The Important Business of the Federal Reserve (and web3)
Full piece here: https://kyla.substack.com/p/narratives-reflexivity-and-market
On narratives, the Federal Reserve and web3, and Market Go Down. I know there is a LOT around web3 – this is a broader piece that hopefully encompasses the macro narrative at large. As always, most of my knowledge is amalgamated from others – these are synthesized opinions.
00:00 – Intro
01:22 – Narratives
03:54 – Narrative of the Fed
10:31 – Narrative of web3
14:56 – Narrative of Society
17:06 – Narrative of Fed and web3
18:25 – Narrative of Energy Markets
19:50 – Final Thoughts
“The real problem of humanity is the following: We have Paleolithic emotions, medieval institutions and godlike technology. And it is terrifically dangerous, and it is now approaching a point of crisis overall.” – EO Wilson
In this piece I hope to discuss:
1. What the Federal Reserve does and why they do what they do
2. The goal of web3 (and how much has already been achieved)
3. The importance of energy markets
4. The intertwindedness of it all
The Federal Reserve and web3 are sort of doing the exact same thing. Of course, they are doing it differently, but the goal is somewhat the same. It’s narrative – convincing people of a Future Thing That Might Happen.
Narratives
Narrative has a few main components:
1. Narrative creation
2. Narrative interpretation
3. Narrative resistance
4. Narrative disruption
Everything starts off in the creation phase – what does this thing mean, and why? It is then interpreted, then usually faces an element of resistance because that’s what humans do, then eventually it gets disrupted because it no longer really works.
The Story of the Federal Reserve
The Fed has two main worries: price stability and maximum employment.
Managing inflation (a political hot potato)
Managing jobs (a lagging political hot potato)
The Fed manages this dual mandate through monetary policy – open market operations, the discount rate, etc – basically, in order to expand the economy, they say to banks, “hey, take some money lend it out” or in order to contract the economy, they say “hey chill out, no more”.
The Story of Web3
There is the ethos of [protect, own, benefit] in web3 where those who have historically not been able to participate in the upside now have the chance – through tokenization, through new platforms, through new incentives.
The Story of Society
Basically, we play games all the time. We are speculative creatures, like to make bets, search for social cohesion and community. We also like cheat codes – and in a life where the world feels increasingly tilted towards “rich get richer”, you have to find other cheat codes in order to make the game work. And those cheat codes right now are $FAST MONEY$.
Hope is ultimately a function of fear, what else is there besides choosing to believe in something better. Sometimes, sh!tcoins are the something better. Things become ultimately a function of emotion and narrative.
The Story of Energy
But the narrative is always disrupted by reality.
Final Thoughts
However, I think web3 is interesting because it’s based in hope. Back to Manias and Mimesis – is that enough to keep the “exaggeration” alive? There is a floor in crypto/web3 – the knowledge that the world can be better. Can you assign valuation metrics to people who truly believe in a better future, will innovation prevail? Or will it melt away into something else entirely?
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Music by Pick Patek – My Mind Is A Barrel (feat. Raindrop Relly & Charles Hussle) – https://thmatc.co/?l=B6CED606
Music by Naomi – Sunset Love – https://thmatc.co/?l=B9EC36BA
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