| SNEAK PEEK |
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— There’s a radical civil obidience movement shaping up in Britain and threatening to fix things without planning permits.
— We take a closer look at what drives Kevin Warsh, one of the names being floated as next Fed governor.
— Why for Frankfurt it’s euroization or bust.
— Related: Why “stablecoins” are just a euphemism for a system reset centered around a global USD currency board.
Happy Father’s Day,
We’re going to dodge the firework show in the Middle East for now, including the rumortrage about American horse-trading with authoritarians for the sake of a greater peace, and focus on things closer to home. Notably declining Britain.
Meanwhile, Dario has been a bit absent the past couple of weeks, because I’ve put him on Berlin Summer Party planning duty. We have a really fun evening organized with some very unique performative journalism elements in them. There’s still time to get a ticket.
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| THE BIG BLIND SPOT THIS WEEK |
A DISPATCH FROM DECLINING BRITAIN: A low-frequency thrum pulses beneath the overlapping shouts of some two hundred mostly-male voices packed into a club in once-trendy Camden — a corner of London that, like much of the country, feels like it’s living in the afterglow of better days.
It’s a typically overcast evening in June, and the rhythmic bassline filling the venue isn’t coming from a DJ, but from dozens of young tech workers volleying ideas in sharp, overlapping bursts. Yet, unlike the usual clubland cacophony, the sound is strangely orderly, almost martial, as if someone has programmed an algorithm to control the chaos.
This is Looking For Growth six months on — a cross-party insurgency founded by legal academic-turned-organizer Lawrence Newport after U.K. Chancellor Rachel Reeves’s November 2024 Budget convinced him Westminster could no longer deliver.
“We are going to force this country to be better, whether it likes it or not,” Newport tells the crowd of largely 20-something olds.
The group’s co-founder Joe Reeve echoes the sentiment, noting it’s time for young Brits to realize “the cavalry is not coming. We are the cavalry”.
Fed up with the visible decline of Britain, the grass-roots movement has taken it upon itself to fix what politicians can’t.
Disruptive civil obedience: Radicalism here, however, is a far cry from civil disobedience. Intent on no longer “using up what we’ve already got” but developing new resources, the group seeks to tidy, build and fix — all while floating and supporting each other’s business development plans. Signature accessories are cloths and algorithms, not balaclavas or placards.
Tonight, the group is updating its expanding cohorts on its achievements to date. The list is growing: a delivery of a planning infrastructure bill to make it easier to get planning permission, a new website, a real-time growth tracker, and a mushrooming network of young volunteers eager to muck in and clean up the Jubilee line.
Finally, there’s the group’s growing sway with Number 10.
“The government was going to give in to a bunch of green amendments that would basically mean the whole planning bill, which already isn’t that great, would be even more shit,” Newport tells the crowd, before adding that by LFG drawing public attention to the move, “Number 10 backed down and didn’t endorse it.”
But the broader message on repeat is simpler: British decline is not inevitable. It’s a choice. It’s time for everyone to use their personal agency to overturn it.
The call to build: As the gathering gains pace, Newport’s disciples insist they are “apolitical,” or rather anti-political: they convene hackathons, not NEC meetings; they crowd-fund their “Infrastructure Bill” rather than woo lobbyists.
The nod, if anything, is to technocracy, the 1930s movement that called to replace politicians and businessmen with engineers and scientists. Its can-do attitude and contempt for the political process resonated during a time of extreme economic disillusionment.
In London, the crowd woops supportively when Newport points out that Elon Musk — whose grandfather happened to be a key figure in the Canadian faction of the original technocracy movement — retweeted one of LFG’s videos over the weekend.
Many in the room are talented software engineers who have actively turned down lucrative opportunities abroad because they believe “Britain is worth fighting for”.
The blend of homeland upkeep and frontier tech produces unexpected role models in the crowd. One participant namechecks Palantir, the U.S. defence-data contractor most Westminster salons treat as radioactive, as the only type of company he’d consider defecting for.
“Perhaps the smart move would be to flee tail between my legs somewhere where the funding is easy, and risk taking it forward. Instead, I’m here because Britain is my home, and I love her,” says one of the opening speakers.
Across the pond, it’s not just Musk who has taken note of LFG. The group is followed on X by Silicon Valley royalty like venture capitalist Marc Andreessen. Closer to home, meanwhile, techbro supremo Dominic Cummings has drifted through earlier meet-ups.
Political affiliations aren’t entirely lacking.
