The Great Financial Reset Has Begun | Marieke Flament & Nicolas Colin

In Episode 497 https://hiddenforces.io/podcasts/the-great-financial-reset-has-begun-marieke-flament-nicolas-colin of Hidden Forces, Demetri Kofinas speaks with Marieke Flament and Nicolas Colin, co-authors of the Currency of Power newsletter, about why the global financial system may be on the cusp of a structural transformation comparable to the Nixon Shock and the collapse of Bretton Woods, the central role of dollar-backed stablecoins and programmable money in that shift, what China's construction of parallel financial rails means for the future of dollar dominance, and how machine-to-machine commerce and the commodification of compute could reshape the monetary order in ways most policymakers and investors have yet to appreciate. The first hour covers why Flament and Colin believe we are living through the initial phase of a "Great Financial Reset" and the parallels they draw between the present era and the 1970s and early 1980s, when a convergence of geopolitical shocks, financial innovations, and technological revolutions transformed the global economy and capital markets in ways that would have been otherwise unimaginable. They discuss how the maturation of the digital economy is creating conditions for new waves of financial innovation and why dollar-backed stablecoins and programmable money sit at the center of that transformation. The second hour turns to what has made Flament and Colin more cautious about the pace of dollar-denominated stablecoin adoption, including China's decade-long effort to build insulated financial rails and the diminishment of American soft power under the Trump administration. They discuss the dynamics of capital repatriation in Japan and Europe, the prospects for financial repression and capital controls, and the potential for the US military to be used as leverage in negotiations between Tokyo and Washington. The episode closes with a discussion of machine-to-machine commerce and the emerging agentic economy—why existing financial infrastructure is poorly suited for AI agents, how stablecoins could become the default payment layer for autonomous systems, and what that means for dollar dominance in a world where compute replaces oil as the most important economic commodity. Subscribe to our premium content—including our premium feed, episode transcripts, and Intelligence Reports—by visiting HiddenForces.io/subscribe https://hiddenforces.io/subscribe. If you'd like to join the conversation and become a member of the Hidden Forces Genius community—with benefits like Q&A calls with guests, exclusive research and analysis, in-person events, and dinners—you can also sign up on our subscriber page at HiddenForces.io/subscribe https://hiddenforces.io/subscribe. If you enjoyed today's episode of Hidden Forces, please support the show by: Subscribing on Apple Podcasts https://podcasts.apple.com/us/podcast/hidden-forces/id1205359334, YouTube https://www.youtube.com/channel/UC8URhgYos5fjHqFSO4RSIEg, Spotify https://open.spotify.com/show/0TK6u251zGSlMgJKH6cOaP, Stitcher https://www.stitcher.com/podcast/demetri-kofinas/hidden-forces, SoundCloud https://soundcloud.com/hiddenforces, CastBox https://castbox.fm/channel/2629539, or via our RSS Feed http://hiddenforces.libsyn.com/rss Writing us a review on Apple Podcasts https://podcasts.apple.com/us/podcast/hidden-forces/id1205359334 & Spotify https://open.spotify.com/show/0TK6u251zGSlMgJKH6cOaP Join our mailing list at https://hiddenforces.io/newsletter/ Producer & Host: Demetri Kofinas Editor & Engineer: Stylianos Nicolaou Subscribe and support the podcast at https://hiddenforces.io https://hiddenforces.io/. Join the conversation on Facebook https://www.facebook.com/hiddenforcespod/, Instagram https://www.instagram.com/hiddenforcespod/, and Twitter https://twitter.com/hiddenforcespod at @hiddenforcespod Follow Demetri on Twitter at @Kofinas https://twitter.com/kofinas Episode Recorded on 09/09/2026

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Demetri Kofinas?

  What's up everybody? My name is Demetri Kofinas and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs, and everyday citizens to challenge consensus narratives and learn how to think critically about the systems of power shaping our world. My guests in this episode of Hidden Forces are Marieke Flemm and Nicolas Collin, co-authors of Currency of Power, a newsletter exploring the new monetary order that they argue is emerging in the form of stablecoins, programmable money, agentic commerce, and the commodification of compute. By the end of today's conversation, you will have a much richer understanding why the global financial system may be on the cusp of a structural transformation

• 0:44Demetri Kofinas?

  comparable to that which accompanied the Nixon shock that ended convertibility of the dollar into gold and the collapse of Bretton Woods in the early 1970s. This includes a discussion about how the maturation of the digital economy is creating the conditions for new waves of financial innovation, why dollar-backed stablecoins and programmable money sit at the center of that transformation, what China's parallel efforts to build insulated financial rails means for the future of dollar dominance, and how the rise of machine-to-machine commerce and the commodification of compute could reshape the monetary order in ways that most policymakers and investors have yet to fully appreciate. Marieke, Nicolas, and I spend the episode's first hour discussing why they believe

• 1:27Demetri Kofinas?

  we are living through the initial phase of a great financial reset and the similarities between the present era and that of the 1970s and early 80s, when a convergence of geopolitical shocks, financial innovations, and technological revolutions transformed the global economy and capital markets in ways that would have been otherwise unimaginable. The second hour turns to what has made my guests more cautious about the pace of dollar-denominated stablecoin adoption, including China's decade-long effort to build insulated financial rails and the diminishment of American soft power under the Trump administration. We discuss the dynamics of capital repatriation in Japan and Europe, the prospects for financial repression and capital controls,

• 2:09Demetri Kofinas?

  and the potential for the US military to be used as a source of leverage in negotiations between Tokyo and Washington. We end the episode with a discussion about machine-to-machine commerce and the emerging agentic economy, why existing financial infrastructure is poorly suited for AI agents, how stablecoins could become the default payment layer for autonomous systems, and what this means for dollar dominance in a world where compute replaces oil as the most important economic commodity. If you want access to all of this conversation, go to hiddenforces.io/subscribe and join our premium feed, which you can listen to on your mobile device using your favorite podcast app, just like you're listening to this episode right now.

