Original translation: angelilu, Foresight News

On September 23rd, Arthur Hayes delivered a keynote speech at the KBW 2025 Summit in South Korea. His keynote outlined the potential for a "printing frenzy" in the United States, analyzing its historical roots, political drivers, and potential mechanisms for achieving it. He also highlighted why crypto investors should be concerned about this.

Arthur Hayes emphasized that by comparing the rise in Bitcoin prices during the pandemic to the scale of credit expansion during the same period, in 2028, the price of one Bitcoin would be approximately $3.4 million. Although this figure is absurd, Bitcoin's "million-dollar" era is approaching. The following is the full text of Arthur Hayes' speech:

Opening and Background: Going to Crazy Money Printing

OK, this is going to get a little technical, with all the talk about who votes for what and that sort of thing. But I think it's crucial to understand where we are right now on this path toward the end of the US's money-printing frenzy. It really all started with Donald Trump's election and the appointment of a Treasury Secretary I call "Buffalo Bill." But they haven't really gotten there yet. They're sending all the right signals, with mainstream financial media talking about how terrible Trump is, like his daily social media posts calling Jerome Powell "Mr. Too Late."

But at the end of the day, the Fed has already cut interest rates permanently, which is good, but they could have done more. How do we get to this point of madness? How do we get Bitcoin to a million or more, and every "altcoin" in your portfolio to go up 100x with no leaders, no revenue, and no customers? I know this is what you want to hear from me.

How do we get there? It starts with understanding how the Fed votes, which committee is responsible for what, and how we ended up with yield curve control. That's why this article and accompanying speech I published after leaving office discuss this. So, to understand where we're going, let's go back to history, because history can be a good indicator of the future.

Historical Review: War Financing in the 1940s

Let's go back to the 1940s. What was going on? There was a world war. The United States entered it in 1942. Obviously, when you're in a war, what do you do? You print a lot of money. How do you do that? You tell the central bank to lower the price of money and increase its quantity, so that the central government can squeeze everyone out and borrow money to build things that kill people. So, how did the US government finance its involvement in World War II?

The Federal Reserve essentially agreed with the Treasury Department to manipulate the bond market to allow the U.S. government to issue debt at extremely low costs. This is a photo of the Tuskegee Airmen. They were preparing to go to war and buy war bonds. What were Treasury bond rates at the time? For nearly a decade, the interest rate on Treasury bills with maturities of less than one year was capped at 0.375%. For longer-term Treasury bonds, those with maturities of 10 to 25 years were capped at 2.5%. This was yield curve control in the United States.

Yield Curve Comparison and Future Speculation

Here's a chart of the yield curve. The orange line represents where we are today. I created this chart over the weekend. As you can see, the one- to three-month Treasury bill rate is around 4%, the 10-year Treasury bond is around 4.5%, and the 30-year Treasury bond is around 4.75%. This is our yield curve today, compared to the yield curve in the late 1940s during World War II.

In Trump's view, this is what he wants to create. He wants to turn the orange line into the purple line. As investors, we have to figure out how to achieve this goal, and we have to make some bold assumptions and guesses. I might have to delve into the realm of bureaucracy, which is obviously very messy because we are dealing with people, and people are strange and do things we don't expect.

So, I'm going to sketch out a possible path, but I don't know if it will actually happen. However, the way I think about Maelstrom's portfolio right now, the probability is high enough that I feel confident in pushing the risk level pretty much to the maximum, even though Bitcoin has gone from about $3,000 to $12,000 and is now experiencing a period of weakness.

The Mechanism of Yield Curve Control and the Fed’s Third Mission

So, what is the mechanics of yield curve control? As you know, Federal Reserve Board member Steven Moran proclaimed the Fed's third mission, which is actually written into the Federal Reserve Act of 1913: the Fed's responsibility to "maintain moderate interest rates on government bonds." What does "moderate" mean, exactly? It means whatever they want it to mean. So when I say the Fed's third mission is to print money to help us best finance the national debt, that's what I'm referring to.

Now, why is it so critical for the United States to finance massive fiscal spending and credit generation right now? The reason is the same as always. The United States is fighting a war, or more importantly, it has essentially lost its two most recent wars. They lost the war against Russia in Ukraine and were forced to stop intervening in Iran after 12 days because they ran out of missiles to help Israel defend itself.

It turns out that America's industrial base is completely defunct. Over the past four decades, it's been transferred to China. Now, the US can't produce enough artillery shells to defeat Russia, nor enough missiles to help its allies bomb wherever they want. And this is exactly what Trump really wants to correct, or at least try to do as quickly as possible. This requires credit, and that credit will be provided by the banking system and the US Treasury.

