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The biggest scam in modern finance is the "risk-free" rate. Trillions of dollars of capital have been misallocated on the premise that there is no credit risk to owning a T-bill. After all the government can always brrr the money printer if need be.
And of course instead of credit risk, there is now substantial inflation risk in its place, which is where the scam occurs. A huge "macroeconomics theatre" is established to convince the rest of the world that USD is *somehow* immune to this inflation risk.
Monetary policy decisions are outsourced to an "independent" Federal Reserve whose mandate is to keep inflation in check. But these days the Fed's hands are completely forced by the market.
They have lost the operational autonomy they once had due to increasing political pressure. They must defend economic policy goals at all costs, even if it goes against their better judgment on risk. And so the balance sheet goes up and up and up.
Very people understand what happens at this point. "QE isn't actually money printing." "There's no risk to increasing the Fed balance sheet." At this point Fed policy just amounts to finding creative new ways to pump money into the system without causing any anxiety / panic.
It's more of a sales and marketing job than a policy job at this point. Fed policy is on autopilot, and will be for years to come. They only need to prevent people from panicking over the entire ruse. Luckily, the entire backend is so convoluted, that this isn't difficult.
Constant confusion and misunderstanding regarding how inflation works or what the goals even are. "Fed is pumping money to prevent deflation, which is the bigger risk." "2% inflation is a good policy goal that we need to achieve at all costs."
When the cookie finally crumbles, people will look back and marvel at how hilariously broken the concept of "risk-free" actually was. THERE IS NO RISK-FREE RATE. And once people start to internalize the inflation risk, there will be an earth-shaking redistribution of capital.
Cue BTC / ETH. A money supply that is commodity-based instead of debt-based. One that also cannot default, but now suffers no inflation risk. The tradeoff here is the lack of stability, which is fine IMO. We don't need sub 100 basis point stability at the base layer.
That stability isn't worth the risk of the entire financial system cratering due to moral hazard. For the times we do need stability, it can be attained with systems that guarantee that the risk is appropriately shared and incentives are properly aligned (cue DeFi).