• 2:53Demetri Kofinas?

  If you want to join in on the conversation and become a member of the Hidden Forces Genius Community, which includes Q&A calls with guests, discounted access to third-party research and analysis, and in-person events like earned intimate dinners and weekend retreats, you can also do that on our subscriber page. And if you still have questions, feel free to send an email to [email protected] and I or someone from our team will get right back to you. Lastly, because this conversation deals with investing, nothing we say on this podcast can or should be viewed as financial advice. All opinions expressed by me and my guests are solely our own opinions and should not be relied upon as the basis for financial decisions.

• 3:37Demetri Kofinas?

  And with that, please enjoy this incredibly timely and important conversation with my guests Marieke Flemm and Nicolas Collin.

• 3:49Demetri Kofinas?

  Marieke Flemm and Nicolas Collin, welcome to Hidden Forces.

• 3:54Speaker 01

  Thanks Demetri. Glad to be here.

• 3:55Demetri Kofinas?

  This is a sort of partial welcome back because Nicolas has been on the show before. He was also at our recent Genius Retreat on the Greek island of Syros. Marieke, this is your first time coming on the podcast. You two have been collaborators for some time, at least publicly, on Currency of Power, not for that long, maybe two or two and a half years, but I assume your relationship goes far back. Before we start, just give us some background. Marieke, why don't we start with you since the audience already has some background on Nicolas?

• 4:25Speaker 01

  Yeah, sure. So by background, I'm a computer engineer. I guess that's how I would define myself. And I've been working in technology, more precisely in financial technology, for the last 10 years or so. My first work in financial technology was actually for Circle, which is today the issuer of USDC. And then I led the digital neo-bank. And actually Nicolas, that's when I was at Circle that we met. So it was in 2018. So that's how far our work together goes back. So we met in 2018. Then I was the CEO of a digital neo-bank in the UK called Metal and Nicolas was actually my advisor back then. So we worked together back then. And more recently, I've been leading like a Layer 1 protocol, blockchain protocol. And for the last year and a half, we've been collaborating on Currency of Power.

• 5:09Speaker 01

  So in my day-to-day, when I'm not writing with Nicolas, what I'm doing is actually advising different companies. So one is Kivalis, which is a European consortium of stablecoin, a new digital neo-bank in Germany called N26, and another group called IG Group. So anyway, I'm on boards of company. I write with Nicolas and I think a lot about the topics we're going to talk about today.

• 5:28Demetri Kofinas?

  Exciting. And Nicolas, for people that either haven't heard your previous appearance on the podcast or just need to be reminded of your background, can you give it to us?

• 5:37Speaker 02

  Sure. So I've been working in tech for about 15 years across Europe, between Paris, London, and Munich. Before that, I was a senior CV servant in the French Ministry of Finance, where I dealt with mostly public administration, macro stuff. And my current main gig is head of research for a deep tech fund based in Munich called V Square Ventures. But on the side, I'm still writing a lot. I have my personal newsletter. But also this newsletter that we launched last year with Marieke called Currency of Power, which is on the new monetary order and with a stablecoin entry.

• 6:11Demetri Kofinas?

  It's funny listening to both of your bios and reflecting on how the nature of work has changed in the course of our careers. Now it has become so much more entrepreneurial and multifaceted. You know, we do a little bit of this, a little bit of that. You need to have a public-facing component. You need to be out there and that's essentially your source of power in the marketplace. So what is the origin story of your collaboration? I mean, Marieke, you said that you and Nicolas first met in 2018 when you were at Circle. What was the sort of, what were the common interest areas that overlapped for you that led to that collaboration? And how did that spark Currency of Power? And what is the motivating vision behind that?

• 6:51Speaker 01

  I still remember we met, so in 2018, we were both invited separately, but together at the same events to meet Zame and Macron actually. And they were both late, but we were on time. And so we got to chat. And after figuring out that we had quite a lot in common, in particular in our backgrounds, actually, we studied the same stuff. We also got to speak very quickly about Bitcoin. And I think Nicolas, at the time, you were writing for Drift Signal. You were writing a piece on Bitcoin and I was at Circle. And so we started debating like what it meant and what it was. And that's really how it started and how we got to know each other. After that, as I mentioned in the intro, Nicolas was also my advisor at Metal because it's a digital neo-bank within a large bank. And Nicolas's views are always super interesting in terms of thinking macro,

• 7:35Speaker 01

  thinking bigger themes, and bringing things from different industry to the industry in which I was. And I guess Currency of Power was on the back of, actually for your newsletter Nicolas, right? For Drift Signal, again, you were challenging me on Bitcoin and crypto again. And Nicolas was telling me like, what is going on with this? And he said like, I'll interview you for my newsletter. And I thought, I mean Demetri, I thought he was a really tough interviewer. I was like, I'm not getting through. He's just like so not seeing what I'm seeing until I spoke about stablecoin. And then there was like some sort of aha moment. And then maybe Nicolas, you continue because that's the idea of the newsletter was basically from you to say like, we have to write about that. We have to raise awareness.

• 8:14Speaker 02

  Yes, because when we met back in 2018, Marieke was working in the crypto world with Circle. Then she left for traditional banking and went back to crypto. And so as she was back in crypto, I saw her as my go-to person to catch up on crypto because that was not a space where I was really involved. But I kind of needed to, once a year, find someone to talk to to update my view of the space. And so I think early in 2025, I approached Marieke and said like, what's going on these days? Maybe we should do an interview, like broad-ranging interview, where we cover everything that's been going on, like between FTX, Trump, everything that's Bitcoin, et cetera. And so we did the long interview.