Control of short-term and long-term interest rates

So, specifically, how can the Treasury bond market be controlled? You can lower the interest rate on excess reserves. Excess reserves are the reserves banks keep at the Fed, and currently these reserves earn an interest rate at the lower end of the federal funds rate. They can also lower the discount rate. When banks run into trouble, such as during the regional banking crisis of 2023, they borrow from the Fed at a specific rate through the discount window. If I can lower these two rates to any level I desire, I can effectively cap the yield on Treasury bonds.

A key committee I'll discuss later is the Federal Reserve Board of Governors. They control the short end of the curve, the interest rate on excess reserves, and influence the rate banks pay when they borrow from the Fed's discount window. So, how do you manipulate the long end of the Treasury market?

The first thing we need to focus on is the System Open Market Account (SOMA). When the Fed engages in quantitative easing (QE) by creating reserves and buying bonds from banks, those bonds end up in the SOMA account. They publish the balance of this account weekly. This is the indicator we can use to monitor whether they are truly practicing yield curve control—whether they are buying an unlimited amount of bonds at a specific price to manipulate yields to a specific level.

The transformation of credit generation: from central banks to commercial banks

If you study how Japan's yield curve control works, you'll see that the Bank of Japan sets a target interest rate and then continues to purchase bonds until the rate reaches that level. This way, you sell your bonds to profit until interest rates fall, bond prices rise, the balance sheet expands, and credit demand in the system expands, which naturally leads to a rise in cryptocurrency prices. The Federal Open Market Committee (FOMC), the key Federal Reserve committee responsible for this expanded balance sheet, will explain its significance in detail later.

The second thing is the generation of credit growth. I wrote an article called "Black and White" about nine to twelve months ago. In that article, I delved into the difference between credit generation at the central bank level and credit generation at the commercial bank level.

Since the global financial crisis of 2008, we've been in an era of central bank-dominated credit generation worldwide. When central banks are in charge of extending credit, what kind of activities have we noticed? Central banks favor large corporations and financial engineering. So, if you're a private equity investor in London, New York, Hong Kong, or Beijing, you acquire a company with a lot of debt, take a dividend from the operating profits, and then sell it again at a higher EBITDA multiple—you make money. You don't create new capacity; you simply leverage existing capacity.

This is why there's no more industry in the US, because since the 1980s, you've been doing leveraged buyouts. You buy companies and take on tons of debt because you have access to the large corporate bond market, and large companies are able to issue money outside the banking system. Because the Federal Reserve pays out a lot of money, all the rich people want to buy this institutional, risk-free capital. That's why MicroStrategy is successful. They can issue debt into these markets. So we issue cheap debt and then buy Bitcoin. That's basically how MicroStrategy became a huge company.

Now, will this approach help President Trump build more bombs? No. They need more capacity in the American industrial sector. They need small and medium-sized businesses to get credit and hire workers to make batteries and produce goods. They need bank loans. When the Fed keeps cranking the crank (printing money), it squeezes out small and medium-sized banks and regional banks, making it impossible for them to operate. They need a steep yield curve. They need to be able to lend to these industries and make money from it. There was a great article in the Wall Street Journal recently that called the Fed's policies "gain of function," referring to its criticism of the coronavirus policy. The article essentially said the Fed was responsible for destroying American industry and exacerbating inequality in the United States. He's absolutely right, but he's also a two-faced liar because he's also out to make money.

So the economics are interesting. But his point is that he's going to give regional banks lending power. And regional banks need a steep yield curve. So what Trump wants to see is a "bull steepening" of the yield curve, meaning a general decline in interest rates and a steepening of the curve, where banks borrow deposits at a low rate on the short end and lend at a higher rate on the long end, a spread based on the 10-year or 30-year Treasury bond rate.

If you look at the current situation, in the 1940s, this spread was close to 2%, making it very profitable for banks. Now, it's only 20 basis points. A few years ago, it was even negative. So, by stifling small banks, you're essentially stifling the nation's credit production and industrial production. Therefore, Trump not only wants to steepen the yield curve, he also wants to remove all the "bad" regulations that prevent small banks from extending credit to small and medium-sized businesses. By making banks more profitable, they'll do what the government wants them to do.

How Trump controls the Federal Reserve

Now we have to understand both committees because Trump has his goals. He's the Treasury's "ambassador," and he'll tell you exactly what they want to do. So how do they transform the Treasury and the Federal Reserve, two separate entities, into a collaborative effort to achieve those goals?