One of the speakers on the night is Mark McVitie, director of the Labour Growth group, an emerging informal faction within the UK Labour Party that champions pro-growth, pro-enterprise economic policies. He jokes that journalists are already dubbing LFG the paramilitary wing of the Treasury. Though he himself begs to differ. “In my opinion, we’re not the paramilitary of the Treasury, we’re the paramilitary wing of the British people in SW1 trying to make their demands happen and come to fruition,” he says, before getting more serious.
“The stakes of another administration failing to meet the demands of the British people are catastrophic,” McVitie tells the crowd. “The social matter for this country cannot withstand another betrayal, right? That’s where we’re at.”
Having asserted it’s five minutes to midnight on the future of Britain, he tells the room everyone present is in the vanguard trying to do something about it. He closes with the group’s emerging rallying cry: “Let’s f****** go!”
Grow or die: Present too is Katie Lam, the 33-year-old Conservative MP — fast becoming one of LFG’s most useful Commons conduits. Working her signature tradwife aesthetic, she tells the crowd the last time the country had meaningful growth was in the 1990s.
“I was 16 when the financial crisis hit. I am now 33, all I have ever known is a low-growth economy,” she says. “Governments cannot create economic growth. They don’t create wealth. They can only spend it, but they can facilitate or inhibit growth.”
“We as a country have two options. We grow or we die.”
The orderly crowd signals enthusiastically that it’s prepared to take on the burdensome task of ensuring it’s the former, not the latter.
| BUSINESS, ECON AND FINANCE |
DOM VS THE BEAN COUNTERS: Dominic Cummings, the former chief adviser to Boris Johnson, continued his calculated campaign against Britain’s civil service and policy apparatus during a keynote at Oxford’s Sheldonian Theatre on Wednesday — sparing no vitriol for HM Treasury. And The Blind Spot was there to listen in.
Leviathan of inertia: In his signature dystopian tone, Cummings described Treasury budget processes as “an absolute disaster” that “make it impossible for people to plan” and “make everything super expensive.” He warned that the structure leads to a “constant cost of churn,” where departments are left unable to organize themselves over 5–15 years, often seeing whole teams fired mid-project due to budget insecurity.
Configured for decline: According to Cummings, long-term growth is structurally stifled by a procurement and budgeting system he called “pathologically hostile to expertise.” Treasury processes, he said, “make everything super expensive” and are riddled with “completely fake” numbers during spending reviews. “Everybody lies in the spending review process, and all the budget numbers, everyone knows they’re completely fake,” he added, noting that government departments can’t plan beyond the short term due to Treasury’s refusal to guarantee stable funding.
Hypernormalized: He also mocked the “fake meetings” culture of Whitehall, where “conclusions are written by officials before the meeting ever happens,” and called for the Cabinet Office to be abolished and its functions absorbed by No.10.
Takes one to know one? The lecture was not without its detractors. Several hecklers in the audience interrupted Cummings, accusing him of being as fake as everything he was claiming to be fake. Still, Cummings remained unfazed — warning that without deep reform, the UK is locked into a cycle of elite dysfunction and economic stagnation. “The system doesn’t see itself as there to deliver for you,” he concluded. “It sees itself as there to protect itself.”
What is to be done? Dom’s prognosis is simple: “You’ve got to actually close [the Cabinet] office. You’ve got to replace people… change the procurement system so the government can actually buy and sell and do things on normal timescales.”
| CBANKING |
KEVIN WARSH FLASHBACK: As speculation mounts over who will be nominated to takeover from Jerome Powell at the Fed — with new prospects coming forth all the time, among them Kevin Hassett and Scott Bessent himself — we decided to take a closer look at the man whose name has been floated more often than not the past few months. Kevin Warsh.
Who dat? Warsh is a former Federal Reserve governor who played a key role in the 2008 crisis. He now teaches at Stanford. What those not in the thick of central banking politics may be unaware of, however, is that he quit the Fed in 2010 after becoming increasingly frustrated with its quantitative easing policies, arguing they would push the Fed into “the messy political business of fiscal policy.”
Warsh was a last minute keynote stand-in for Mark Carney at the G30 Spring Meetings in April, and the speech made some incredibly poignant points about the errors of QE. It also raised some very good arguments about the state of central bank independence, which are worth reiiterating.
Throughout, Warsh suggests the Fed’s expanded role and underperformance due to QE have “weakened the important and worthy case for monetary policy independence”. He recalls that quantitative easing was a “crisis time innovation” in 2008 when interest rates hit zero, however, “when the crisis ended the Fed never retreated” and QE became a “near permanent feature of central bank policy and power”.
