Politics

Co-founder of Palantir takes a hard line with Fed

In a recent interview with the financial broadcaster CNBC, billionaire and co-founder of Palantir, Joe Lonsdale, took a hard line on the centralization of the American economy and financial sector as well as the Federal Reserve. Some of the statements made even left the questioners open-mouthed and speechless…

But why can’t truths simply be spoken when they become so obvious to attentive observers?!
A few days ago, Joe Lonsdale, billionaire and co-founder of the company Palantir, gave an interview to the financial broadcaster CNBC that attracted attention, and the statements he made in this context led to some heated discussions in the social media.

On the one hand, this conversation was about the future of cryptocurrencies. On the other hand, one of the main topics discussed once again revolved around the role of central banks, which, with reference to Lonsdale, were attempting to retain control over something that the establishment had already lost its control over.

Doubts about successful centralization of the U.S. economy
In this context, Joe Lonsdale expressed grave doubts about the centralization of the U.S. economy being crowned with success. Henry Kissinger is said to have once expressed things as follows: “He who controls the money controls the world.”

This quote is attributed to the former United States Secretary of State in reference to the now infamous statement by Mayer Amschel Rothschild. The one-time maestro of banking is said to have summed things up in his lifetime as follows:

“Permit me to issue and control the money of a nation, and I care not who makes its laws!

Emergence of the crypto sector not surprising
From this perspective, it hardly seems surprising that the loss of trust in those who “control the money” has led to an increasing decentralization of the monetary system in the field of private digital currencies in order to evade that very control.

In this context, however, the question remains whether the starting shot in the cryptocurrency sector at the time of its emergence might not have been triggered by various government authorities in order to test its degree of acceptance among broad sections of the population over a certain period of time.

As is beginning to emerge these days on the basis of Turkey, the People’s Republic of China and perhaps soon on the Indian subcontinent, it is not particularly difficult for governments with their backs to the wall (as in the case of Turkey) to ban trading, use and thus payment transactions based on private digital currencies such as Bitcoin and Co.

In the interview linked at the beginning of this article, Joe Lonsdale discussed, among other things, how he personally views and assesses the successes of various DeFi (Decentralized Finance) platforms – in this sense, a shaking up of the existing fiat money system.

Capitalism’s traditional financial heritage is coming under fire
At the same time, Joe Lonsdale addressed constant critics of cryptocurrencies such as JPMorgan CEO Jamie Dimon, whose calls for a forcing regulation (of the competitors of the existing fiat and paper currencies) already sound like a record played over and over again – but with old and always the same demands.

According to Joe Lonsdale, Jamie Dimon is now living in a permanent state of anxiety, triggered by the nagging question of whether the JPMorgan CEO will still be able to retain and retain the best people at his bank in the future. After all, he said, the most talented people in the financial world have long since come to the realization that they no longer want to work for large commercial banks.

The reason? According to Lonsdale, discussions have been going on in the industry for some time now, according to which these people are not allowed or able to be creative in an employment relationship with large banks. This is also due to the fact that the regulatory framework imposed by various supervisory authorities in the banking world leaves little room for creativity.

It is precisely for this reason that the smartest and most creative people in the financial world decide to turn their backs on employers such as JPMorgan or Goldman Sachs and leave their office towers. These people are internally driven to join up-and-coming start-up companies.

Taking this into account, what is Lonsdale’s personal conclusion? Quite rightly, the time-honored and traditional financial heritage of capitalism is being sucked out and destroyed by this highly centralized regulatory system of the state, as Lonsdale went on to say, while the brightest minds are fleeing this system to henceforth engage in creative pursuits.

Preventing innovation paralyzes the country
And it is precisely for this reason that Jamie Dimon’s calls and demands for a tightening of the thumbscrews in the area of innovative financial technologies, which would affect start-up companies and so-called FinTechs alike, have increased. However, this would make it more difficult for start-up companies to bring new innovations to life.

Lonsdale criticizes that in the medium to long term it cannot be good for the entire country, and thus the United States of America, if these people are prevented from doing or pursuing the things and activities they feel like doing.

Billionaire Lonsdale, from California’s Silicon Valley, also spoke about other sectors of the economy, such as domestic health care, where technological innovations made the time more than ripe to make better use of data in the future.

The entire U.S. economy is undergoing a major transformation at the moment, he said, and this is largely due to the fact that companies and individuals are increasingly basing their activities on cloud-based systems and Big Data. Despite all this, this development is still in the early stages in almost all industries, according to Joe Lonsdale’s statement.

Fed divides country and society
Shortly after, the conversation then began to shift to private cryptocurrencies and the Federal Reserve. The Palantir co-founder sometimes left his questioners on the CNBC channel open-mouthed and thus speechless as to his dropped “truth bombs.”