• 8:58Speaker 02

  And it's true that when she mentioned stablecoins as the actual first large-scale convincing valuable use case for crypto, I got convinced somewhat and got interested. And then we talked a bit more offline about the whole space, stablecoins. And what Marieke told me is like, okay, stablecoins are a big thing, but they're all denominated in dollars, which means that other currencies are left behind in that race to reinvent money and automating money, to echo what you just said before Demetri. And so, and in particular, the euro is nowhere to be found in the stablecoin space, which at some point will become a problem for Europe from a sovereignty perspective,

• 9:43Speaker 02

  from a strategic power perspective, from a financial perspective. And so we started having a back-and-forth conversation on that, euro-stablecoins. And what I said is that, oh, okay, it's so important, but also so niche. That's why nobody is covering that space. Like it was very difficult to find anything written about euro-stablecoins and why they didn't really exist at the time and why they were still important. And so I said, like, just with my, you know, my sense of what works in the public space, like if it's so niche but so important, there's room for launching a newsletter. We should launch a newsletter focused on that euro-stablecoin. And that was the very first iteration of the newsletter, which was initially called Euro Stable Watch.

• 10:28Speaker 02

  And we did that for a few months. And at some point, we had like, it's such a niche, like there's so little happening in the space of euro-stablecoins that we had covered everything over a few months. And so we said like, okay, we need to go a bit further. We need to cover dollars. We need to cover what's happening in China. So it's not only about euro-stablecoins anymore. It's about something much bigger, which is the reinvention of money. And that's when we rebranded from Euro Stable Watch to Currency of Power. And the newsletter became what you know in its current form.

• 11:05Demetri Kofinas?

  So it feels like the term crypto has really outgrown its usefulness as a term. And it's associated with so many different ideologies and promises and promises of certain types of technological innovations and use cases that I feel like we need some other term, though I don't know exactly what that is. What is the underlying value additive innovation that you think is specifically applicable to the thesis that you guys have been developing? Whether it's stable coins, whether it is tokenization, like what is the actual thing

• 11:47Demetri Kofinas?

  that quote crypto provides that you think will actually be useful in these cases?

• 11:52Speaker 01

  Well, maybe so, and I think you're you're spot on, right? The word crypto is charged, but the reality is also like, you know, without Bitcoin, which is the first cryptocurrency ever invented, there's no blockchain, right? That's like the birth of all blockchains and therefore that's the birth of a lot of innovation, which is broadly called crypto. But I think within that, the most transformational thing is actually enabling to have the ability to send truly peer to peer over the internet without having to have a central party to be able to send like value. That's like transformation number one. And then after that, what what actually has been also like a huge shift in the industry in terms of innovation was the birth of Ethereum. And with Ethereum, you could actually code smart stuff on a blockchain.

• 12:36Speaker 01

  And that's transformational because the way money moves today, for example, if you look at Swift, it's there is a decorrelation between the action and the message to send, like this bank needs to send from one point to the other to actually the physical sending of the money on a wire. And in blockchain, when money moves around, actually, all of that is together. So you can really program it and actually do smart stuff and have it on a programmable version. So I think that's really the real true transformation is the fact that with blockchain and with smart contracts, you can actually have smart money and therefore program it. We can go more into like what it means for financial system and how it's rewiring everything. But today, yes, there is a lot that's happening on, okay, so if we can actually move fiat

• 13:19Speaker 01

  money in a way that's programmable and decide when and how it should be moving, we can surely also do that with any financial instrument, be it stock, being actually, you know, gold or be it other things, right? And so therefore we can do what is often called like tokenization of all those assets, but it's always on a blockchain. And there is hundreds of them. Yeah, I don't know, Nicola, if you want to add anything, but that's how I would frame. And I think it's a good point. Crypto is a charged word, but it is still what is being used and that's still the core of it.

• 13:49Speaker 02

  Yeah, I think it's charged, but it also reflects the underlying technology like cryptography and the fact that you need that key to unlock the value. And it's really the technology that makes it possible for the whole system to work in a decentralized way. That said, any decentralized system that proves that reveals interesting features will soon be, I don't know, conquered or colonized by large players and will re-centralize quite fast, which we're seeing at the moment, like the crypto space, in so long as it's a reinvention of financial markets is already dominated by large players rather than decentralized at the individual level. But it's still the same technology that was revealed through decentralization and made

• 14:33Speaker 02

  it obvious that there's something to be added, an extra layer to be added to the financial system, which makes money programmable or automatable. But I agree that crypto is charged. I think it's the default term at the moment, like everyone's talking about tokenizing financial assets, which makes it quite clear, but also doesn't really resonate with the people that are far from this world. Maybe when we finally impose that consensus in terms of speaking of programmable money, programmable capital or automating money, which I find very interesting as a concept. But it's not enough to decide the three of us that we we will label it automation, whether

• 15:13Speaker 02

  the tokenization, we need Larry Fink and Scott Besen to convert to that as well for it to become market consensus.

• 15:21Demetri Kofinas?

  So what does this emerging financial architecture look like? Is it increasingly breaking up into permissioned distributed ledgers that then reconcile and settle on, I don't know, Ethereum or Solana? Like a lot has changed in this industry since I was first in it. So how would you sort of go about explaining to someone in the most rudimentary, simplest terms possible, how they should think about what is being architected here and how it's fundamentally different from the legacy financial infrastructure that everyone has been accustomed to using forever?

• 15:56Speaker 02

  No, I think for me, the key intuition for me comes from being a practitioner in the investment world. Before doing what I'm doing these days, that is head of research for V Squared, I was the co-leader of a startup accelerator, Pan-European Startup Accelerator, which has grown over the years, a portfolio of stakes in companies, but also special purpose vehicles that gather investors to invest capital in companies. And when you manage a special purpose vehicle, you own an asset. When that asset is realized, it is converted into cash and that cash needs then to be distributed to shareholders of the SPV and then the SPV is dissolved.

• 16:40Speaker 02

  What you realize doing that is that two different layers coexist without interacting much, except through humans, through the humans that are managing the whole thing. One layer is financial, that's what happens on the bank accounts, like money coming from, if a company is acquired, that's realization of the asset and the acquire wires money to the SPV, which then has to wire the money to shareholders. That happens on bank accounts. And then you have another layer entirely independent, which is the legal layer. You have the contracts. What does the contract say in terms of how the money should be split between the different shareholders? Is there carried interest? Are there expenses that need to be reimbursed first, et cetera, et cetera?

