Richland Parish, Louisiana. That's in the northeast corner of the state. It's the Delta region, and it's one that has long faced economic hardship. Farming right now in the US Is a difficult task, particularly if you're farming cotton as this region does. And Meta is planting a $200 billion data center there. What that looks like is nearly 4,000 acres. President Donald Trump has said it will be Manhattan sized. They are building 10 new natural gas plants just for this data center alone. That's about the energy consumption of New York City on a winter day. And the one of the largest private capital deals ever assembled is funding its development. And that's all before we get to the 200 billion. So it's just a massive, massive project in a, in a very small farming community, which, you know, makes for, for tensions and growing pains. But also unlike a lot of American cities and suburbs that are pushing back against data centers, this is a community that is cautiously optimistic that it will prove to be an economic.

[Paul Sweeney]

So tell us a little bit more about what people told you when you went down to Louisiana and checked in with the locals there, those who would be directly affected by this.

[Riley Griffin]

Yeah, you know, before I went to Richland Parish, I didn't realize how much of an agriculture story this would be. I spent time with more than 100 people in the region and again and again hearing just how hard it has been to grow cotton, corn, soybean. You know, it really landed with me. These are folks who are losing hundreds of dollars on every acre that they plant. Subsidies aren't making up half of that. There are a lot of bankruptcies. Small farms don't even exist anymore. And you know, as one person, Dustin Morris, who runs a soybean and corn farm in the parish, told me, you know, the promise of the land has been broken for a lot of folks. They've held land in their family for generations. They don't even know how long back they've been in the parish. They're just unable to break even right now. So enter meta. After years of that, you know, a lot of people are trying to get in on the land rush. For now, one family has been the primary beneficiary. But it is a textbook boomtown. 7,500 workers have descended on a community of just 20,000. That comes with its own challenges. But folks are optimistic that Meta long term will provide some of the economic opportunity that has been lost over the last century.

[Paul Sweeney]

And what I think we're all learning Raleigh, about data centers is what is one of the gating issues is access to power. Do they have access to power down in rural Louisiana?

[Riley Griffin]

Well, Louisiana is an oil and gas state. So energy Louisiana, the utility that is working with Meta on this has, has told Metta, use all you want, we'll make more. They are saying that energy won't be the constraint. And they're going to build these 10 new natural gas stations, plants really to serve this one data center. Six of those are going to be in Richland Parish, just to put that in perspective. So I think Meta has really benefited from picking a place where regular Tory hurdles to getting that kind of, you know, fossil fuel generation has been a real boon. And we're seeing that across the board. Right. With these mega data centers, hyperscalers companies like Meta, they're not looking to Northern Virginia anymore. They're looking to the South. They're looking to rural regions where land is abundant, they can get lots of energy. And there are politicians who are willing to clear the red tape. And that's a big part of this story is thinking about Louisiana politicians at the national level, at the local level, at the state level who really heard Meta and its demands and said we will do everything it takes. As one person said, we will move heaven and earth to make this happen for you.

[Paul Sweeney]

Wow, that is some pretty strong, a pretty strong stance there. What surprised you the most, Riley, as you were doing the reporting for this in terms of I know the scale was something that, you know, kind of blows all our minds. But what took you by surprise?

[Riley Griffin]

Yeah, I again, coming back to the state of American agriculture, that's not a sector I've actually covered. I've spent many years covering health care and now I cover tech. But to to learn more about ag, it feels like you can't tell this story about rural Louisiana without telling a story of agriculture. So that really stuck with me. And just thinking about the long term questions, this is a story at its beginning. The data center is an opening till 2028. So more to come.

[Paul Sweeney]

Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market add paid for by Public Holdings Brokerage Services by Public Investing Member FINRA, SIPC Advisory Services by Public Advisors SEC Registered Advisor Crypto Services by 0/ash all investing involves risk of loss. See complete disclosures at public.com disclosures small

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[Paul Sweeney]

We want to continue on with Bloomberg Intelligence and we have a great guest right now. Let's talk about currencies, because people conflate a currency with the country that issues it, right? Like the US Dollar equals The US and vice versa. But if you look at the history of the dollar, it tells us otherwise. Our friend Brendan Greeley has devoted years to studying this and based his PhD dissertation on it as well. He joins us now. And full disclosure, Brendan used to work at Bloomberg as a reporter for BusinessWeek and as an anchor on Bloomberg Television, hosting Surveillance with Tom Keene and myself. So welcome back, Brendan.

[Brendan Greeley]

Thank you. It's so great to be here. I have one correction to make, unfortunately. When I arrived at school, they told me your book, your popular trade press book about the history of the dollar cannot be your dissertation. So I have a completely different.

