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Ripple’s Path From Pushback to Plumbing
A conditional trust bank charter is permission to build, not a free pass to operate. It means Ripple is being judged as infrastructure, not as a speculative crypto company. The focus isn’t deposits or lending; it’s custody, control of reserves, and compliance. Ripple is being allowed to handle sensitive plumbing, but only under tight supervision and with clear guardrails.
That distinction matters. A national trust bank is boring by design. And boring is exactly what institutions want. This is about making RLUSD legible to regulators and usable by banks, not about hype. The conditional part is the system keeping leverage, Ripple still has to prove it can meet operational, risk, and governance standards before anything goes fully live.
From Resistance To Absorption
The bigger arc here is familiar if you’ve watched how the U.S. system deals with disruption. First comes resistance, then containment, then absorption. The SEC lawsuit looked existential at the time, but in hindsight it forced Ripple to clean up its legal edges and commit fully to building inside the system rather than around it. While most of crypto was arguing about price, Ripple was quietly assembling the boring pieces institutions actually need including custody, risk management, prime brokerage, stablecoin infrastructure.
That’s why this moment matters. Ripple isn’t positioning itself as a bank killer. It’s positioning itself as connective tissue and the rails banks can use to move value faster across fiat, stablecoins, and tokenized assets without rewriting the rules every time. XRP sits in the middle as the bridge asset, not the headline. When you zoom out, this doesn’t look like chaos or a sudden win. It looked choreographed with years of friction followed by a controlled entry into the system. That’s how financial plumbing gets built…slowly, quietly, and under supervision.
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Ripple’s Path From Pushback to Plumbing
A conditional trust bank charter is permission to build, not a free pass to operate. It means Ripple is being judged as infrastructure, not as a speculative crypto company. The focus isn’t deposits or lending; it’s custody, control of reserves, and compliance. Ripple is being allowed to handle sensitive plumbing, but only under tight supervision and with clear guardrails.
That distinction matters. A national trust bank is boring by design. And boring is exactly what institutions want. This is about making RLUSD legible to regulators and usable by banks, not about hype. The conditional part is the system keeping leverage, Ripple still has to prove it can meet operational, risk, and governance standards before anything goes fully live.
From Resistance To Absorption
The bigger arc here is familiar if you’ve watched how the U.S. system deals with disruption. First comes resistance, then containment, then absorption. The SEC lawsuit looked existential at the time, but in hindsight it forced Ripple to clean up its legal edges and commit fully to building inside the system rather than around it. While most of crypto was arguing about price, Ripple was quietly assembling the boring pieces institutions actually need including custody, risk management, prime brokerage, stablecoin infrastructure.
That’s why this moment matters. Ripple isn’t positioning itself as a bank killer. It’s positioning itself as connective tissue and the rails banks can use to move value faster across fiat, stablecoins, and tokenized assets without rewriting the rules every time. XRP sits in the middle as the bridge asset, not the headline. When you zoom out, this doesn’t look like chaos or a sudden win. It looked choreographed with years of friction followed by a controlled entry into the system. That’s how financial plumbing gets built…slowly, quietly, and under supervision.
HUGE news! @Ripple just received conditional approval from the @USOCC to charter Ripple National Trust Bank. This is a massive step forward - first for $RLUSD, setting the highest standard for stablecoin compliance with both federal (OCC) & state (NYDFS) oversight.
To the banking lobbyists – your anti-competitive tactics are transparent. You’ve complained that crypto isn’t playing by the same rules, but here’s the crypto industry – directly under the OCC's supervision and standards – prioritizing compliance, trust and innovation to the benefit of consumers. What are you so afraid of? tweet
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Democratizing Access Or Socializing Exit Risk?
If this gets approved, the real risk is that a massive, steady pool of retirement money becomes a new, permanent buyer for assets that usually rely on institutions. 401K flows are predictable and sticky. Once alternatives are allowed in the wrapper, they don’t show up as flashy picks they get folded quietly into target date funds, managed portfolios, and diversification sleeves. That’s how these things always enter the system…calmly, professionally, and with just enough structure to pass oversight.
On its own, that’s not inherently bad. But it matters when this happens. If the economy were accelerating and liquidity were abundant, it would look like natural evolution. Doing it as growth is slowing and credit stress is rising changes the character of the move.
Where the risk really sits
The risk is liquidity and timing. Alternatives don’t reprice smoothly. They look stable until they don’t, because prices are model based and exits are limited. Retirement accounts feel liquid; private assets aren’t. That mismatch only becomes obvious when people want their money at the same time.