First, let's talk about the Federal Reserve Board of Governors. It has seven members, all nominated by the president and confirmed by the Senate. This is crucial. Trump currently controls the Senate, and we'll see if he maintains control after the November 2026 midterm elections. But if any indication is given, his nominees are having a tough time getting through. Steven Moran, Trump's most recent appointee to the Federal Reserve Board, was confirmed by just one vote last week. So the situation is very tight. If Trump can't get his nominee confirmed within the next 12 months or so, he'll be out of luck, as opposition Democrats won't approve his nominees for the Federal Reserve Board. So he needs more votes. This board controls the interest rate on excess reserves and influences the rate banks can borrow from the discount window at the Fed's 12 regional banks. Crucially, regional Fed presidents are approved by a simple majority of the Federal Reserve Board. So the first step is for Trump to secure four votes on this board to control the short end of the yield curve and get more people on the Federal Open Market Committee (FOMC), so they can ultimately control the balance sheet.

The FOMC has 12 members: seven are members of the Board of Governors and five are rotating presidents of the regional Federal Reserve banks. The President of the New York Fed holds a permanent seat due to his significant influence on the US financial ecosystem. So what does the FOMC do? We know they are responsible for setting the federal funds rate, meeting monthly or nearly monthly, and managing the System Open Market Account (SOMA). They also determine the scale of quantitative easing, the pace of bond purchases, and the types of bonds purchased, which is extremely important.

So how does Trump gain control of the Federal Reserve Board? You need to roll the dice, like Snake Eyes and a Cheat. Here's a very interesting chart. Essentially, we see this scenario: Trump has two senators, Bowman and Waller, who we know want to be on the Fed Board. They were the dissenters at the July meeting, wanting to cut rates, while Jerome Powell and the majority want to keep rates steady. They have publicly pledged their allegiance to Trump.

Cook is the latest to leave the Federal Reserve. She abruptly resigned in August. Amid rumors that her husband engaged in unethical insider trading during Fed meetings, she resigned to avoid being forced to resign by an enraged Trump. This is how Steven Moran was able to get in. Trump now has three-seven votes. The fourth is Lisa Cook. If you've been following the media, she's a recent Biden appointee. There are allegations that she participated in mortgage fraud, falsely reporting her primary residence to obtain lower mortgage rates. Her case has been referred to the Department of Justice for possible criminal investigation. Currently, she's being very stubborn and refusing to leave or resign. But I think by the end of the year, she'll get the political assurances she needs, and then she'll exit. That would leave Trump with four votes and control of the board.

The first thing they'd like to do is accelerate the decline in short-term interest rates. There's an interesting arbitrage that could force the FOMC—even if Trump isn't fully in control—to lower rates more quickly than anticipated. If the Board lowers the interest rate on excess reserves and the discount window rate, a flood of money will flood the federal funds market. This opens up an arbitrage opportunity for large commercial banks. What will they do? Commercial banks pledge assets at the discount window, borrowing money at a discount to the federal funds rate and then lending it out at around 4%, a great arbitrage opportunity for depositing funds. This arbitrage essentially operates on the Fed, which now has to print money and hand it over to banks. This is completely absurd, and that's why it essentially forces the FOMC to lower rates.

I saw a recent interview with Steven Moran on Bloomberg, I think it was yesterday or this morning. He said the Fed's monetary policy is too tight at 2%. That basically gives you an idea of where they want to go. They want the federal funds rate to be around 2%, and they wanted to get there yesterday. In fact, if Trump can get Lisa Cook out, he could execute this arbitrage by the end of the year and possibly get the federal funds rate below 2% pretty quickly.

How does control of the Federal Reserve Board lead to control of the FOMC?

As I mentioned, all members of the Federal Reserve Board of Governors are permanent voting members of the FOMC. The Board approves the regional Fed presidents as rotating voting members of the FOMC. I believe that in addition to the New York Fed, Philadelphia, Cleveland, and Minneapolis will be the other four voting regional Fed presidents in 2026. All 12 regional Fed presidents will face re-election in February of next year.

