In a desperate attempt to salvage the failing U.S. economy, President Donald Trump has urged the Federal Reserve to slash interest rates once again; something which could help see the price of assets such as gold and bitcoin proliferate.
Yesterday, Trump fired off a double-barreled Tweet in which he proposed yet another rate-cut; suggesting that the Fed could bring the already historically low interest rates, down even further. Trump also blasted the “boneheads” within the Federal Reserve for not following suit with other major economies.
….The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”
— Donald J. Trump (@realDonaldTrump) September 11, 2019
Trump: The Ultimate Shill for Safe Havens?
Trump appears determined to copy the latest trend of the global economy. Central banks from Europe, all the way to Japan have adopted historically low-interest rates, with some even slipping into the negative for the first time in recent times; all in an attempt to recover a faltering economy.
In order to enact a rate cut, the Federal Reserve needs to increase the monetary supply. As a result, the U.S. dollar loses some of its value; all in an attempt to incite spending and stimulate the economy.
While the rest of the market shudders at the thought of a further rate cut, Trump’s latest tirade could well prove to be favorable to assets such as gold and BTC. The last time a rate cut was imposed, both BTC and gold saw a correlated move upward, as the value of the U.S. dollar looked to be cannibalized. At their post-cut peak, BTC and gold cited respective 23% and 10% price hikes in the weeks following the rate cut.
Experts seem to agree that Trump’s call for a further rate cut could be the boost gold and BTC need to proliferate further. One such authority is Gold Bullion International co-founder Dan Tapiero. Slamming Trump’s “debasement of the U.S. dollar,” Tapiero noted that he was the first U.S. president to call for negative interest rates.
Moreover, Tapiero suggested that Trump may be inciting negative rates in an attempt to further his political ambition; adding that “gold and BTC should benefit as alternative stores of value.”
First President to call for negative interest rates. Medium term this is direct call for a debasement of the US dollar in an attempt to create excess growth into 2020 election. Federal Reserve “boneheads.” Gold and Btc should benefit as alternative stores of value. https://t.co/gdT0RXkn1P
— Dan Tapiero (@DTAPCAP) September 11, 2019
Is Bitcoin Truly a Macro Hedge?
Despite the growing sentiment behind BTC, there has been much disagreement over whether or not it is actually acting as a true safe haven in the face of global uncertainties, or whether it’s merely riding speculation. One such propagator of the latter theory is gold bug Peter Schiff.
Following the devaluation of the Yuan and the suggestion that Chinese investors were leaping into BTC as a hedge, Schiff accused CNBC of trying to “dupe its audience.”
CNBC is trying its best to dupe its audience into buying Bitcoin. Despite gold being a much larger market, CNBC devotes far more airtime to Bitcoin. The Chinese aren’t buying Bitcoin as a safe haven. Speculators are buying, betting that the Chinese will buy it as a safe haven!
— Peter Schiff (@PeterSchiff) August 5, 2019
Nonetheless, many proponents of bitcoin suggest the opposite. After August’s rate cut, Fundstrat analyst Tom Lee indicated in an interview with Fox Business that rate cuts were “adding liquidity” to the BTC markets:
“Bitcoin’s becoming increasingly a macrohedge for investors against things that could go wrong. Rate cuts are adding liquidity. Liquidity is pushing money into all these risk assets and also hedges, which is helping Bitcoin.”
A study conducted by Grayscale seems to support this theory. Researchers delved into the effects of global risks on several assets. In one example, BTC gained significantly more than contemporary assets:
For now, all eyes rest on the Fed, keen to see whether or not they’ll act on Trump’s request.
Last modified (UTC): September 12, 2019 12:53 PM