• 17:22Speaker 02

  And so you have, as a human, as a manager, human manager of the whole thing, you have to do all the calculations yourself and then send instructions to the bank. I think what crypto or tokenization or programmable money brings about is the possibility to plug one of those two layers into the other and make them work as one, the legal layer and the financial layer. That is, when the money arrives on the bank account, that triggers execution of a contract that's been preloaded in the system, that has been modeled under the form of code and that code can then be executed, but effectively by splitting the money and wiring it to all

• 18:04Speaker 02

  the shareholders based on the rules that were agreed upon when the SPV was formed.

• 18:10Speaker 01

  And I think if I build on that, so all of that is happening, but it's happening on different technologies. So you mentioned Ethereum, you mentioned Solana, there's like 150 of those, right? And why is that? Well, because at some point, there's been a realization that some of those like blockchain and technology were good, but they had like some constraints, some were not fast enough, some didn't have privacy, some were not user friendly enough and so on and so forth. So you've had this explosion in an ecosystem, which basically created like hundreds of those different blockchains. And what we are seeing today is actually what we see in a competitive environment is that, you know, at least that's what I believe, a few are going to win, right? And so you mentioned, for example, Ethereum and Solana, and those are the blockchains where today, in an open source way, you see actually more and more of the traditional

• 18:55Speaker 01

  financial system moving to this system. To me, blockchains have always been just like an infrastructure. It is designed to do what Nicola described, right? But it's the technology and it's the tech part of it. And I know sometimes it's like, it's confusing and there are so many of it. And I think it's also because the the entire ecosystem was still quite immature, right? So today we're seeing like this concentration, there is still a few blockchains that are emerging as like, you know, very specific for payments, maybe very specific for like banks, because, you know, for banks or central banks might be very uncomfortable to think like, oh, should we work on something that's open source and decentralized? You know, there's always this question like, can we trust it? I think you can trust something that's open source and decentralized way more than something that's closed and that, you know, you know, like a few guys that know. But that's all it is, right?

• 19:40Speaker 01

  So at the end of the day, the genius in all of that is like the what it can do. And then it's just a matter of tech, like how you do it and with different parameters.

• 19:49Demetri Kofinas?

  So you two recently published a post on Currency of Power titled, "The Great Financial Reset Has Begun," which builds on articles and posts you've been writing now for the last year and a half. And in that article, you wrote, "What we've witnessed over this turbulent summer of 2026 is not a series of isolated market tremors, but the initial grinding gears of a structural shift in the global monetary order." What is the shift you're seeing? And embed that within the larger thesis that you guys have been developing over the last year and a half that makes sense of this latest piece, the great financial reset has begun?

• 20:28Speaker 02

  So like many people in the tech space, I'm an avid reader and follower of Carla Taparez, who's a British Venezuelan economist who wrote that book in 2002 called Technological Revolutions and Financial Capital that explains that technological revolutions happen approximately every 70 years by bringing about a new technology that provides the opportunity of reinventing how we produce, how we consume, how we work. That's what she calls a new techno-economic paradigm. And then there are certain nations that take advantage of that new technology to update or upgrade their social institutional framework, as she calls it, to be more in sync with

• 21:12Speaker 02

  the techno-economic paradigm made possible by the new technology of the day and reap the rewards of that. In Carla's model, she divides what she calls a great surge of development, triggered by a technological revolution into various phases. And the last phase is called the maturity phase, is when the new technology is not so new, the new entrants powered that have harnessed the power of that new technology have become big and a bit exhausted, the markets are plateauing and growth is not as strong as it used to be. And that's typically a phase where you have to find extra room if you want the economy

• 21:57Speaker 02

  to keep growing, because you've made the most of the new technology and you need to pull different levers, not technological levers, but other levers. And so the last time that happened, the last time we reached a maturity phase in a great surge of development was in the 1970s. That was the maturity phase of what Carla calls the age of oil, automobiles and mass production, which started with the invention of assembly lines to assemble automobiles early in the 20th century in Detroit, USA. And yes, it reached maturity in the 1970s, which we all remember, I think, even though

• 22:39Speaker 02

  we were not all born at the time, we all remember the 1970s, having read about them in history books as a period where the economy really stalled and it created a lot of problems, including stagflation, social unrest, political upheaval, et cetera, et cetera. One of the things that happened during the 1970s was a financial reset, a complete upheaval of the international financial system, by which I mean not only the Bretton Woods system, the IMF, the dollar being linked to gold, et cetera, but also who participates in the market, what is traded in the market, how companies are funded, how capital is raised,

• 23:24Speaker 02

  et cetera. And if you go through a list of everything that was invented or emerged during the 1970s, it's mind blowing in terms of financial innovation. So it starts with something known as the Nixon shock, when the US decides to cut the link between the dollar and gold. That's 1971. A few years after that, Michael Mirkun invents the junk bond market, thus providing an abundant source of capital for many, many things, including something else that was kind of invented in the 1970s, leveraged buyouts. The end of the 1970s is when Jerome Kohlberg, the first K in KKR, partners with Henry Kravis

• 24:07Speaker 02

  and George Roberts to found KKR, because the two younger co-founders have seen that what Kohlberg had been practicing in a very artisanal way at a very small scale was a way to deploy capital in mature companies and force them to find extra productivity and to create additional value for shareholders. Something else that was invented by then was the Bloomberg terminal. Bloomberg launched the terminal at the end of the 1970s. It became like an omnipresent device on everyone's desk in financial services during the 1980s, and it made it possible to exchange information and to do trading like a much faster and in a much more efficient way.