How did this happen? Each of the Federal Reserve's 12 regional banks has its own board of directors. This arrangement dates back to a time when each region of the continental United States had different interest rate requirements related to agricultural product taxes. Each regional Fed board is composed of three categories of members. There are six Class B and Class C board members, who collectively elect the bank's president. So, who are the people who sit on these regional Fed boards? Here's a list, and all of this information will be available online shortly. You'll notice that the chairmen of these Federal Reserve banks are either bankers or industrialists. What do bankers and industrialists always want? They want cheap money. They want lots of money. So, how could these people oppose Trump's policies of lowering interest rates and increasing the amount of money? It would increase their wealth. Since we are all self-interested, I think they would likely vote for a president who would follow Trump's wishes, which is a looser monetary policy. If they don't, the Trump-controlled board is essentially signaling that if you don't vote for a dovish president, we won't approve him.

So now Trump has seven votes, and he's going to gain control of the FOMC sometime in the first half of 2026. So what can they do once they have a majority on the FOMC? They can go back to quantitative easing. They can stop participating...

We're currently in a period of quantitative easing because the Treasury has a massive amount of debt to issue. And right now, the Treasury is afraid to issue long-term debt. They're afraid, just like they were during the Great Depression, of long-term debt. So, all they're issuing is short-term debt, which is why deft action against excessive regulation is so crucial, because they need an inelastic buyer of these Treasury bonds or bills at all times. But if they controlled the FOMC and the FOMC agreed that yield curve control was necessary to achieve the Trump administration's political and industrial goals, they would invest trillions of dollars in debt. The Fed would buy most of these bonds because the FOMC members have already restarted quantitative easing.

So, with this control over the Board and the FOMC and the advances in the timeline, Trump can essentially create the yield curve that I showed you between 1942 and 1951.

Why should we as crypto investors care?

I have a question, of course. There's a lot of math involved here about currency markets. I know it's a bit like a map of currency markets, looking at what's happening in Japan. But, folks, that's what we're here for. So, with yield curve control coming to the US, what price could Bitcoin reach? That number, you know, is patently ridiculous: $3.4 million. Do I stand before you today and believe we'll get to $3.4 million per Bitcoin by 2028? I'd probably say no. But I'm interested in where it's headed, and the potential size it could reach. So I'm hoping we get to a million, and others are hoping too, which is great, but I'm very skeptical.

This isn't just a figure based on adaptability in the mental dimension, but on the amount of Treasury debt that will be issued. What will the situation be like when Trump and his team leave office at the end of 2028? I checked my Bloomberg terminal and figured out how much Treasury debt would have to mature in order for these people to lower interest rates. Then I added the projected $2 trillion federal deficit from now until 2028. This is roughly the Congressional Budget Office's estimate of the fiscal deficit. This gives us a figure: $15.3 trillion in new Treasury debt must be issued over the next three years.

How much did the Fed buy during the COVID-19 pandemic? The Fed bought about 40% to 45% of Treasury issuance. I think it's higher during this period because foreigners are less likely to buy U.S. Treasuries than they were before, especially given what Trump has done. He tends to add debt to America's reindustrialization by devaluing the dollar, which makes others uneasy. So why would I do that? I don't know. I wouldn't. So we've effectively created $7.5 trillion in credit. That's how much our balance sheet will grow between now and 2028.

The second part is "fake" credit creation. How much credit will be extended to small and medium-sized businesses across the United States? That's a very difficult number to predict. So I said, okay, look at what happened during the COVID-19 pandemic. That was the last time they successfully ran this policy, basically from February 2020 to the peak in late 2021. If you look at the Federal Reserve's weekly statistics on the balance sheet of the U.S. banking system, which is a good measure of credit and loan growth, I estimate that over those years, we had $3 trillion in growth. So, we had three years, multiplied by three, which gives us a total of about $15.2 trillion in credit creation.

Okay, so what does this mean for a rising Bitcoin price? Going back to the COVID-19 experience, I use a very crude slope: the percentage increase in Bitcoin's price per dollar of credit created based on this framework. The slope is 0.19. You multiply this slope by $15.2 trillion in credit growth, and then multiply it by Bitcoin's base price of $115,000. That's how we arrive at a Bitcoin price of approximately $3.4 million by 2028. I'm almost 100% certain that won't happen. But I think this is the framework for understanding this credit creation flowing from the Fed to the Treasury, and then from the banking system to fund America's reindustrialization. We know what happened during the COVID-19 pandemic when this policy was pursued for only one year. What if it lasted three years? When the Fed and the Treasury work in tandem, printing money and, as they say, sending the American economy to "Valhalla," we'll see Bitcoin prices exceeding $1 million.

That's why I'm very confident that the four-year cycle doesn't apply in this particular cycle. We're in the midst of a military-religious realignment, and if they can take control of all monetary policy leadership and believe they're very motivated, that's what's going to happen. Thank you, everyone.