[Paul Sweeney]

Oh, my gosh.

[Brendan Greeley]

It's too. It's too approachable.

[Paul Sweeney]

Wow. Okay. Yeah, no, you didn't need it to be much more obscure in your dissertation. Well, let's talk about your book then. It's called the Almighty dollar and about 500 years of the world's most powerful money. The US is about to celebrate its 250th anniversary this July. But how does the history of the dollar go back 500 years?

[Brendan Greeley]

So I had to figure out how to write about the dollar. I had to figure out where to start. So I thought I would start in 1971. Nixon closes the gold window. And then I sort of, like, keep pulling that thread and I end up in 1913 with the Fed. And then you end up with what I've been thinking of as the 1776 problem, which is that we learn in school to assume that countries have monetary sovereignty, that they have control over their own currencies. The problem with that is when you get to 1776, United States declares political sovereignty, but it chooses as its currency a Spanish coin made of Mexican silver with a German name.

[Paul Sweeney]

I didn't know that.

[Brendan Greeley]

And so we can talk through, like, where that came from and how we got there. But for me, the most important part of this story is that at its founding, the United States did not have control over the dollar. It was very clear when you look at the correspondence from the Founding fathers, what they thought a dollar was. They saw it as a silver coin. Alexander Hamilton called this coin the ancient dollar. And I wanted to actually title the book the Ancient Dollar. And my editor was like, do you intend to sell? And Thomas Jefferson said, it's important when we choose a currency to choose one that the people are already familiar with. So I think of monetary sovereignty now, sort of, after doing the work on this book, as something that has to be won with a lot of work, very slowly over time. And it's Constantly in danger of eroding. So the story of the dollar is not the story of America. It's not the story of the Federal Reserve. It's not the story of the United States Treasury. It has its own history. So I ended up, but, you know, literally at the bottom of a Czech silver mine, looking at 400, 500 year old chisel marks to understand sort of the origins of this currency that is much older and much powerful.

[Paul Sweeney]

When did the dollar that we know of, when did that come into existence

[Brendan Greeley]

really define what we know of?

[Paul Sweeney]

Okay, I don't know when did what we use now.

[Brendan Greeley]

Well, okay, so, so this silver coin, I'll give you like a brief potted history. I think we can do this in like one radio minute.

[Paul Sweeney]

Okay.

[Brendan Greeley]

Which is that there was this silver mine in a place called Jochemstal in Bohemia. They produced only very high quality large silver coins. Those were very useful for trade. Those coins became known as Jocham's Thaler, from Jocham's Taller and that got shortened to thaler. And then in Dutch, dollar, and then in English it became dollar. This is all in the 16th century. Right. So early, early in the 1600s, Shakespeare used the word dollar in his plays. In the Scottish play and in the Tempest, there are mentions of, of the dollar. So it was clear that that was a coin that was familiar in English well before the founding of the United States. So when you actually get to the Constitution and what we think of as the actual United States, not just the colonies, there was about a 60 year period to take this silver coin and turn it into what we think of now as a dollar, which is bank money.

[Drew Redding]

Okay.

[Brendan Greeley]

So what we think of now as a dollar, it sits on the ledger of a bank, of a commercial bank. It's a bank deposit or bank note that's printed by the Fed. But increasingly nobody uses cash. So just talking about bank deposits. So the United States had to win sovereignty over that very slowly. And there's this long history of panics in the 19th and early 20th centuries. And after each panic there's new regulation. So panic of 1837 introduces comptrollers of the currency at the state level. It introduces reserve requirements. You have to hold silver in the bank. You know, 1861 there's. Or 1862, there's new legislation during the Civil War introduced, produces backing banknotes with treasuries.

[Paul Sweeney]

Right.

[Brendan Greeley]

We had to figure that out.

[Paul Sweeney]

Right.

[Brendan Greeley]

1907, we have the Federal Reserve, which provides cash in an emergency. 1932, after that bank panic, we finally get national deposit insurance. That's huge. No other country, no other currency zone nearly the size of ours has unified deposit insurance. Only America has that. And so to answer your question, I think it was by 1932 that we had stable regulated banks.

[Paul Sweeney]

Gotcha.

Okay. So regulation was key here. And making a lot of mistakes and kind of addressing those mistakes was key in how the dollar system grew up. Where does that leave us now? When we talk about things like stablecoins or, you know, cryptocurrency, how do you think about the dollar's role in a decentralized financial system where regulation is, is less robust, if even there?