• 24:51Speaker 02

  And then you have a few regulatory inflection points, such as what is known as May Day on the New York Stock Exchange in 1975, when the New York Stock Exchange decides to end the system of fixed fee brokerage, thus unleashing financial innovation in many different directions on the New York Stock Exchange. And about a decade later, in London, there's something known as the London Big Bang, which is essentially the British government and the London Stock Exchange, drawing the lessons of everything that's changed in finance over the past 10 years and deciding that they

• 25:29Speaker 02

  will implement the perfect regulatory framework to take advantage of all of that in London. And that turns London effectively as the second financial hub for the global financial system moving forward. So all of that happens during the maturity phase of the age of oil, automobiles and mass production for reasons that we can discuss. But I think one of the reasons is that when the new technology is not so new, when it fails to deliver additional productivity gain, then you have another lever that you can pull, which is reinventing finance. You can find extra value, you can create extra additional value by unlocking the power of finance.

• 26:14Speaker 02

  And that needs to be done by launching new financial products like junk bonds, launching new financial tools like the Bloomberg terminals, bringing about new financial regulatory frameworks like May Day or the London Big Bang, and all of that together effectively gives birth to a financial system that is completely different. And so, fast forward to today, and sorry for the long answer, but if you assume, as I do, that we've now reached the maturity phase of the current techno-economic paradigm, which I call that of semiconductors, computing and networks, then that maturity phase should give birth to a new financial system.

• 26:58Speaker 02

  And so if I have this conviction, then I look everywhere for signals that the financial system is changing. And having written about that for one year and a half with Marek, I have gathered a lot of such signals and organized them in a coherent way. And that's really the thesis behind the idea of a great financial reset.

• 27:21Demetri Kofinas?

  What were the underlying forces that led Nixon to end convertibility? And here I don't mean the proximate reason of gold reserves being drained, but what led to that? And then how did that end of Bretton Woods serve as a forcing function for what really is a cornucopia of financial innovation? I mean, you're talking about junk bonds, LBOs, Bloomberg terminals, there isn't just one form of financial innovation. So flesh that out for me a bit, if you can.

• 27:52Speaker 02

  Yes. By the way, one that I forgot was the invention of passive investing. The 1970s is also the launch of Vanguard by John Bogle.

• 28:01Demetri Kofinas?

  And the institutionalization of finance and the development of investment frameworks that now define largely how people invest their retirement savings, which have also come to replace savings as the primary mechanism by which people plan for their retirements.

• 28:16Speaker 02

  At least in the US, not so much in Europe.

• 28:18Demetri Kofinas?

  Yes, correct. So start first again with the, what were the underlying drivers that led to the end of convertibility? And then how did the end of convertibility lead to this just broad cornucopia of financial innovation?

• 28:31Speaker 02

  So I have two answers, and maybe Mike will have other ideas, but one answer I heard from Martin Wolf on an episode of the Odd Lot Podcast, I think last year, and he was saying like the US had spent so much for the Vietnam War and for Lyndon Johnson's Great Society in the 60s, end of the 60s, that normally it would have had to devalue the dollar. To adjust for having spent so much and restore balance in the system. But because it was humiliating for the hegemon that the US was to devalue its own currency,

• 29:11Speaker 02

  especially since the dollar was really the anchor for the whole international financial system. Nixon just said, no, we won't devalue. Let's just cut the cord and bring this system to an end and let exchange rates float. So that's one explanation, the fact that the US had spent so much and was refusing to assume the consequences of that. The other is more generic, but it goes back to the conversations, Mark, we've had about inflation and hard assets, et cetera. So one of our interviewees, because Currency of Power is also a podcast, and the first, very first interviewer, actually, was Matt Green, whom you know.

• 29:53Speaker 02

  And we asked him about his skepticism about Bitcoin. And so difficult to do justice to the whole thesis, which is fascinating. But essentially, what he says is that you can't anchor the entire economy on hard assets. Because hard assets, by definition, have a limited volume.

• 30:11Demetri Kofinas?

  Lack elasticity.

• 30:12Speaker 02

  Yes, lack elasticity. And if your economy is growing well, if you have technology, if you have productivity, et cetera, the economy can grow indefinitely, well beyond the volume of hard assets. So if you pick one hard asset and the economy is productive, at some point, there will be tension because you'll need more money to reflect all that additional value brought about by productivity. And the hard assets in limited volume won't be enough to anchor the whole thing. And so at that point, you have two options. One option is to go into.

• 30:45Demetri Kofinas?

  And for people that are listening, just to, I just wanted to clarify, because this conversation, I've heard it often over the years. The key insight here, I think, is that borrowing costs go up. If you don't have an elastic currency, the cost of borrowing money becomes punitive and that reduces the potential for growth. And that's essentially the insight.

• 31:05Speaker 02

  Yes, exactly, exactly. And then you go into deflationary mode and you've missed an opportunity. You could have created more value, but because you force yourself to anchor the entire economy on a hard asset that is limited in volume, then you can't grow as fast. And so that's why every regime that relied on some hard asset, whether the gold standard or the Bretton Woods regime, which was a gold standard by proxy of the dollar, was ultimately brought to an end, not because it didn't work, but because the economy grew so much, thanks to technology mostly, that we had to let go of the hard asset and find something else to anchor the economy. And so I think fundamentally, that's what happened in the 1970s.

• 31:48Speaker 02

  It's that mass production, the techno-economic paradigm of the day had brought about so much value, so many jobs, so much wealth, widely distributed across, especially the US middle class, that all the gold in the world was not enough to sustain this massive value creation machine.

• 32:07Speaker 01

  That's also when you start seeing things crack, was like, you know, the gold and his prime minister at the time, Giscard d'Estaire, starting to talk about like an exorbitant privilege. And I think, you know, you mentioned like, it's not just about gold and sending ships and not wanting to ship that. But there is like cracks into how the system is perceived and how that position works. So I think that's actually definitely, you know, the premises of what we are seeing. And then the question becomes, which is also like one of the question that has always been, you know, a trigger in particular in crypto world is, okay, so if fiat currency is backed in essence by nothing, then what is it, right? And so you have also like, within this timeframe, the birth of a petrodollar system. So we could say, okay, is then the dollar, you know, a representation of energy and therefore of oil?