According to Lonsdale, the United States is on a dangerous path of intensifying economic and financial centralism. This is almost a kind of fetishism, as so-called experts from all possible areas of the economy are given far too much space (note: with the supposed purpose of manipulating public opinion).

With regard to the Federal Reserve Bank, he said, it was frightening from a current perspective how divided the country and society looked at these institutions. Sometimes some of his smartest friends in New York City would tell him that they might disagree with the Federal Reserve’s monetary policy activities personally, and yet conclude that they must be smart people.

And then there is the other side, which perceives things in a completely contrary way. From this camp, it could be heard that the majority of the people in charge of monetary policy on the Federal Reserve’s Open Market Committee were idiots. And the People’s Republic of China would know that by now, too.

China make things worse
Lonsdale added in this context that the People’s Republic of China is pushing major financial institutions to hold the Chinese yuan/renminbi. Lonsdale himself believes that those in charge at the Federal Reserve have gone crazy, as they are well on their way to destroying the U.S. dollar.

The People’s Republic of China, meanwhile, is already advertising such prophecies, claiming not to want to make the same mistake with the yuan/renminbi. Furthermore, investors are promised higher returns in the People’s Republic of China, in order to point out in the same breath that money invested in the People’s Republic of China is safer due to greater currency stability (note: than in the USA).

Joe Lonsdale, according to his own statement, was not a supporter of such views, but noted that in the meantime quite a lot of intelligent people had made bets against the U.S. dollar, which in view of this development would also be a bet against a successful centralization of the economy and the financial world in the U.S..

He (Lonsdale) would not infrequently hear these days that madmen were sitting at the top of government and finance. Furthermore, Lonsdale warned that there would be terrible developments in the United States if the Federal Reserve Bank were to persist with its attempts to create a digital currency (the digital U.S. dollar) that would be centralized at its core.

As in the case of all centralized systems, this would be a top-down approach that would not necessarily be approved or accepted by all parts of the population. For this very reason, the development in the field of digital cryptocurrencies will make leaps and bounds in the next few years, as an increasing number of people try to evade this attempt at control, according to Lonsdale.

This is an area where one of the biggest social battles could be seen in our day, he said. Lonsdale concluded his remarks by pointing out that it was not only the PRC that was fully aware that, with regard to the Federal Reserve, these were people who had obviously lost their minds.

Furthermore, they would pretend that nothing was wrong – and that everything was fine – by continuing to create U.S. dollars electronically, as if on an assembly line. When Janet Yellen calls for this, as she has done over the past weeks and months (keyword: “Go Big”!), far more new money will be created than is advisable and should be the case in the current environment.

The People’s Republic of China has begun to exploit this situation for itself in order to set geopolitical games in motion, which could ultimately result in a fall of the U.S. dollar as the world reserve currency.

DepthTrade Outlook

From the very beginning of Quantitative Easing (QE), every observer who had all seven senses together was aware that – once down this path – there would be no way out of this impasse. This fact became all too apparent in the face of the Federal Reserve’s temporary rate hikes and bond sales (Quantitative Tapering or QT for short).

When a deflationary crash in the stock markets occurred at the end of 2018, those in charge immediately rowed back to pump unimaginable sums of money into the financial system from then on. The coronavirus crisis literally topped it all off!

As a result of lockdowns imposed by governments around the globe, some of which severely damaged production and global supply chains, Fed Chairman Jerome Powell now believes that inflation is temporarily on the rise.

A deflationary collapse would occur immediately if Powell were to end all his QE programs and have to raise interest rates in the USA. But who still believes in such a development?

The Rubicon in terms of money generation has long since been crossed, so that we would be much more likely to see more of this monetary policy if it should become necessary. Whether the development of inflation will then actually remain temporarily high, or whether it will eat into consumer prices in a stubborn manner, is something that every attentive observer should be able to figure out for himself.

With world debt at record levels, what tools do the Federal Reserve and other central banks have to counter inflation that may be getting out of hand? That’s right, the answer is: none at all!

It gives the impression that the QE trap that has been self-built over the past few years is about to snap shut, especially since people like Intel CEO Pat Gelsinger warned in early May that chip and semiconductor shortages could persist for years to come.

Do Jerome Powell and Janet Yellen actually go shopping in the supermarket themselves? Or do they have enough henchmen for this as well, in order to isolate themselves widely from the events in the real world? Please answer this question for yourself…

Hayato Ishikawa

Mr. Ishikawa has more than 25 years of experience in the financial markets, focusing on stocks, real estate, cross-asset risk hedging, and business founding. He is co-founder of a private investment group - specializing in the western pacific region and an independent analyst as well as business advisor. Mr. Ishikawa is known for bringing technical and fundamental analysis as well as sentiment into a coherent overall assessment - unbiased financial and political journalism made in Japan.
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