MARKETREGULATIONBITCOIN

Unlimited money printing is madness! Federal Reserve Chairman: We have plenty of ammunition.

share
Unlimited money printing is madness! Federal Reserve Chairman: We have plenty of ammunition.

Since February of this year, the Federal Reserve's balance sheet has increased by $2.8 trillion, a 60% increase. Federal Reserve Chairman Jerome Powell stated in an interview on May 17th that the Federal Reserve is not out of ammunition yet, and is prepared to use "all tools" to support the economy in order to prevent a recession. This statement led to a significant surge in the stock market on that day, highlighting Bitcoin's optimal use case.

The Fed Claims Ample Ammunition

Federal Reserve Chairman Jerome Powell appeared on CBS's "60 Minutes" program on Sunday. When reporter Scott Pelley asked him, "You simply flooded the system with money?" Jerome Powell replied:

"We did. We really did. We've done so by printing money digitally, by increasing the money supply through buying Treasury securities, bonds, or other government-backed securities. We've also printed physical money, which we distribute through the Federal Reserve Banks."

In fact, since February this year, the Fed's balance sheet has increased by $2.8 trillion, a 60% increase, approaching the record high of $7 trillion, with the last significant surge during the 2008 financial crisis bailout period.

Source: FED

The Fed's balance sheet consists mainly of securities and bonds purchased on the open market and loans provided to financial institutions and small and medium-sized enterprises. Each new asset generates a new liability, with liabilities representing the new currency issued into the market and the bank reserves held by commercial banks.

Many in the market believe that implementing unlimited quantitative easing is the Fed's last resort, indicating that the Fed is running out of options. In response to such doubts, Jerome Powell stated:

"There's a lot more we can do, and we have plenty of ammunition. Our lending facilities are basically unlimited."

Furthermore, Powell urged Congress to stimulate the economy with fiscal policy, increase spending to prevent households and businesses from going bankrupt, and suggested that concerns about escalating debt consequences should be addressed later, when the economy improves, pointing out that stopping the increase in spending would cause long-term damage to productivity and people's lives.

Traditional Finance Optimistic, Still Relying on Policies

Although many in the traditional financial market believe that it will be difficult to recover from this economic downturn in a short period, International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned that the global economy may take longer than expected to fully recover from the COVID-19 pandemic, and the IMF is likely to downscale economic forecasts, expecting only partial recovery next year instead of the previously estimated 5.8% growth. However, the market's reaction to Jerome Powell's unwavering commitment to saving the economy at all costs has been positive.

The Dow Jones Industrial Average surged 1,023 points, about 4.32%, less than half an hour before the closing bell on that day, ending with a slightly smaller gain of 912 points (3.9%), reaching a new high in over two months. This indicates that the market still holds hope for Powell's plan of unlimited money printing.

Bitcoin as the Next Generation Hedge Asset?

Interestingly, the cryptocurrency market's response to the Fed Chairman's comments seems even more intense than that of the traditional financial market. Travis Kling, CIO of Ikigai Asset Management, mentioned this in a recent tweet, implying that Powell is indirectly promoting Bitcoin:

"Jerome Powell is doing the legwork for us. Bitcoin is a non-sovereign, limited supply, global, immutable, decentralized, digital store of value, which is an insurance policy against this (unlimited money printing)."

Historically, gold has been the best hedge against inflation. However, Bitcoin is gradually replacing gold as the preferred store of value. As legendary U.S. hedge fund manager Paul Tudor Jones stated in a letter to investors:

"Bitcoin is a tool to combat severe currency inflation, reminiscent of gold in the 1970s. The world is hungry for a new safe asset, which could benefit Bitcoin."

He further predicts that Bitcoin will be the best-performing dark horse in the future investment market. No one knows how long the pandemic and economic recession will last, but the Fed has indicated its willingness to print money at all costs, and the economic consequences of this approach remain uncertain.

Related Reading

  • Mark Cuban: Bitcoin May Benefit from the Fed's Unlimited Money Printing, But Has No Chance Otherwise
  • Wall Street Giants Enter! Paul Jones: If Forced to Choose a Profit-Maximizing Strategy, I Choose Bitcoin

Join Telegram now for the most comprehensive financial technology information, blockchain updates, and industry examples!