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- [00:00]
Host
Everyone keeps asking why the recession that was promised never came, why bitcoin is still so volatile, and what the next real use case for crypto actually is. Today I'm talking with Campbell Harvey about all of it. The yield curve.
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Campbell Harvey
The yield curve tells us something about what's expected by the market. And I believe that there is good news ahead.
- [00:20]
Host
AI driven productivity so we've not really
- [00:23]
Campbell Harvey
seen the impact of AI yet. This is just the tip of the iceberg in terms of productivity. Bitcoin versus My paper makes the case that Bitcoin is not a substitute for gold. So some people say, oh well, Bitcoin's digital gold. It is not a substitute. It's better to think of it as a compliment.
- [00:49]
Host
Tokenized real world assets stablecoins and why crypto may become the payment layer for AI agents.
- [00:55]
Campbell Harvey
Agents need to be able to transact 24. 7, not during banking hours. They need a way to do transactions cheaply and securely. All of this invites crypto.
- [01:10]
Host
This one goes way beyond price charts. It's about where markets, money and technology are actually headed next. Would you rather hold Bitcoin, gold or tokenized assets in the next cycle? Let's go.
- [01:23]
Campbell Harvey
Let's do. Foreign.
- [01:37]
Host
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- [02:09]
Interviewer
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- [02:10]
Host
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- [02:35]
Interviewer
Cam, we've spoken quite a few times over the years. This is the first time when I feel like markets are completely broken and it's very difficult to project what comes next. The recession that was promised has effectively never come. I guess depending on how they define recession and what Metrics you look at and markets seem to continue up no matter what. My friend Matt Hogan made a joke that recessions are now illegal. You've obviously done quite a bit of work on the relationship between yield curve and recessions. How do you view what's happening right now?
- [03:10]
Campbell Harvey
So I'm actually very positive. The yield curve tells us something about what's expected by the market. And it has been a remarkable indicator over the last 60 years with a very good track record. And when it's normal, so the slope is upward, meaning short rates are lower than long rates, that's good news. And right now we're in that phase. And I believe that there is good news ahead in terms of productivity increasing. So we've not really seen the impact of AI yet. So this is just the tip of the iceberg in terms of productivity. The US in particular is in the driver's seat, I will say as usual, but it is kind of surprising that it's still in the driver's seat in terms of this innovation. So I do think that with this surge of productivity, this will lead to, to surprisingly higher growth.
- [04:22]
Interviewer
I tend to agree. I'm just curious your thoughts on why we didn't get the recession that seemingly was being projected for all those years.
- [04:31]
Campbell Harvey
So there are many different reasons for that. So the yield curve did invert and it was when that happened, it was different than previous inversions, because previous inversion people just ignored. It was only after the global financial crisis that people realized that, oh, the yield curve inverted before the global financial crisis. So maybe there's some information in it. So when it inverted in late 2022, people noticed and they took actions. So think of this as, are you going to make a major capital expenditure that is financed with debt in the face of inverted yield curve? Like, no way. So it actually changed behavior. So in the past, my indicator, you saw it and it gave you some advance warning. However, recently given all of the attention paid to changes behavior. So observing the slope of the yield curve actually changes your behavior and in a way degrades the predictability of the indicator. So once the indicator is well known, this is a typical thing throughout the history of finance. Once you've got an indicator that's well known, then it stops working because people's behavior actually changes. And if you look at the data, it's very clear. So we know that GDP has got four components in general consumption, investment, government spending, and net exports. So you don't see any recession in consumption or government spending or net exports. But after that inverted yield Curve, there was a significant pullback for three quarters in investment and that is a very important part of gdp. But that pullback wasn't enough to put us into a recession.
- [06:55]
Interviewer
That's so interesting and so poignant that once everybody knows about something, obviously it no longer works because they change their behavior to make sure that the worst case doesn't come true.
- [07:06]
Campbell Harvey
Exactly.
- [07:07]
Interviewer
Yeah.
