While the stock market has recovered by over 30% since the lows, the “real” economy, so to say is not in a good place. As Chamath Palihapitiya — one of the first Facebook executives and a prominent venture capitalist — said in a recent CNBC “Squawk Box” interview, the economy is now far removed from capital markets due to the trillions of dollars worth of stimulus.
With over 30 million Americans filing for unemployment over the past two months, with companies projecting a huge drop in earnings for the second quarter of 2020, and much more, the calls for “easier” monetary policy have become more prevalent.
It’s a trend that analysts say will provide a boost for both the intrinsic and the market value of Bitcoin.
Trump Doubles Down on Interest Rates
Although you may see the 0% interest rates set by the Federal Reserve as low, the U.S. central bank is actually behind other monetary authorities around the world.
Responding to even slower economies across the world, the central banks of the European Union, Japan, and of a swath of other nations have turned to negative rates, meaning that certain banks and certain accounts are actually charged to hold money in an institution. In a “normal” world, as readers well know, holders would be paid a small interest fee.
In a tweet posted on May 12th, President Donald Trump asserted that with other countries going negative, the U.S. should follow:
As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the ‘GIFT’. Big numbers!
As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT”. Big numbers!
— Donald J. Trump (@realDonaldTrump) May 12, 2020
While many have dismissed Trump’s calls for negative interest rates, a growing number of economists think it’s going to happen, and quick.
It Could Happen Eventually, Analysts Suggest
The Federal Funds futures market — which allows Wall Street to trade the direction they think policy interest rates will take — earlier this month “priced in negative rates of about half a basis point in April 2021,” Reuters wrote last week. The Fed Funds market is by no means 100% accurate, but it is representative of what the market wants and what it is expecting.
Raoul Pal, a former executive of Goldman Sachs, echoed this market outlook in a May 11th update video published to Real Vision, explaining that the Fed Funds market is showing signs it wants to go to negative 2% in the coming years. Pal added that this scenario happening is “certainly possible.”
Also, as reported by Blockonomi, Kenneth Rogoff, Professor of Economics at Harvard University, said in an op-ed that to prevent the destruction of wealth “on a catastrophic scale,” central banks should take short-term interest rates below zero, going as far as to say -3% “or lower.”
The reason: by taxing holders of cash, you incentivize spending and economic development.
Bullish for Bitcoin
Analysts believe that this trend is decisively bullish for Bitcoin.
Paul Tudor Jones, a legendary macro hedge fund investor worth over $5 billion, specifically cited the ongoing direction being taken by central banks and governments as reasons why he is investing in Bitcoin for the first time ever. Jones thinks that in this inflationary environment, BTC is the “fastest horse in the race.”
As reported by Blockonomi previously, Phil Bonello, head of Grayscale Investments’ research division, put this narrative the best when he said:
Today’s macroeconomic environment continues to reinforce that a scarce, digital, non-sovereign form of money may be an attractive place to store value and may serve as a hedge against unrestrained money printing.
The post Bitcoin Gets Boost: President Trump Still Wants Negative Interest Rates appeared first on Blockonomi.
May 13, 2020 at 12:36PM https://blockonomi.com from Blockonomi https://ift.tt/3dJ19GA
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