• 32:52Speaker 01

  Or is it something else? But I think all those conversations are linked from the fact that it was ultimately linked to gold, doesn't allow enough elasticity, there's cracks in the system, needs to change, becomes, you know, there is more freedom to basically print more money, but then what is it? And then there's actually a petrodollar system that puts itself in place. And then is that system the system for the future, in particular, if we move into into an electrostate, right? I mean, maybe we'll come back to it, but I think there's also, for the great reset that we are seeing, what's very interesting is the modern history, right, from 2008 and how we saw financial crisis and so on and so forth. So I'll pause here for now, because you might have a follow up question. But I think we should also look at why we think now there's this great reset happening and what are all the trigger points that actually we have thesis about?

• 33:36Demetri Kofinas?

  Yeah, no, I'd like to do that. Let me just, let's linger here a bit longer. So there was a broad expectation that Nixon's de-pegging of the dollar from gold would lead to a devaluation, a long-term devaluation and loss of that exorbitant privilege. But in fact, by decentralizing the international financial system, the dollar actually became stronger. And to your point about the petrodollar, what we saw was capital recycling back into the United States, driving the value of the dollar up so high, in fact, the international governments needed to come together under the Plaza course in 1985 to drive the dollar value down. And so I think that's an important observation, because it has ramifications for a lot of the work that you guys are doing

• 34:21Demetri Kofinas?

  in terms of what the implications would be for dollar-backed stablecoins, isn't that right?

• 34:26Speaker 01

  Absolutely, and I think that's actually spot on. There is this like, almost the, you know, enabling the peg to the goal to be finished, enables this printing of money and this decentralization of the dollar in other places, right? And now you have that with the petrodollar, but also with the eurodollar, which is like, okay, if two counterparties are outside of the US and they need to have dollars, where there is actually exchanges that are made, but it's not dollars that are directly controlled from the US and benefit. And actually, I think there is such a strong parallel with what we're seeing today, for example, with stablecoins. Tether is a perfect example of that. There are people anywhere, everywhere in the world, as long as they have actually a digital wallet, they can have dollars in their pocket. And that's also an outsourcing of dollar.

• 35:10Speaker 01

  And I think the strength in a way of the dollar has always been to believe that outsourcing its currency is a better mechanism rather than actually, you know, strengthening it. So it's like, let it flow, don't fully control it, but at least it's in everybody's hand. And by being in everybody's hand, one, you can also dictate the rules, right? Because that's your money that's floating and in the world, but you basically have that that is in everybody's hand. So there is absolutely a parallel. And Nicola and I have debated a lot, like, you know, are stablecoins the new petrodollar? Are stablecoins the new eurodollar? Are stablecoins actually something different? And they're like the money for compute, because compute is the new oil, right? We've played around with all those different ideas, but I think you're totally correct

• 35:51Speaker 01

  that what it enables in 1970s is actually that it enables the outsourcing and therefore the more free-floating decentralization of the dollar.

• 35:59Demetri Kofinas?

  What I've long argued is that the dollar is the most decentralized currency on the planet. Would you agree with that?

• 36:04Speaker 01

  Hundred percent. It is everywhere. And the more we look with Nicola, we are like, okay, China will de-dollarize. And then you look at it, it's actually fully, it's completely linked, right? So like, it is very decentralized, it's everywhere.

• 36:14Demetri Kofinas?

  This is of course, a very controversial statement to make to Bitcoin Austrian economists and libertarians at the time that was making it. But I feel like most people think of the dollar as this thing that Uncle Sam has and that he emits to the rest of the world and that the rest of the world can decide at some point, well, we just don't want this anymore and we're just going to take something else, which I feel like is really an inaccurate view of what the dollar is, which is at its core, a denomination. It is a lingua franca, it's like English. The rest of the world speaks English, no one forces them to speak English. It isn't that easy to stop speaking English and it comes with all sorts of network effects and conveniences. And so what would you think, like, if you were to try to explain to people what it is about the dollar that makes it so sticky and powerful?

• 36:59Demetri Kofinas?

  As we go further into this conversation about financial innovation and dollar-backed stablecoins in particular, what would that be?

• 37:06Speaker 02

  Yeah, I can't remember, but we went through a detailed list of everything that makes the dollar so enduring and sticky in our podcast interview with Jess Olson a few weeks ago. And off the top of my head, one is obviously the network effects. It's same as a language, like if I'm transacting with a counterparty in Brazil, they speak Portuguese, I speak French, the two languages are very close in general, but the easiest way to understand each other will still be switching to English. And it's the same for the dollar. If we try to transact in euros or reals, well, maybe we'll say, oh, it's too complicated or too risky,

• 37:50Speaker 02

  because the market is not deep enough to to secure the the exchange rate over the time, over the duration of the transaction. So maybe we'll switch to the dollar, which is known, safe, liquid, et cetera.

• 38:04Demetri Kofinas?

  And in both cases, you don't need anyone's permission.

• 38:06Speaker 02

  No, yeah.

• 38:07Demetri Kofinas?

  You don't need any permission to use dollars or to speaking.

• 38:10Speaker 02

  Yes, exactly. And so that's one factor, network effects. The other factor, which was the conclusion of our discussion with Jess, was that the financial rails matter a great deal. That is, how convenient and how easy the financial system makes it to use a specific currency for a specific transaction.

• 38:34Speaker 02

  And because the dollar is so massive, there have been so many investments in the infrastructure that supports the dollar across the world. Then it's usually the default solution because those are the financial rates that everyone uses. And they've been over invested and they're very convenient and very easy. So you could argue that maybe the euro is close enough from a convenience perspective, especially within the eurozone, etc. But yes, so those would be two reasons.