Layer on fees, complexity, and discretion, and you get a system where returns can look fine on paper long after the underlying reality has shifted. That’s manageable for pensions and endowments who know what they’re holding. It’s a different story for households who assume their retirement savings behave like public markets.
The uncomfortable incentive question
This wouldn’t be used as some cartoonish dump on retail moment. But incentives matter. When private markets tighten, everyone wants new capital and orderly exits. Opening the 401K channel creates a slow, reliable bid and exactly the kind that helps absorb aging assets, smooth valuations, and extend cycles. That’s not malicious; it’s how capital markets work.
The danger is that households end up funding assets late in the cycle, when returns are harder and risks are more asymmetric. Not because anyone lied, but because distribution widened at the wrong moment.
My View
This is about where risk lands when the cycle turns. Expanding access to alternatives during economic deterioration doesn’t just spread opportunity, it spreads fragility. The biggest threat isn’t the first loss. It’s the plumbing stress that shows up later, when liquidity, pricing, and expectations stop lining up.
tweet
Democratizing Access Or Socializing Exit Risk?
If this gets approved, the real risk is that a massive, steady pool of retirement money becomes a new, permanent buyer for assets that usually rely on institutions. 401K flows are predictable and sticky. Once alternatives are allowed in the wrapper, they don’t show up as flashy picks they get folded quietly into target date funds, managed portfolios, and diversification sleeves. That’s how these things always enter the system…calmly, professionally, and with just enough structure to pass oversight.
On its own, that’s not inherently bad. But it matters when this happens. If the economy were accelerating and liquidity were abundant, it would look like natural evolution. Doing it as growth is slowing and credit stress is rising changes the character of the move.
Where the risk really sits
The risk is liquidity and timing. Alternatives don’t reprice smoothly. They look stable until they don’t, because prices are model based and exits are limited. Retirement accounts feel liquid; private assets aren’t. That mismatch only becomes obvious when people want their money at the same time.
Layer on fees, complexity, and discretion, and you get a system where returns can look fine on paper long after the underlying reality has shifted. That’s manageable for pensions and endowments who know what they’re holding. It’s a different story for households who assume their retirement savings behave like public markets.
The uncomfortable incentive question
This wouldn’t be used as some cartoonish dump on retail moment. But incentives matter. When private markets tighten, everyone wants new capital and orderly exits. Opening the 401K channel creates a slow, reliable bid and exactly the kind that helps absorb aging assets, smooth valuations, and extend cycles. That’s not malicious; it’s how capital markets work.
The danger is that households end up funding assets late in the cycle, when returns are harder and risks are more asymmetric. Not because anyone lied, but because distribution widened at the wrong moment.
My View
This is about where risk lands when the cycle turns. Expanding access to alternatives during economic deterioration doesn’t just spread opportunity, it spreads fragility. The biggest threat isn’t the first loss. It’s the plumbing stress that shows up later, when liquidity, pricing, and expectations stop lining up.
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If someone wants to label this a Hassett premium, that’s fine but the point is more basic than that. The long end is charging a toll. It’s charging for deficits and supply, for inflation uncertainty that hasn’t fully cleared, for political and policy noise, and for the fact that the buyer base is more price sensitive than it used to be. That’s what term premium looks like in real life with trust, volatility, and supply, all expressed in basis points.
And that’s the key distinction. This move isn’t about rate expectations doing the heavy lifting. If it were, you’d see the long end following the front end more cleanly. Instead, the message is that the Fed can ease short rates, but long term money still demands compensation. That’s how you end up in the uncomfortable regime where cuts happen, spreads widen, and financial conditions don’t actually loosen where they matter most.
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If someone wants to label this a Hassett premium, that’s fine but the point is more basic than that. The long end is charging a toll. It’s charging for deficits and supply, for inflation uncertainty that hasn’t fully cleared, for political and policy noise, and for the fact that the buyer base is more price sensitive than it used to be. That’s what term premium looks like in real life with trust, volatility, and supply, all expressed in basis points.
And that’s the key distinction. This move isn’t about rate expectations doing the heavy lifting. If it were, you’d see the long end following the front end more cleanly. Instead, the message is that the Fed can ease short rates, but long term money still demands compensation. That’s how you end up in the uncomfortable regime where cuts happen, spreads widen, and financial conditions don’t actually loosen where they matter most.