Fiscal blurring: The situation, Warsh adds, made it “considerably easier” for elected members of Congress to “appropriate money knowing the government central bank would be subsidizing the costs of it”.
Mission creep: Importantly, Warsh observes that “changes in the role of the US central bank have been so pervasive as to be nearly invisible”. He states that the Fed has taken on “a much more expansive role inside of our government on all matters of economic policy” that it has even “moved into matters of state craft and soul craft” meaning “the line between the central bank and the ostensible fiscal authority has grown harder to identify.”
But it’s worse than that. It’s not just that the central bank is no longer independent. It’s that in many cases it is the one leading government policy and intruding into decisionmaking in areas traditionally reserved for elected bodies or Congress. He notes “monetary dominance rather than fiscal dominance monetary dominance where the central bank becomes the ultimate arbiter of fiscal policy is the clearer and more present danger”
Oh, how the Fed mandate has grown: Another gripe is that Congress has granted important functions to the Federal Reserve far removed from monetary policy. “I’m thinking for example of banking and supervision,” he says. “Fed claims of independence in bank matters undermine the case for independence in the conduct of monetary policy and when the Fed turns away from its creed and traditions exercising powers that were once in the province of our Treasury Department or take positions on societal issues whether popular or not it further jeopardizes the operational independence in what matters most”.
Don’t pretend quantitative tightening isn’t monetary policy. Finally, he highilghts the Fed’s strange reluctance to pretend that QT is somehow separate to interest rate policy in terms of its effects on credit conditions. “If it was monetary policy when we grew the balance sheet how could it not be monetary policy on the other end now we have a tendency in central banking circles to say well we have very large balance sheet don’t look at that that has nothing to do with monetary policy that’s about excess reserves and banking and liquidity,” he says. “I think we need to be upfront about was it then monetary policy and is it not now monetary policy”
Not a fan of CBDCs: When asked about the rise of CBDCs, Warsh sides with The Blind Spot’s long interpretation that it takes us down the pathway of state-banking. “We central bankers… we’re in the wholesale business we ought not be in the retail business”, he notes, adding “it is the decision of Congress if they want to create a US dollar stable coin …. and if it’s a retail product I wouldn’t very much want the central bank to be too involved in that”.
His view is that if the Fed were to manage retail accounts, it could become an “appeals court for fiscal policy”.
STABLECOIN GOES RETAIL: The WSJ reported on Friday that some of the biggest merchants were exploring how to issue or use stablecoins, potentially shifting the high volumes of cash and card transactions that they handle outside the traditional financial system and saving them billions of dollars in fees. Think of it as the Tesco clubcard reborn.
Etiher way, it’s another clear indicator of The Blind Spot’s thesis that a USD stablecoin superstructure is on its way to being formed.
Visa and Mastercard tanked some 6 percent on the news.
From Tesco clubcard points to travelers’ cheques: Tony McLaughlin, who used to lead a cross-bank endeavor at Citi focused on creating a “regulated liability network” but has now shifted to stablecoin enterprise UBYX.xyz, made a wonderful observation on Linkedin about the nature of the stablecoin revolution.
“Towards the end of November 2024 I realized that stablecoins were close analogues of travellers cheques and could achieve IAS7 cash equivalence through redemption at par value at banks and fintechs,” he noted.
DIGITAL EURO STASIS: Politico reported this week that Fernando Navarrete, the EPP’s Spanish lawmaker, who was appointed last December as the Parliament negotiator for the digital single currency regulation, is organizing a series of workshops centered on two different models that he sees as alternatives for a digital euro: “One led by the public sector through a retail central bank digital currency (CBDC) proposed by the European Central Bank, and another driven by private sector innovation,” according to a document obtained by our colleagues.
But rumors have been rife for a while that Navarrete’s real agenda is to frustrate the delivery of the digital euro as he aligns with the Germanic factions who view the digital euro as very anti ordo liberal. The growing view in Brussels is that the workshops are thus a good way to buy time and postpone concrete progress on the current Commission’s proposal.
As a consequence, there will be “separate sessions that present both the ECB’s perspective and the private sector’s approach.” A concrete example? Two parallel discussions on the maximum amount of digital euros citizens can hold in their digital wallet, one from the ECB perspective and another one from the private sector perspective.
“The goal is not to lock into any one solution, but rather to maintain a flexible, open-minded approach that adapts our political response to the significant changes that have taken place in the global and European payments landscape over recent years,” the document says.
See you in 2027: In private meetings, two of the people said that Navarrete has indicated he aims to give private industry at least another 18 months to set up an autonomous pan-European payment system. Only if that fails by a given time window would the digital euro project need to be considered.