[Brendan Greeley]

I think for me, the key to thinking about crypto is that it's not new, it's not that novel. I think of crypto as finances of the past. Never happened. When you look at the various kinds of crypto, there's bitcoin, that's basically a commodity. We know how that fits into the financial system. It's a commodity you think about. Most coins are they're essentially equities. Stablecoins, to your point, are really interesting case because as you know, they're pegged one to one to the dollar, but to me it just looks like a bank. So right now we have decentralized money. Commercial banks, when they make a loan, when you take out a mortgage, they are not getting that money from somewhere else. They're marking that up on their bal sheet, brand new deposits for you. A stablecoin provider has the same fiduciary responsibility as a bank. They've got when you deposit, they've got to buy assets. Those assets have to have meaning. We have to know that they have the assets they say they have. Every time I hear like somebody in crypto say, you know, we've got the first private decentralized money, my answer is my dude, you just invented a bank. We know how those work.

[Paul Sweeney]

Except they're not regulated like a bank.

[Brendan Greeley]

That's exactly right. And so what I worry about, to my point earlier, about monetary sovereignty, see, it's won slowly and painfully over time and it's constantly in danger of being eroded. And what I see when I look at stablecoins is these are bank dollars that are slowly slipping out of the regulatory control that we've built up over the course of a century. Like, we know how finance works, we know how banks blow up. And I know that the Bloomberg audience right now are shaking their fists in anger at the radio. I do think that like the basic bulwark of fdic, comptroller, Federal Reserve, that we built up to protect banks needs to be extended full force to stable coins. And I think if you did that, they'd lose a lot of their appeal because it's no fun running a bank because it's very well regulated for obvious reasons.

[Paul Sweeney]

Big money versus small money. What is that?

[Brendan Greeley]

Well, there's this sort of theory of coins, you know, physical coins that points out that small coins are much more. No, actual coins. Jingle, jingle. Yeah, that actually points out that small coins are much more expensive per unit of value to produce because each coin had to be hammered out. It's an industrial process I've seen.

[Paul Sweeney]

That's why we're not printing or minting the penny anymore.

[Brendan Greeley]

Yes, absolutely right. Like money is a product, somebody's got to produce it. Money doesn't happen by magic. And so the big coins are cheaper per unit of cost to produce. And what we found sort of historically is that mints, almost all mints were privately run, would much rather make the big coins. So you have this constant demand for small coins to settle small retail transactions. Right. These are, these are not. It's not as if the small coins are units of the big co. They're completely different economies. So when we look at the economies of Renaissance Italy, Florence, Genoa, Venice, they all had a big silver coin for international trade and small coins, and the exchange rate fluctuates between the two of them because the small coins are for local purchases. And you've got to manage inflation in a slightly different way than you do with a big coin. So I think that's still true. Now, banks are like mints. They produce our money. Banks for the exact same reasons, would rather produce, would rather deal with big loans, big deposits, big transfers, than small loans, small deposits, small transfers. And so I think we've replicated that system with banks. And when you look at the problems with banking in America, rather the challenges of getting people into the financial system, it's the exact same problem. Banks don't want to handle small depositors. They don't want to make small business loans because the back office costs are higher. This is a problem that would be very familiar to Amit.

[Paul Sweeney]

I want to switch gears and talk a little bit about currencies used in commodities and international systems. We talk a lot about this petrodollar because oil, which we talk about constantly, given how much it's risen, is priced in US dollars and how other central banks are kind of beholden to the US because everything is priced in dollars and how they want commodities to be priced in other currencies for instance, is that doable given where we sit? Is this something that the US controls, or is it all way beyond our control?

[Brendan Greeley]

I think so. I've been splitting hairs on this one. I think it is within our control but beyond our regulation. And what I mean by that is when we think of the offshore dollar system, what we think of as the Eurodollar system, this is just foreign banks producing their own dollars, manufacturing their own dollars, using new loans denominated in dollars. Okay, so the Fed doesn't have any oversight. The treasury, the comptroller, we can't look at what's happening. But the Fed does step in, as we know 2008, 2020 with these swap lines with foreign central banks. To me, that says the the US dollar is unique in that since the 60s we've been willing to tolerate in the United States some level of offshore activity. It's very useful to the United States to have these offshore dollars and in return we provide this service. Is it sustainable? It seems to be so far. When we look at measures of Eurodollar growth, of offshore dollar growth, that line is still going up and to the right. There are 14 trillion Eurodollars offshore dollars. There are 19 trillion domestic dollars. They're comparable in scale and they're still growing. So offshore banks seem to think it's sustainable.

[Podcast Host/Announcer]

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