My colleague, and the world's best bond strategist (in my humble view), Ryan Swift argues that the 10-year is struggling with the "Hassett premium." The bond market may require a sacrifice at the altar of CB independence... even if I think that's kind of unfair to Hassett. https://t.co/2nhbjMHl0N tweet
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https://t.co/XqxVI7NXWN
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https://t.co/XqxVI7NXWN
BREAKING: President Trump says land strikes in Venezuela are "starting." https://t.co/55nXPXavPU tweet
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When Banks Choose Certainty Over Comfort
The discount window is the Fed’s backstop for banks when funding gets awkward. If a bank needs cash and doesn’t like what it’s seeing in private markets, it can borrow directly from the Fed against good collateral. That’s the point…keep a temporary funding issue from turning into forced selling or something worse. It’s not meant to be a go to source of funding, and banks generally avoid it unless they have a reason to value certainty over optics or cost.
What’s different right now
This chart isn’t about a sudden crisis. It’s about a higher baseline of stress. Usage stepping up and staying elevated tells you private funding is less forgiving than it was earlier in the year. When markets are smooth, banks fund each other easily and cheaply. When volatility rises, deposits get more competitive, or counterparties get cautious, banks start preferring guaranteed liquidity even if it’s a little more expensive.
My View
Banks don’t tap the discount window because they’re bullish. They tap it because the system is getting tighter in subtle ways. Rate volatility, unrealized losses, balance sheet constraints, and year end pressures all push behavior in the same direction: don’t sell assets at bad prices, don’t rely on fragile funding, lock in certainty. This isn’t a red alert panic signal, but it is a sign that the plumbing is under more strain than the headlines suggest. Liquidity is still there but it’s becoming more selective, and that’s usually how stress shows up before anyone wants to call it a problem.
tweet
When Banks Choose Certainty Over Comfort
The discount window is the Fed’s backstop for banks when funding gets awkward. If a bank needs cash and doesn’t like what it’s seeing in private markets, it can borrow directly from the Fed against good collateral. That’s the point…keep a temporary funding issue from turning into forced selling or something worse. It’s not meant to be a go to source of funding, and banks generally avoid it unless they have a reason to value certainty over optics or cost.
What’s different right now
This chart isn’t about a sudden crisis. It’s about a higher baseline of stress. Usage stepping up and staying elevated tells you private funding is less forgiving than it was earlier in the year. When markets are smooth, banks fund each other easily and cheaply. When volatility rises, deposits get more competitive, or counterparties get cautious, banks start preferring guaranteed liquidity even if it’s a little more expensive.
My View
Banks don’t tap the discount window because they’re bullish. They tap it because the system is getting tighter in subtle ways. Rate volatility, unrealized losses, balance sheet constraints, and year end pressures all push behavior in the same direction: don’t sell assets at bad prices, don’t rely on fragile funding, lock in certainty. This isn’t a red alert panic signal, but it is a sign that the plumbing is under more strain than the headlines suggest. Liquidity is still there but it’s becoming more selective, and that’s usually how stress shows up before anyone wants to call it a problem.
New high in discount window usage for 2025
Highest since April '24 https://t.co/heOsRavigS tweet
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When Credit Spreads Whisper Confidence And Risk Gets Loud
Credit spreads are just the market’s risk surcharge. It’s the extra yield investors demand to lend to companies instead of the government. When spreads are tight, investors feel comfortable, defaults feel far away, and liquidity feels reliable. Nobody thinks they’re being paid much for risk and they’re fine with that.
That’s what makes this moment interesting. Spreads this tight don’t mean risk is gone. They mean people believe it’s contained.
Why this isn’t as comforting as it looks
What you’re really seeing here is money crowding into the safest looking parts of credit. Big investment grade issuers still have a bid because pensions, insurers, ETFs, and foreign buyers want yield without touching obvious trouble. Meanwhile, a lot of the stress is hiding elsewhere like in private credit, commercial real estate, smaller balance sheets, and borrowers that don’t trade every day. Those pressures don’t show up neatly in an IG spread chart.
My Read
Spreads this tight say more about confidence in policy backstops than confidence in the economy. Investors are leaning on the idea that the system stays orderly, that refinancing works, and that policymakers step in if things wobble. That can hold for a while. But when spreads are already compressed, there’s very little upside left and a lot of downside if growth slows more than expected, downgrades pick up, or funding costs stay high because long term rates refuse to fall. This is a warning that the market is pricing a very smooth outcome, and smooth outcomes are fragile by definition.
tweet
When Credit Spreads Whisper Confidence And Risk Gets Loud
Credit spreads are just the market’s risk surcharge. It’s the extra yield investors demand to lend to companies instead of the government. When spreads are tight, investors feel comfortable, defaults feel far away, and liquidity feels reliable. Nobody thinks they’re being paid much for risk and they’re fine with that.
That’s what makes this moment interesting. Spreads this tight don’t mean risk is gone. They mean people believe it’s contained.
