Michael Novogratz is a billionaire (according to Forbes) who made his money as a hedge-fund manager (currently Galaxy Investment’s co-founder and CEO). These days, he’s keen on cryptocurrencies in general, and in Bitcoin mainly. He recently told CNN that Trump’s economy makes him more bullish on Bitcoin. Granted, this is a man who needs no extra stimuli to be bullish on BTC but let’s try and understand what he means.
The economy these days
Things are very good with the US economy right now. There is steady growth, low unemployment, and meager inflation. While Trump likes to take the credit for this, a more objective analysis based on facts would show that this is the result of the measures taken during the Obama administration (by many players, not just the president) to rebuild the country’s economy after the 2008 global crisis.
Trump is trying to interfere with the monetary policy by nagging the Fed to lower the central bank’s interest rates. The problem with that is that they’re already quite low. They’re so low that saving makes no sense because it renders a negligible return. The best thing you can do with your money is to spend it. And the reason that the rates are so low is that they got lowered to stimulate the economy on the aftermath of the last global crisis and they were never corrected back up.
The thing about the Fed is that it’s not as powerful as some people think. Basically, it only has two handles to affect the country’s economy. One is to set the interest rates, and the other one is to control the supply of currency.
The current dilemma for the Fed (and many economists) is this: what if recession strikes right now? It would seem unlikely, but remember that nobody saw the 2008 recession coming. It hit as everything seemed peachy. If that should happen, then one of the Fed’s resources to help things along (to lower interest rates) would be void, because they’re too low already.
The thing about interest rates is that they’re supposed to go up when the economy as a whole can afford it thus avoiding inflation. In other words, if the interest rates are going to move at all these days, they should be going up, not down. Thus inflation cloud remain low, and the Fed would have options when the next recession hits.
The president is famously not in agreement with that. Neither is the Vice President. The administration’s lack of understanding of monetary policy shows all across the board.
But while the economy does look healthy, some events could undermine the world’s confidence in the USD. The China trading talks are stalled; they were supposed to be solved months ago. Trump has tried to impose a new Fed governor twice already (and failed), and the world really doesn’t trust him to nominate the right man.
And there’s always North Korea’s usual sable rattling. Oil prices are volatile. The US’ main ally in the world, the United Kingdom, could face pandemonium if it goes out of the European Union without a deal, and it would need a lot of help from the US to survive that. So yes things look good, but there are worrying signs for the future.
And that’s what Mr. Novogratz means. If things went South anytime soon, Bitcoin would be the ideal wealth storage means to be protected against a recession in the US, and to a sudden loss of value in the USD. That, after all, has been Bitcoin’s purpose from the beginning. Let’s not forget that Satoshi Nakamoto created it precisely as a means to negotiate the shortcomings in traditional banking successfully.
This billionaire says he has good reasons to be bullish about BTC. We couldn’t agree more.
Disclaimer: Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.