• 39:10Speaker 01

  Yeah, and I think we find them back also in, in, you know, when stablecoins pick up, why they pick up, right? One is actually availability. You need to be able to have access to a currency where is it? And for the dollar, whether it's like correspondent banking or the rails that Nicola was mentioning, all of that, like the rails are there, right? So the availability, the system, it works. And it's been built over years. But if you look at it again, like we were talking about the seventies, not that long ago, right? In essence. And the second part is really important is once you have actually this network and the rails that are being built that within it, there is liquidity, there is very deep liquidity. And so it's almost endless. And so it works. So the system, wherever you go in the system, even in like the most remote places, there will always be liquidity for you to be able to have access. And that's really the thing that works. So for today, and that's some of the question that also we look at like,

• 39:55Speaker 01

  for today to actually change that, it is so prevalent everywhere. The network is so deep and the liquidities are like so deep also. That actually to change that, it's not going to be a matter of like, you know, days or years, it's just going to take a long, long time. And it's all about network effect, right? So anyone that wants to start, if anyone would want to actually become the reserve currency of the world, big question mark. But if anyone wants to start that, you know, it's a cold start thing, right? You can build the rails, but then you can build the rails and nobody comes on it. Or you can build the rails, but there is no liquidity. So it's not working, right? But to me, it's really that it's like the infrastructure, the liquidity, which is again what we see in crypto.

• 40:32Demetri Kofinas?

  And US public debt markets are what provide a big chunk of that liquidity and the ability to manage outstanding liabilities and funding requirements, which is, I think, also something that people don't appreciate when they look at the state of US finances and they say, who wants to own US government debt? Well, the primary reason that people want to own US government debt is not because they think it's a better long-term investment than, I don't know, gold or art or something else, but because they need it. They need dollars if they have outstanding liabilities and they need to manage those outstanding funding requirements. And I think this is something we'll have a chance to certainly talk about in the second hour when we discuss sort of where things could be going in the larger macro picture. Let's now, I feel like we did a good enough job

• 41:14Demetri Kofinas?

  establishing the analog of the Nixon shock period to the London Big Bang. And we discussed two aspects. One was the, the set of primary drivers that led to the end of Bretton Woods. And then we didn't talk as much exactly about the forcing function that led to the financial innovation. But we certainly gave examples, Nicola did, of forms of that that financial innovation took. What are today's drivers?

• 41:39Speaker 01

  Yeah, so that's where I would call that modern history. But I think there's a few drivers that have happened. So one, 2008 financial crisis, also the birth of Bitcoin, right? And we can debate, you know, related or not, whatever. But like financial crisis, birth of Bitcoin. So you have now a technology that enables transfer of value in a peer-to-peer fashion with the rest of, you know, the, the industry, as we discussed a bit before, which is like, you know, Ethereum and smarter and smarter blockchain that enable you to do better and better things. So to us, 2008 is definitely like a shift into what's happening. There's another shift that is actually also very interesting, which is more 2014. And in 2014, actually, when Russia invades Crimea and then there is sanctions that are being put on Russia,

• 42:23Speaker 01

  that's a wake-up call for many in actually the world. And that wake-up call is, oh, hang on. If sanctions can happen at that level, and maybe next it's us, right? Next, we are the country. And one of such country that looks at that very closely is actually China. To think, right, to say, okay, wait, if that happens to Russia, maybe it could happen to us. So how do we build something that's, you know, independent and self-sufficient? And Nicola has this amazing concept, which when he talks about China, he looks at like a self-sustaining society. I think it's really like thinking of like a, a full stack society, how to build that. Part of that is actually building the rails and having rails that are independent and that, you know, no one has oversight with and can cut. So that's the second shift that we look at 2014, which I think is very interesting.

• 43:07Speaker 01

  Covid is another very interesting moment in this, again, like massive shift of how everything is happening, not only because of like, of course, what happens and most of us are locked in our flats, but that enables actually also massive acceleration of everything that's digital, right? So if we were still debating, you know, is money going to be digital or not? What's going to happen? Like there's a, no doubt, there's a tremendous acceleration of actually digitalization to that. And then there is Trump comeback, right? And with Trump comeback, the genius act and all the laws that are basically starting to emerge and are being put in place to actually also fully embrace like a technology with the understanding that actually the dollar has power through network effect, but that the money of the future is technology and that therefore this is actually an instrument

• 43:52Speaker 01

  that is actually really important to protect. So I don't know if you want to add anything, Nicola, but like, I think in modern history, when we look at like more the, the points and everything that we see has been happening to start creating this moment of this great reset, like those are some of the key moments.

• 44:08Speaker 02

  Yes, I would add an older episode, which is, I think, when the US ceased to be a surplus nation and became a deficit nation from a trade perspective and current account perspective. That really echoes Ray Dalio's discussion about the rise and fall of empires. And basically what he explains is that when the empire stops being a net exporter and becomes a net importer, which happened to the US sometime between 1976 and 1982. So also the 1970s. It creates a, a dynamic, like at first it's a very low,

• 44:50Speaker 02

  you don't see much at first, but in the end it peaks in terms of discontent because the empire imports so much and has to provide everyone with its own currency. So that's where we are, like the fact that Trump was elected twice in 2016 and then 2024, mostly because of his trade agenda, like putting an end to the US being ripped off by the rest of the world, re-industrializing America, et cetera. All of that implies that the dollar has to cease to be the reserve currency. And you need to erect trade barriers and you need to reverse

• 45:33Speaker 02

  the trend that started between 1976 and 1982, which is when the US ceased to be a surplus nation and became a deficit nation. And so you have those macro imbalances that are pining up and culminating now with China having this massive trade surplus, including the US. And Ray Dalio, another thing that he says is that, so effectively the reaction to that is that the empire becomes predatory towards others, which is exactly happening with Canada, with Europe, with South Korea, et cetera. But he says the last thing that gives in, in the imperial construct is the reserve currency.

• 46:18Speaker 02

  That's the very last thing that will still be in place when all the rest is gone. And in a recent podcast conversation, geopolitical analyst Marco Pappi was saying, was reminding us that the Britain ceased to be the largest economy in the world at the end of the 19th century. It was passed by the US back then. But the pound sterling remained the reserve currency of the world until the end of World War II, when it was finally decided that, okay, we need something else. It'll be the dollar anchored peg to gold. And that was Bretton Woods.