Why this isn’t as comforting as it looks
What you’re really seeing here is money crowding into the safest looking parts of credit. Big investment grade issuers still have a bid because pensions, insurers, ETFs, and foreign buyers want yield without touching obvious trouble. Meanwhile, a lot of the stress is hiding elsewhere like in private credit, commercial real estate, smaller balance sheets, and borrowers that don’t trade every day. Those pressures don’t show up neatly in an IG spread chart.
My Read
Spreads this tight say more about confidence in policy backstops than confidence in the economy. Investors are leaning on the idea that the system stays orderly, that refinancing works, and that policymakers step in if things wobble. That can hold for a while. But when spreads are already compressed, there’s very little upside left and a lot of downside if growth slows more than expected, downgrades pick up, or funding costs stay high because long term rates refuse to fall. This is a warning that the market is pricing a very smooth outcome, and smooth outcomes are fragile by definition.
U.S. Credit Spreads fall to lowest level since 1998 🤯👀 https://t.co/rCc8K2FHeY tweet
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When Workers Stop Quitting, the Clock Starts Ticking
The quits rate is really just a window into how secure people feel. Workers don’t quit when they’re nervous they quit when they’re confident they can land something better without much risk. When quits fall like this, it’s not a sign of comfort. It’s a sign people are choosing caution over mobility. That shift almost always shows up before the labor market weakens in more obvious ways.
That’s why this matters even if layoffs aren’t exploding yet. Companies rarely start with mass firings. First they slow hiring. Then workers stop quitting. Only later, when pressure builds, do layoffs follow.
What History Tends To Do Next
The part people forget is the timing. In 2008, quits fell to roughly these levels while was sitting around the 5% range. Then the turn came quickly. Within about six to nine months, unemployment accelerated sharply, eventually pushing past 10%. Quits didn’t fall because unemployment was already surging, they fell first, as workers sensed risk and stayed put. The unemployment spike was the lagged response, and it wasn’t gradual once it started.
That pattern shows up elsewhere too. Quits soften quietly, unemployment drifts at first, then rises much faster than people expect once firms move from caution to cuts.
What It’s Saying Now
Right now, this looks less like a collapse and more like a loss of confidence. Hiring is cooling, workers are staying put, and stress is creeping in where it usually does first in the consumer facing sectors. Pair that with rising delinquencies and tighter financial conditions, and the labor market looks more fragile than the headline numbers imply.
My Read
The labor market isn’t falling off a cliff yet, but it’s clearly losing altitude. And history says once quits fall and stay down, unemployment doesn’t stay flat forever, it just takes a little time for the math to catch up.
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When Workers Stop Quitting, the Clock Starts Ticking
The quits rate is really just a window into how secure people feel. Workers don’t quit when they’re nervous they quit when they’re confident they can land something better without much risk. When quits fall like this, it’s not a sign of comfort. It’s a sign people are choosing caution over mobility. That shift almost always shows up before the labor market weakens in more obvious ways.
That’s why this matters even if layoffs aren’t exploding yet. Companies rarely start with mass firings. First they slow hiring. Then workers stop quitting. Only later, when pressure builds, do layoffs follow.
What History Tends To Do Next
The part people forget is the timing. In 2008, quits fell to roughly these levels while was sitting around the 5% range. Then the turn came quickly. Within about six to nine months, unemployment accelerated sharply, eventually pushing past 10%. Quits didn’t fall because unemployment was already surging, they fell first, as workers sensed risk and stayed put. The unemployment spike was the lagged response, and it wasn’t gradual once it started.
That pattern shows up elsewhere too. Quits soften quietly, unemployment drifts at first, then rises much faster than people expect once firms move from caution to cuts.
What It’s Saying Now
Right now, this looks less like a collapse and more like a loss of confidence. Hiring is cooling, workers are staying put, and stress is creeping in where it usually does first in the consumer facing sectors. Pair that with rising delinquencies and tighter financial conditions, and the labor market looks more fragile than the headline numbers imply.
My Read
The labor market isn’t falling off a cliff yet, but it’s clearly losing altitude. And history says once quits fall and stay down, unemployment doesn’t stay flat forever, it just takes a little time for the math to catch up.
Jolts Quits. Leading indicator
At levels seen in recessions.
Yes the Labor market is weakening https://t.co/YXuFW5xHoM tweet
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I don’t think any of this starts where we usually point. It doesn’t start with fentanyl, or smartphones, or even COVID. Those things made it worse, no question. But they didn’t create the hole. They poured gasoline into something that had already been smoldering for a long time.