- [07:08]
Campbell Harvey
That's a good thing, by the way. Yeah, of course it's a good thing. Because if you think about this as kind of like risk management, the way that the inverted yield curve was used this last time and is far better to take that risk management. Rather than be surprised your company's at risk, you have to do mass layoffs. No, it's way better to manage that risk. And I think the yield curve was useful for that.
- [07:38]
Interviewer
Very interesting. So I want to pivot slightly towards bitcoin and defi, which I know my audience is very passionate about. So you've been teaching about bitcoin at Duke far, far longer than it's been popular. You wrote a book on defi that came out in 2021, so presumably you're already writing it during the defi boom of 2020. What surprised you over the past, let's say, decade since you've been looking at this?
- [08:04]
Campbell Harvey
So I recently did a keynote in Hong Kong and, and the title was the Wandering Path to Satoshi's Vision. So let me unpack that a little bit. So the original Satoshi Nakamoto paper, and this is in 2008, Bitcoin was launched in 2009, talked about an alternative way to do payments. And I argued in this keynote that we have kind of wandered from that vision that cryptocurrency isn't really used for payments other than payments for speculation. So over 90% of the use of crypto is purely for speculation. And in crypto in general, and I'm talking about non collateralized crypto like Bitcoin or ETH, it's extremely volatile. So think of Bitcoin as four times the volatility of the S&P 500. And people have tried to rebrand bitcoin. So instead of Satoshi's vision of a payments mechanism. No, it is a store of value, it is a safe haven asset. It is an inflation hedge. And I've been very critical of that viewpoint that we don't have enough data, number one, in terms of store value or inflation hedging. And for any asset that has got four times the volatility of the stock market, it is immediately disqualified as A safe haven asset. And just by the way, gold has about the same volatility as the stock market. So gold is much less volatile. Gold has got a track record of millennia, not 15 years. So. So we need to be careful on this rebranding. And I do think that we've kind of wandered away from the original path. And I will say in this talk, I said that there is considerable reason to be positive in this space in terms of what's going on with the tokenization of real world assets. And the exemplar is the so called fiat stablecoin. And this actually is solving problems, problems within our financial system in terms of speed, security, cost of transferring. And it's not just fiat. We have tokenized bonds, we have tokenized stocks, we have tokenized gold and commodities. So I think that this is a really big deal. And indeed I see the space gradually, but with increased acceleration pivoting towards real world asset tokenization. So a different type of crypto and of course we are in a drawdown for the main cryptos that doesn't happen with tokenized assets. The value of the asset is the value of the collateral. So if you have tokenized gold, it is tied to the price of gold. So this is a much different technology. Again, perhaps something that allows us to get closer to Satoshi's vision.
- [12:16]
Interviewer
Bitcoin is obviously still more volatile than equities that some estimates say three times, you said four times. I think we're all in the ballpark there. That started at 8 times or 10 times or 15 times. So obviously that volatility has dampened slightly over time. Is there a threshold or a point at which you would consider it a viable store of value or even in the consideration to be 1, if it 1 or 2x volatility, you know, 1 and a half, 2x volatility. What's your number?
