Remarks on the Valley
[Delivered to no one. Recorded for the record.]
Let’s talk about geography for a minute, because geography is not usually where the interesting monetary story hides — except this month it is. In two weeks, the town of Jackson, Wyoming, population roughly eleven thousand, is going to host two conferences, one week apart, both nominally about the future of money, and neither one will admit the other exists.
The first is the Kansas City Fed’s Jackson Hole Economic Policy Symposium, August 27th through 29th. This year’s chosen topic is “Financial Innovation: Implications for Payments and Policy” — central-bank-speak for stablecoins, tokenized deposits, and whatever else has been quietly disintermediating the correspondent banking system while everyone was watching the funds rate. The second is the Wyoming Blockchain Symposium, convening in the same valley days earlier, populated by exactly the kind of people the first conference is nominally there to regulate. Same mountains. Same thin air. Two entirely separate theories of what a dollar is going to be.
That’s not a scheduling coincidence worth a chuckle. That’s the tell.
Here is the structural situation underneath it. Kevin Warsh has spent his first three months as Fed Chair systematically dismantling the informational architecture his predecessors built — shorter post-meeting statements, curtailed forward guidance, answers in press conferences that strategists have started describing as evasive by design rather than by accident. He said it plainly at the podium in July: the Fed is “not constrained by market prices” in setting policy, and markets “can be a useful source of information, but they are not the definitive source.” That’s a chairman explicitly telling the largest, most liquid pricing mechanism in human history that its opinion is optional. He followed the FOMC’s 9-3 hold — the most divided vote in recent memory, three regional presidents pushing to hike into a labor market that had just shed 23,000 jobs — with a promise that his Jackson Hole speech will step back from what he called “near-sighted debates” toward “big questions” and a “big picture perspective.” Translation: don’t expect a rate signal. Expect a worldview.
Now overlay that on the payments question. If the sitting Fed chair has already told you he considers market pricing structurally unreliable as an input to policy, and his signature symposium this year is dedicated to the infrastructure question of who settles transactions and on what rails — stablecoin issuers, tokenized bank deposits, the plumbing underneath everything — you are watching a central bank quietly relitigate its own relevance in the exact week that the people building the alternative system are convening a few miles away to compare notes. Robert Kaplan, the former Dallas Fed president, has already gone on record urging Warsh to use the platform to “deliver clarity.” He is not going to get clarity. Clarity has been the explicit casualty of this chairmanship since May.
What does this mean structurally, not narratively? It means the market is currently pricing two regimes simultaneously and hasn’t noticed it’s doing so. Regime one is the rates regime — funds rate at 3.5 to 3.75, held for a fifth straight meeting, September hike odds sitting near 42%, everyone still trading off payrolls revisions and CPI prints like it’s 2019. Regime two is the payments regime, where the actual battle isn’t over twenty-five basis points, it’s over whether the Fed’s balance sheet remains the load-bearing wall of dollar settlement or whether a growing share of that function migrates onto privately issued, blockchain-settled instruments that don’t ask the FOMC’s permission first. Bitcoin has spent this entire cycle failing to behave like the macro hedge its own mythology promised — it trades like a leveraged tech proxy, not digital gold, and that failure is directly downstream of regime one still dominating price action. But regime two is the one Warsh chose to headline in Jackson Hole. He is telling you, in the driest possible institutional language, which fight he thinks actually matters over a ten-year horizon.
Markets are structurally bad at pricing two regimes at once. They pick one, over-trade it, and get blindsided when the other one asserts itself — usually at the worst possible moment, usually with maximum velocity, because nobody positioned for it while everyone was staring at the funds rate. The 10,000-BTC cohort that quietly accumulated through the crash from 126,000 to 58,000 earlier this year wasn’t betting on a September cut. It was betting on regime two. The AI-capex trade obsessing over Nvidia’s August 26th print — one day before Jackson Hole opens — is a regime-one trade dressed up as a regime-two story, and that mismatch is exactly the kind of thing that produces the seven-percent-miss-for-fourteen-percent-selloff arithmetic we’ve been watching all week in names like Cerebras.So watch the valley, not the funds rate. Watch which conference gets more real capital in the room, which one produces the paper that actually moves five-year breakevens, and whether Warsh’s “big picture” turns out to be an olive branch to the payments-innovation crowd or a warning shot across it. Either way, the two theories of money currently sharing a zip code are not going to keep sharing much else for very long.