If you go back to the late 90s, a lot shifts at once. That’s when OxyContin gets pushed hard into the medical system. Pain stops being something you endure or manage and becomes something that should be eliminated completely. Doctors are told addiction risk is low. Patients are told relief is basically guaranteed. And everyone trusts the system because why wouldn’t they? It’s wrapped in credentials and white coats. When that story falls apart, the damage doesn’t unwind. It just mutates.
At the same time, work is changing in ways that don’t show up cleanly in charts. Manufacturing keeps shrinking. Unions lose leverage. Jobs get more flexible, which mostly means less secure. A lot of people are working just as hard, sometimes harder, but feeling more disposable. And when work stops anchoring people, the rest of life starts to wobble too.
Then the prescriptions dry up in the late 2000s. That’s supposed to fix things. Instead it just pushes people to heroin. Same pain, fewer rules. And then fentanyl hits in the early 2010s and rewrites the entire risk equation. At that point, it’s not about recklessness. It’s about the fact that one mistake can be fatal. There’s no buffer anymore.
Now layer in the economic side of this. Since the late 90s, most of the gains flow to people who already own assets. Stocks, housing, anything financial. If you’re in, you’re fine. If you’re not, you’re chasing a moving target. The middle gets squeezed. The bottom barely moves. That stress doesn’t stay in spreadsheets. It shows up in drinking, in depression, in people quietly checking out.
You see it in alcohol deaths almost doubling. You see it in suicide rates rising, especially among middle aged men and younger women. You see it in how much time people spend alone now compared to twenty years ago. Fewer places to belong. More screens. Less face to face life. It’s not that people forgot how to connect. It’s that the scaffolding that made connection normal just eroded.
COVID ripped the cover off. Isolation got sharper. Coping mechanisms broke. Deaths spiked. And even now, as some numbers improve, they’re settling at levels that would’ve been unthinkable a generation ago. That tells you something didn’t heal. It just reset lower.
This feels like decades of decisions that optimized for efficiency and profitability and quietly removed resilience. Institutions learned how to protect balance sheets and reputations, not people. When things broke, whether it was health, money, or work, people were left to handle it on their own. Most did for a long time. And then, at some point, they couldn’t anymore.
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I don’t think any of this starts where we usually point. It doesn’t start with fentanyl, or smartphones, or even COVID. Those things made it worse, no question. But they didn’t create the hole. They poured gasoline into something that had already been smoldering for a long time.
If you go back to the late 90s, a lot shifts at once. That’s when OxyContin gets pushed hard into the medical system. Pain stops being something you endure or manage and becomes something that should be eliminated completely. Doctors are told addiction risk is low. Patients are told relief is basically guaranteed. And everyone trusts the system because why wouldn’t they? It’s wrapped in credentials and white coats. When that story falls apart, the damage doesn’t unwind. It just mutates.
At the same time, work is changing in ways that don’t show up cleanly in charts. Manufacturing keeps shrinking. Unions lose leverage. Jobs get more flexible, which mostly means less secure. A lot of people are working just as hard, sometimes harder, but feeling more disposable. And when work stops anchoring people, the rest of life starts to wobble too.
Then the prescriptions dry up in the late 2000s. That’s supposed to fix things. Instead it just pushes people to heroin. Same pain, fewer rules. And then fentanyl hits in the early 2010s and rewrites the entire risk equation. At that point, it’s not about recklessness. It’s about the fact that one mistake can be fatal. There’s no buffer anymore.
Now layer in the economic side of this. Since the late 90s, most of the gains flow to people who already own assets. Stocks, housing, anything financial. If you’re in, you’re fine. If you’re not, you’re chasing a moving target. The middle gets squeezed. The bottom barely moves. That stress doesn’t stay in spreadsheets. It shows up in drinking, in depression, in people quietly checking out.
You see it in alcohol deaths almost doubling. You see it in suicide rates rising, especially among middle aged men and younger women. You see it in how much time people spend alone now compared to twenty years ago. Fewer places to belong. More screens. Less face to face life. It’s not that people forgot how to connect. It’s that the scaffolding that made connection normal just eroded.
COVID ripped the cover off. Isolation got sharper. Coping mechanisms broke. Deaths spiked. And even now, as some numbers improve, they’re settling at levels that would’ve been unthinkable a generation ago. That tells you something didn’t heal. It just reset lower.
This feels like decades of decisions that optimized for efficiency and profitability and quietly removed resilience. Institutions learned how to protect balance sheets and reputations, not people. When things broke, whether it was health, money, or work, people were left to handle it on their own. Most did for a long time. And then, at some point, they couldn’t anymore.
What a chart.
h/t @LukeGromen https://t.co/35yn90gWnl tweet