Navarrete has since pushed back, telling our colleagues that his planned workshops on the digital single currency project were no delaying tactic, but rather a way to allow lawmakers and political groups to cultivate an unbiased approach and develop a “deep, nuanced understanding” of the issues. “If I may, I would have really desired that all institutions and legislators involved in the process could have taken this intellectually honest approach,” he told them.
But while the BoE appears to have a preference for interoperability with a stablecoin superstructure, the story in Frankfurt is very different. There’s a real concern that the arrival of USD stablecoins en masse could suck savings out of the eurosystem and destabilize the eurosystem.
While this won’t at first officially be declared an exchange or capital control, it will increasingly feel like one, making the shadow banking services provided via offshore USD stablecoins incredibly alluring, due to their fully reserved “currency board” like nature, which will create confidence in the system.
A digital euro will then become a necessary mechanism for control of the monetary system, as do exchange and capital controls, if Europe determines it does not want to voluntarilly opt-into this great “re-pegging” of the Western financial system, which will ultimately be anchored (if Trump gets his why) in the robustness of a core bitcoin-based settlement system.
We beg to differ on the point that this is crypto-mercantilism. We see it more as a rebasing and rebalancing to correct for multiple decades of industrial policy that prioritized finance over industry in the West. We also believe signalling that the system will be reset on these terms is what makes Trump’s Big Beautiful Bill tenable. By promising to anchor the system around a bitcoin and currency board structure from now on, the bill becomes America’s version of the dash for growth. One last over-extension, but this time to correct for the imbalances of the past and never do it again. You can believe us, because look, bitcoin.
Over in the UK: While the Brits face a similar problem, unlike the Europeans, they can more easily peg the pound to the dollar if it all falls apart for the sterling system. And are likely to be more open to it.
Naturally, this would also foment the “special relationship” and give the U.K. access to dollar swap lines.
Getting the ECB to peg the euro to the dollar would be far more difficult, both politically and structurally, than a hypothetical UK dollar peg. First, it would need an outright treaty change, as the ECB’s mandate prioritizes price stability and forbids targeting exchange rates. Second, the eurozone already functions as a quasi-pegged system internally, underpinned by a single currency backed by sovereign bonds of widely varying credit quality. Shifting ECB support from national bonds — particularly those of fiscally weaker members like Italy — to U.S. Treasuries would be a seismic move. It would deprive these governments of the implicit subsidy provided by ECB bond-buying, potentially triggering a renewed sovereign debt crisis.
Back to Monnet’s paper: “By regulating stablecoins, Trump could extend American financial and monetary influence, potentially increasing global dependence on the US dollar. This shift would pose major risks for Europe.”
Unlike in the UK, QE losses in the eurozone are much harder to mutualize, and any move to do so would likely face legal and political resistance, especially from Germany. The result would be to expose — and likely inflame — the long-standing perception that the euro is just a rebranded Deutsche mark, with Germany structurally advantaged at the expense of the periphery.
It is strategically plausible to suggest that under such extreme conditions, Germany could be tempted to break away and relaunch the Deutsche Mark — indeed, from what we hear, some serious factions are already planning for such a situation.
As and when that becomes obvious that the wider Western central bank system will either formally have to plug into the disicipline of a de facto USD currency board, or suffer a dollar liquidity crisis. Hence the growing talk about floating a “dollar coalition of the willing” to guard against such effects, an idea first floated by former BIS man Robert McCauley.
*Note, we’ve been talking about the return of capital controls at the Blind Spot long before it was fashionable to do so.
For European central bankers, therefore, there is no middle way. A digital euro is essential to be able to direct capital back into its systems.
**We hear there are already plans afoot in central Europe to push for USD pegging instead of euro-pegging among EU members that are not yet eurozone members.
| WHAT We’RE PROCESSING |
— We’re re-listening to Kevin Warsh’s speech to a G30 gathering at the Spring Meetings this year.
— We sat down with Ron Steslow of Politicology to talk about debt and financialization and more.
— Warsaw is going to knock down the iconic Communist tower block Intraco, where this author spent hours of her early life in the 80s waiting in the cafeteria for her mum while she was doing meetings there.
— Poland’s president claims “post-communists and liberal-leftists” tried to distort latest Presidential vote.
— Poland very likely to reintroduce border controls with Germany.
— Bulgaria hit by anti-euro protests as it prepares to switch currency.
— Cryptomercantilism: Donald Trump’s monetary doctrine