• 47:00Speaker 02

  But through all of those things, like Britain ceased to be the largest economy in the world. Then it didn't lose World War I, but World War I was a massive blow to Europe and to everyone in Europe, including Britain. Then it tried to go back to the gold standard, then had to go off the gold standard in 1931. Then World War II, the Holocaust and everything that happened. Europe completely destroyed Britain in ruins because it's been bombed down by the Germans. You needed all that for the pound sterling to cease to be the reserve currency. So the dollar, if you extrapolate from that, following Marco's reasoning, the dollar is here to stay for a few more decades.

• 47:44Speaker 02

  But the signs that its demise will happen at some point are already here if you know where to look.

• 47:53Demetri Kofinas?

  Which is also consistent with the observation that the dollar is a denomination. It is a independent thing that people can continue to use and contract in, even if the United States or the US empire is no longer around. So that there's a, it explains the lag, in other words. I want to share a few thoughts before I move us to the second hour. Because it seems to me, you know, having read your work now for the last, the, the writings that both of you have been putting out on currency of power and Nicola, your stuff at Drift Signal for, you know, at least two or three years now. It seems that you each have grown less certain about whether America will be able to maintain its financial hegemony or dollar dominance, or whatever term you want to use,

• 48:38Demetri Kofinas?

  for as long as maybe you initially thought when you were working on your theses around dollar-backed staple coins. First of all, is that accurate? Am I correctly reading that from your most recent piece on the Great Financial Reset?

• 48:53Speaker 01

  Yeah, I think you are, right? Because, well, one thing is, I think through our work, one, we've actually started also to disentangle what it is to be a reserve currency for what it is to be a currency used in trade, right? And I think actually, that distinction is very important, because as Nicola say, you could continue to be a reserve currency, but maybe some other stuff is being used in trade, right? Which I definitely think is probably some of the signals that we see with China. But one of the other realization has been like, you know, the dollar is so entangled everywhere, right? Like, so for example, I know that people look at China and they say, "Oh, it's, you know, it's gonna take over." But the reality is that if you go to Hong Kong, which by the way, is the key door from China to the rest of the world, if you go to Hong Kong, the Hong Kong dollar is pegged

• 49:38Speaker 01

  to the dollar. Like, there's a fixed rate, that's it, it's pegged. So, it is, in a way, the Hong Kong dollar is dollar, right? Like, there is an exchange rate that's straight to that. So it's way more intertwined in everything that exists out there. I think in our work, what we found really interesting is that this idea that if you are sat around members of the government in the US and you start, you know, putting the pieces of everything that's happening, and you say, "Okay, what is the next financial innovation? Like, what do we need to think about, like, the next generation of thing?" And then you start, you know, pondering that, well, maybe stable coins as this next generation, because they have all the tools and the instruments that you could actually require for continuing to be able to dictate, you know, trade and to actually have an oversight.

• 50:22Speaker 01

  We haven't talked yet about, like, you know, financial regulation and oversight and, you know, freezing and being able to seize and so on and so forth, but this is part of the power of the dollar, right? If it's happening, dollar is there. So I think the point that we found really interesting was to say, "Okay, there's this technology that can come up and do that." Now, you know, how fast? How fast can this transition be? You know, uncertain, right? So I think we, I don't know, Nicola, what would you say? But yeah, I feel like we, personally, I've grown a lot into, you know, it's, things are not like they look on the headlines, definitely not. You know, it's catchy to make a headline, like, "The dollarization is there." I'm like, "Well, hang on, it's gonna take way longer."

• 51:00Demetri Kofinas?

  Well, I think, so I think in the second hour, we'll have a chance to discuss what has changed. And I think one thing that's changed is this administration's policies, or sort of what we expected their policies to be, and the seriousness with which they pursued the agenda of financial innovation and re-regulation of the financial system, and what has actually consumed the energies of the Trump White House. When I was asking you about analogous drivers today, you touched on two that I had previously identified from your work, one of which was the re-architecting of the financial system and of money itself, primarily through the widespread adoption of dollar-backed stable coins. Another was the geopolitical fragmentation and localization, as other countries began

• 51:44Demetri Kofinas?

  to feel the need to protect their own capital reserves from being expropriated to US-dollar-backed stable coins. And the third, which you didn't mention, but which I want to talk about in the second hour, is machine-to-machine commerce as the increasingly dominant layer of the global economy. And what does that really mean when we build all these automated systems that then need to engage in commercial activities? And do we need, by definition, a new sort of financial system or financial innovation to do that? And that seems to be, in my opinion, a primary driver. And one more thing for sure that I want to talk about in the second hour, guys, is what is both of your views on the likelihood or inevitability of debasement of capital controls

• 52:26Demetri Kofinas?

  and other means through which to achieve financial repression? Does the rise in treasury yields, for example, suggest concerns about the state of US finances? Does it reflect, to some degree, just the preference that investors have for pouring more and more money into the AI trade? So I'd love to sort of have a broader macro conversation when we head into the second hour as well. For anyone new to the program, Hidden Forces is listener-supported. We don't accept advertisers or commercial sponsors. The entire show is funded from top to bottom by listeners like you. If you want access to the second hour of today's conversation with Marieke and Nicola, head over to hiddenforces.io/subscribe and sign up to one of our three content tiers.

• 53:10Demetri Kofinas?

  All subscribers gain access to our premium feed, so you can listen to the rest of today's conversation on your mobile device, using your favorite podcast app, just like you're listening to this episode right now. Guys, stick around, we're gonna move the second hour of our conversation onto the premium feed. If you want to listen in on the rest of today's conversation, head over to hiddenforces.io/subscribe and join our premium feed. If you want to join in on the conversation and become a member of the Hidden Forces Genius Community, you can also do that through our subscriber page. Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes, you can check out our website at hiddenforces.io.

• 53:54Demetri Kofinas?

  You can follow me on Twitter at Kofinas, and you can email me at [email protected]. As always, thanks for listening. We'll see you next time.