- [12:46]
Campbell Harvey
So let's be careful here. I've been in this space a long time, so I got into the space in 2012, so it's really early on. And before that there's no liquidity for bitcoin trading. So it is reasonable to look at let's say the past, like 13, 14 years where we've got some trading venues. And if you look at the volatility of bitcoin over that period, not 2009 and 2010, the volatility hasn't changed that much. So yes, you're correct that it was four or five times and now we're three or four times. That to me is not a significant decrease in volatility. So 60% volatility is really, really high. And over the years, I was told by many people, oh, just wait, just wait. Because when the markets become more liquid, the volatility will come down dramatically. Well, the markets have become more liquid and the volatility has not decreased, in my opinion, significantly. So what is the reason that the volatility is so high? So again, people have said, well, it's illiquidity. And just to be clear, what I mean by illiquidity is that a large buy or sell will move the price very dramatically and cause volatility. So illiquidity can't be the main story because we've got evidence, historical evidence now, that there's only a minor effect on volatility. So it's got to be something else. And there are two related reasons, in my opinion, that volatility is so high. So the number one and kind of obvious reason is that the Bitcoin is not collateralized with anything. So you might say, well, fiat currency isn't collateralized either, but it kind of is because the US is not going to default on, on their debt. The US has, has dollars as legal tender. You need to pay your taxes in US Dollars. If you don't pay your taxes, you're potentially incarcerated. So there's a lot of reasons to think that there is some value to the US dollar, whereas bitcoin, it's got value because people believe that the price will go up in the future. So that is a much different situation. So given that there's no backing officially for bitcoin that increase risk, and I said there's a second reason that is correlated with this. And I do think that it's important to, to take this all into account. And that is disagreement. And I've got recent research on disagreement. So let's compare, let's say Bitcoin to Apple stock. So there's disagreement over the value of Apple stock. And people take a look at Apple's business, they extrapolate into the future potential revenues and costs and come up with what they think is a fair value today. And there's disagreement over that because you're not quite sure about what the future cash flows and risks actually are. But that disagreement is narrow for Bitcoin. There's no obvious way to value Bitcoin. There are no revenues from Bitcoin. So it turns out that there are very different forecasts of what the true value of Bitcoin should be. So this is not a narrow band plus or minus $100 this is a massive band where there are people that believe that bitcoin is worth zero and other people that believe that bitcoin is worth $1 million. So when you've got extreme disagreement like that, there is the possibility that any information coming into the market leads to large price movements or volatility. You put similar argument for gold and you get this extreme volatility.
- [18:07]
Interviewer
I mean, you talk about not, you know, the fact that bitcoin obviously doesn't have earnings. It can't be valued in the same way as Apple shares. Neither can gold by that lens. Correct.
- [18:20]
Campbell Harvey
So it's interesting to contrast gold and bitcoin. Indeed, that is the topic. And maybe you could link to my SSRN paper called Gold and Bitcoin. So it is interesting to contrast the two and there are some similarities, but some very, very sharp differences. So the biggest similarity is the inflation. So gold inflation, which means new mining supply very steady for the last dozen years, about 1.9%, which is in around the range of economic growth. So just ideal bitcoin inflation is less than that today and going even lower. So that's a similarity. Also the decentralization of production is a similarity with miners all over the world for both gold and bitcoin. Indeed, there is no country that really dominates the gold mining new supply. Interestingly, China is the largest producer, but unlike rare earths where they've got 80 or 90%, it's less than 10%. So no country controls the supply. But there are risks. And my paper details one particular risk that's new for bitcoin. So let me detail that risk. And it's actually the risk is an old risk, but it's only operational recently. So number one, we were in the middle of a drawdown for bitcoin. And my research shows that again, sampling from, let's say 2012, when we actually have some trading, some liquidity, my research showed that there were six episodes where Bitcoin drew down more than 60%. So from a peak to a trough, more than 60% decrease. And that's remarkable over a short period of time. So we're talking 13, 14 years, six drawdowns. We're in number seven right now. Now this we could brush off as well. We've seen that before. That's exactly what you expect with volatility. And that I think is definitely a valid argument. And one thing that I also do in my paper is I don't just detail the drawdowns, I also look at the recoveries. You can call it a draw up if you want and they're spectacular. And to have the strategy, if you're prescient and can buy at the trough, is just enormously profitable historically, but less
- [21:43]
Interviewer
so each cycle, interestingly. Go on.
