[Week 25, 2025] Imitation and Inheritance
Welcome back to Price and Prejudice with a few musings from Week 25 of 2025.
Stablecoins and the Great Disintermediation
The stablecoins, which are cryptocurrencies designed to maintain a stable value typically pegged to a fiat currency like the U.S. Dollar, are having another moment. This WSJ piece reports that Walmart and Amazon are exploring the option of issuing their own stablecoins, potentially shifting billions in payment volume away from traditional card networks. Meanwhile, big banks are contemplating their own consortium approach, less out of enthusiasm than existential necessity. And of course, there are some regulatory and financial stability concerns. The underlying tension is familiar: incumbents never quite know whether to embrace the thing that might replace them or fight it until it's too late.
What makes this development particularly interesting is how the competitive landscape gets redrawn when you think seriously about what stablecoins actually compete against. The obvious answer is bank deposits and payment rails, but that misses the broader substitution happening across stored value systems. Americans already hold roughly $21 billion in unused gift cards at any given time – essentially private scrip backed by corporate promises rather than government guarantees. Starbucks has turned its mobile app into a quasi-bank, with customers prepaying billions that the company invests until redemption. These aren't accidents of consumer behavior; they're proof points that people will gladly hold non-bank money when the friction is low enough and the benefits clear enough.
The more compelling long-term vision (at least the one that I've always espoused in private conversations) is not that of stablecoins replacing dollars, but rather enabling programmable exchange between these parallel value systems. Imagine trading your accumulated Starbucks points for someone else's Southwest miles, or settling a dinner bill by automatically converting accumulated loyalty balances across multiple programs. The Genius Act moving through Congress suggests we're closer to finding out whether this future materializes or remains another example of elegant technology searching for a problem that people actually want solved.
Following the Leader
New Zealand's inflation targeting story, as described in this nice piece, is one of those perfect examples of how the most important policy innovations often start with someone just winging it. Roger Douglas – the finance minister leading New Zealand's free market reforms in the 1980s – wanted to show his commitment to price stability, so he went on TV and declared his intention to reduce inflation to "around 0 or 0 to 1 percent" over the next couple of years. Not because of some grand theoretical framework, but because he needed to say something convincing about getting inflation under control. This is a classic move of make a bold public commitment first, figure out the implementation details later.
What's fascinating is how this improvised political gesture became the template for modern central banking. The Reserve Bank essentially chose inflation targeting "as the least bad of the alternatives available," and the specific 0-2 percent target range was settled on "more by osmosis than by ministerial sign-off." Yet once New Zealand proved it could work, suddenly everyone wanted in.
In fact this is not a coincidence – when central banks try something new, others follow not just because of economic fundamentals, but because central bankers literally copy each other. QE was the Bank of Japan's weird experiment until suddenly everyone was doing it. Publishing financial stability reports was the UK's nerdy innovation in 1996 until it became the standard central banker accessory. Mark Carney gives one speech about climate risk in 2015 and now every central banker has to have a take on green finance. It's basically peer pressure, but with monetary policy and way higher stakes.
Writing About Parents
Finance has its illustrious history of influential and brilliant minds, but Fischer Black is widely considered among the very top. He's best known for co-developing the Black-Scholes model with Myron Scholes and Bob Merton – the equation that essentially created modern options pricing and earned his collaborators the 1997 Nobel Prize (Black had died two years earlier, making him ineligible). As a measure of his lasting influence, the American Finance Association awards the Fischer Black Prize every two years for the best financial economist under 40, positioning it as finance academia's most prestigious early-career honor. This WSJ piece offers something rarer: a portrait of Black written by his daughter Alethea, who remembers him not as the towering intellectual figure but as the dad who let her butter bread before putting it in the toaster.
This essay is also interesting because you actually learn relatively little about Fischer Black the economist. Instead, we are mostly watching his daughter construct her own identity through inherited traits and remembered interactions. As a result, the piece functions less as biography than as a kind of intellectual genealogy, tracing how certain ways of thinking get passed down through families alongside eye color and mannerisms. Perhaps this is inevitable when the biographical subject also happens to be the person who shaped your entire framework for understanding the world – the line between describing them and describing yourself becomes meaningless.