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Campbell Harvey
Indeed. So the question is, the usual question, is this time different? So is there something else going on? And my usual response to this is every time is different, number one. And in this particular case, I do believe there are two distinct differences between this drawdown and the other six. So let me tell you number one. So given that most of the interest for crypto is focused on speculation, we actually have some new ways to speculate. So there's competition for the crypto, whether it be Robinhood offering fractional shares with no transactions costs, and other online brokers. So this brings in a very simple way, on your mobile phone, you can do highly speculative trading with assets that might have greater volatility than Bitcoin, in a way no transactions cost. You've got a middle person, your online broker. So it's reasonably safe to actually do this. You can even not even bet on individual stocks, but take a leveraged position in an ETF which delivers enormous volatility. So you've got this competition from the stock market and simultaneously you've got a brand new market that's available. Prediction markets, we can bet on anything. So this is competition. And I think that given the main use we've seen is in speculation, there's just more ways to gamble. So that's number one. So competition number two is something that I described as a known risk, but only operational today. So let me detail this risk and it's called the 51% attack. So this is a simple idea that indeed is in the abstract of Satoshi Nakamoto's famous paper in 2008. So somebody can attack the network with 51% of the hashing power of the network and then develop the longest chain, effectively take over the bitcoin blockchain. So this is known from the very first paper, but it just didn't make sense. So like it, it wasn't incentive compatible. So this is what I mean. Why would you spend billions of dollars investing in mining equipment? You spend all this money and then you take over the network, but the price of bitcoin would collapse to zero. So you spend all this money to get nothing. So the only way we could justify this is a nefarious geopolitical entity, a country or an organization wants to do havoc to the bitcoin kind of crypto space, thinking that that might spill over into the main financial system. That's the only way it made sense until a couple of years ago. So let me describe the attack. So the attack is an attack, just the usual thing. You amass the hardware to take over the network and that's going to cost billions of dollars. The same thing in my paper, Golden Bitcoin, I go through the calculations as to how much it would take to take over the network and it is surprisingly affordable. So what do you do? The cost is about 50 basis points of the value of Bitcoin. That's what I mean by surprisingly affordable. But again, you are at this situation where, okay, I'll spend $8 billion to take over the network, but the price will collapse to zero. The difference today is the derivatives markets. These markets are highly liquid. So what you want to do is to simultaneously during the attack, take a short position in Bitcoin. And as you know, with a short position, the ideal outcome for you is if the asset goes to zero. So you would have to do this offshore because it's blatant market manipulation. But it is feasible with the offshore derivatives markets to launch a profitable attack. So this is not talked about a lot, and I'm not sure this is a real risk of a network attack. I also contrast this with gold. There is no risk that I can think of that the price of gold goes to zero. This idea of a network attack, even though, again, it's a bit under the radar screen, I think certain traders are taking that into account. And I should also say that even if somebody put a consortia together to announce the intention of building a giant data center to take down Bitcoin, that would have an impact of highly negative impact on prices.
- [28:25]
Interviewer
Yeah, I've seen that argument from Justin Drake and others at Theorem. I think it makes sense. But it's simplified, obviously, because A, it would be pretty highly telegraphed if you bought $8 billion worth of ASICS. But also there's the mining, the setup, the time, the electricity, and a lot of other factors. From what I've seen, I don't know that it would be feasible. But you're basically saying that, right? You're saying it's a possibility, even if distant. We've seen 51% attacks on other networks before and they all still continue to exist, even smaller and less secure networks.
- [28:59]
Campbell Harvey
So just to be clear, in my paper, Golden Bitcoin, I go through all of those costs. So the electricity, the wear or the data housing, all the electricity, all these details, plus a considerable inflation on the price of the actual mining hardware, because the price would go up. You might have to build some of this. So I do have yet another paper that contrasts with Ethereum. So Ethereum is not as vulnerable to this type of attack. And, and let me explain why, and this is important because all of these tokenized assets, most of them reside on either the Ethereum blockchain or Ethereum compatible blockchains. But Ethereum has a different method. There's no mining anymore, it's proof of stake and you'd need to take over at least a third of the existing Ethereum and that turns out to be really hard to do. And the reason is that much of the Ethereum is staked and there's a huge queue to go into the staking and not much to actually come out. So it turns out that about 65% of the supply is available to unstaked. So to get a third you would have to buy like over half of the existing supply. And that's going to be very expensive to do. It would drive the price up of Ether dramatically. And the same sort of trade that we were talking about for Bitcoin, where you buy the equipment and short the Bitcoin, that doesn't work for the Ethereum blockchain because you're buying the Ethereum and then if you're selling it's a wash. So there's no obvious way to do a Bitcoin like attack on the network. So in my opinion the Ethereum network is much more secure in the long term. So on that I agree because of
- [31:34]
Interviewer
the merge, because they went from proof of work to proof of stake. So assume that the same argument you would make for Bitcoin, even though people may be less compelled, could be for Dogecoin or any of the existing Bitcoin forks, or effectively anything Litecoin, Monero, that is still proof of work.
- [31:53]
Campbell Harvey
Well, Bitcoin has got the advantage of an enormous hash rate. So again I calculate the total cost of an attack at about 8 billion. To attack a lesser chain is way easier.
- [32:10]
Interviewer
Yeah, I just hasn't happened.
- [32:12]
Campbell Harvey
Yeah, again you don't have the liquidity in the derivatives markets for some of these other tokens. So they're secure because of the lack of liquidity in the derivatives markets. When that changes, they're vulnerable.
- [32:27]
Interviewer
It's interesting because you're focused, I think rightfully so, on the financial gain aspect of doing it, which did not exist before and not on somebody trying to kill Bitcoin. It's purely a financial motive. Now there is a way that you could theoretically take over the attack price Take over the network, price exactly what that would cost, and then calculate what you'd make by doing it. Exactly.
- [32:49]
Campbell Harvey
It's pure economics.
- [32:52]
Interviewer
I've actually not not seen that argument before and one I would definitely dig more into. Obviously I think bitcoiners have a emotional and probably reaction to that with a lot of the same arguments that I probably made. But I think it's worth considering.
- [33:08]
Campbell Harvey
Yeah. So it's certainly something to discuss. It should not be something that is dismissed. So what I do is risk management and you can see that's the area of research. And with any asset, when you hold it, either in the short term or long term, you need to understand the risks. So you need to put aside emotional attachments, you need to put aside the grandiose visions for the future and look at all of the risks. And if you do not do that, that, in my opinion, is irresponsible.
- [33:55]
Interviewer
I loved your points about speculation. It echoes with my own writing and shows and diatribes I've been doing for the last few years. I was one of the first people and was very unpopular in the crypto world for saying that altcoin cycles were dead because people have found shinier casinos. And I specifically agree with you in prediction markets and obviously the everything apps of Robinhood and such that are offering leverage on more volatile assets fractionalized. I'll give you one more even point for that when you're looking at it, which is that even the crypto native venues where the speculation used to happen now have added all of those other assets. And so even the crypto natives themselves, many of whom I think lost all their money Last October on 10 10, but the ones who were left didn't even have to go to those new casinos to participate. They could stay on hyper liquidity and such and actually trade those other assets, which is why we saw silver and gold explode there, oil explode there, pre ipo, space X exploding there. And I'm not saying you missed that part, but I'm saying it's another big part of, I think, that exact argument, which is that even the crypto natives aren't trading crypto.
- [35:04]
Campbell Harvey
Well, just let's be careful here. Tokenized stock and tokenized gold, those are cryptos. So there are two different types of cryptos. So one crypto might be like a coin that is issued on a blockchain, like bitcoin or ether. And then there's another type of crypto that is a token that often is collateralized with some other asset. So when I transact tokenized Gold. I can use a decentralized exchange. I can use my crypto wallet. It is crypto. The difference is that it is collateralized and the other type of crypto like Bitcoin is uncollateralized. That's the key difference. But they're all crypto. So what hyperliquid is doing is not deviating from crypto. It's just using crypto in a different way. So it's all crypto.
- [36:18]
Interviewer
Yeah, agree. I was just making the argument more about why the price of the existing crypto assets pre tokenization have not risen as they did in previous cycles. So if you, you know, if you want to talk about the previous cycles when Bitcoin went up to 126k, you would have expected that broadly the altcoin market will would have outperformed at some point there or at least kept up and all we've seen is down for five years. I think most of it is exactly what you described. I was just adding that as a bit of extra nuances that it's not only do people have better places to gamble than in crypto, even the crypto people have better places to gamble than in crypto.
- [36:52]
Campbell Harvey
Sure.
- [36:53]
Interviewer
Interesting. So obviously you believe that tokenization of real world assets is the future of this technology you mentioned, obviously stablecoins, the explosion there has been indisputable. I guess my next question is if that is the future and this is one that I've been thinking on myself, how does that become investable for the average person has in the past? Or is it something that effectively gets co opted by the institutions that do it themselves and we end up with a situation where the technology was adopted as plumbing and infrastructure, but it really cease to be investable or profitable for the average person who believed in it this whole time.
- [37:37]
Campbell Harvey
Okay, so this is the way that I see it. So I am positive on the tokenization of real world assets. I don't see that as the only crypto technology. So I don't see the world in the future just focused on tokenized real world assets. There's plenty of room for uncollateralized and Ether is a good example of that. You need it to, to run a smart contract or to do a transaction on the Ethereum blockchain. So you pay Amazon for AWS cloud computing time and you need to use your Ether to pay for compute time on the Ethereum blockchain. So I think that that is quite resilient. I do believe that. And if you look at what is happening in the real World asset space. You see many traditional companies getting involved. So all major banks have stablecoin initiatives. Even though there were negative unstable coins, they realize that this technology is actually useful to them. It actually saves money and they can pass some of that on to their, the people they do business with. They can pass it on to their shareholders. So is it fully decentralized? No. Does it improve the current situation? Yes. So it's not just stable coins. Tokenized bonds, tokenized money market funds, tokenized deposits, tokenized stocks, tokenized gold. There's many different possibilities here. They all have some degree of centralization. So this is not pure decentralized finance. It's only partial. So if you think of something like tokenized gold, well, you need to have a custodian for that gold. It needs to be audited. The quality needs to be attested to. For a tokenized fiat currency. You've got a reserve fund like Circle's USDC has got the Circle reserve fund where you can see the investments and treasury bills and reverse repos. And there's a degree of trust. So this is not trustless. So think of it as a continuum between kind of centralized finance and everything was centralized before 2008. And then on the other end is complete decentralization. I think early in the process people thought we're moving to the complete decentralization. I think it's more realistic to think of this as a continuum and we've moved from, from centralization to somewhere in between. Will continue to approach the decentralization, but again, balancing the rewards and the risks.
- [40:48]
Interviewer
I agree. It's something I've also talked about quite a bit, is that decentralization, centralization are a sliding scale and there's no such thing as true decentralization. I think you can get close, but even if you get all the way there with the protocol, then you're on an Amazon Web Services server and things go down. You're no longer decentralized. Right. So I mean, it's very interesting that people are working on solutions for all of that, but I think that's a decades long process.
- [41:16]
Campbell Harvey
Yeah, I totally agree.
- [41:17]
Interviewer
So you, you obviously it seems like you would prefer tokenized gold to Bitcoin. I was going to ask you, you know, if you were designing a monetary path.
- [41:25]
Campbell Harvey
So I didn't say that. So my paper makes the case that Bitcoin is not a substitute for gold. So some people say, oh well, Bitcoin's digital gold. The paper makes the case that it is not a substitute. It's different and it's Better to think of it as a complement. So what I'm not saying is, oh, dump all your Bitcoin and invest in gold. I'm saying in a bucket of investments that are considered safe. So that might include commodities like gold, it might include cryptocurrencies like bitcoin. Not holding it naked. So holding it naked, you get that extreme volatility. But when you put it into a portfolio, given its lower correlation, it can be very helpful. And this bucket might include real estate also. So the sort of things that are not linked directly to equity or bonds.
- [42:39]
Interviewer
Yeah, that makes perfect sense. I was just going to ask, if you were designing a monetary asset from scratch now, would it look more like gold or would it look more like bitcoin?
- [42:51]
Campbell Harvey
So my idea is, and we're just in this mode of, well, the central bank has control. It issues like a fiat currency or a commodity backed currency or whatever. This is how it's worked historically. But it doesn't need to work like this in the future. So with tokenization, we've got different types of value that we hold in our wallet. So it could be US Dollars or euros, it could be Apple stock, it could be gold. And then we just decide what to pay it. And it's seamless. You tap your phone, your, let's say that day you decided to pay in gold. You tap your phone at the checkout. If the retailer doesn't want the gold, you're automatically routed to a decentralized exchange that gives you the best possible exchange rate for your gold. And whatever the retailer wants, maybe they want silver, maybe they want Amazon stock, it doesn't matter. And it's seamless. So you choose what to pay in. And again I said somebody might want to exist in the world of the gold standard, which we lost August 15, 1971, you can choose to do that. So everything for you is in gold. Now let me also say the fiat currencies will not disappear. The government will still demand that taxes are paid in US Dollars. All government employees will be paid in US dollars. But even if you're a government employee, you get paid in US Dollars, you swap into something else and you've got this freedom. But given that you're a government employee, you're not immune to inflation. So inflation could go up. And inflation as we know it today is a monetary phenomena. The reason we have inflation is because of money creation. And historically we've seen extreme examples of this where you get reckless money creation and hyper inflation.
- [45:20]
Interviewer
What do you think WARSH will do?
- [45:24]
Campbell Harvey
So I'm actually positive on the new Fed chair. We will see. We share a point of view that is really important and that is that the Fed has strayed away from their fundamental charge. And what do I mean by that? So traditionally I've studied the Fed for decades. Traditionally they were doing open market operations in the bond market and that's it. During the global financial crisis, they adopted this idea of quantitative easing and they expanded the range of assets that they could buy. So for example, buying mortgage backed bonds is an example of this. And to me that is something that goes well beyond the Fed's mandate. That is a political decision to support the housing market. And that decision should be made by Congress, not the Fed. So they have strayed very significantly. The balance sheet has exploded to over $6 trillion. And I believe that the new chair will provide a correction for that. So the balance sheet will be drawn down and the Fed will extricate itself from these other assets where it really smacks of a policy initiative rather than focusing on the dual mandate of low inflation and sustained growth.
- [47:28]
Interviewer
I agree that the Fed is out of control, so I don't know what his policies will be. But going back to the original mandate seems like a positive through any lens, certainly. Well, Campbell, I know that we've only got a few minutes left. Anything that I missed that you'd like to dive into before I let you go?
- [47:50]
Campbell Harvey
Let's see, we've covered a lot. One last thing, I will say that kind of ties two different pieces of what we talked about. We talked a little about AI and the productivity growth that we've not seen. And AI is moving so quickly. And one part of AI that the average person has not really participated in is this idea of AI agents. So we use AI, we do a Google search now and Gemini gives us much more detail. We might use Claude, might use ChatGPT or even Grok for answering questions, kind of an enhanced answering of questions. But with agents, so much more can actually be done. And most people have not realized this yet. They've not participated in this part of the AR revolution. And the reason that I mention this is that this provides a new opportunity for crypto. So agents need to be able to transact and they need to be able to transact 24, 7, not during banking hours. Indeed, the agents can't go into a bank and open a bank account. That's just not possible. They do not qualify. The agents need a way to do transactions quickly so they cannot afford to to wait two to five days. They need a way to do transactions cheaply and securely. And all of this invites crypto. And indeed the first crypto that will be used by agents is a stablecoin linked to a fiat currency. And it felt fits, it fits exactly in terms of what we want. So this, this agent to agent, or A to a economy. In the past we've talked to, you know, things like B2B, business to business. This is agent to agent. It's enormous opportunity and it provides a synergy between AI and crypto. So I'm very positive on that.
- [50:34]
Interviewer
Totally agree that that's the future and that is the killer use case most likely for this.