What Will $6 Trillion in Monetary Expansion Do To Cryptocurrency? (Opinion)

The pressure’s on for Congress to pass a $2 trillion spending bill to thaw the frozen economy. While they negotiate the largest ever emergency relief bill in US history, markets are getting restless. Stock futures have been volatile as the bill makes progress and stalls, then makes progress and stalls again. Voters are getting restless too. Both sides are badgering each other to “Hurry!” while negotiating a $2 trillion transaction with other people’s money.

Any time either side of the partisan divide has a scruple, the other party attacks them for holding up the bill. They insinuate the other side doesn’t care about all the people who are hurting right now. Of course, a swarm of each party’s rank and file supporters also join in the shouting. The farther you zoom out from the picture, the more ludicrous the entire affair looks from afar.

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Further, so much of the bill, styled as an emergency stimulus package, is just a massive grab bag of goodies and pork-barrel spending for bloated Washington bureaucracies America can definitely live without, and special interest groups with lobbyists on K Street. $25 million for the JFK Center for the Performing Arts. $75 million for the National Endowment for the Arts. $75 million for the National Endowment for the Humanities. And a monster $500 billion slush fund for Treasury Secretary Mnuchin to dole out to corporations at his discretion with little oversight.

When a terrible crisis strikes, politicians and special interest groups huddle together in Washington and grab all the money and power, they can possibly get their hands on. It’s the American way. Washington did this to Americans during the 2008 Financial Crisis with Bush’s $700 billion Wall Street bailout in 2008, and Obama’s $831 billion stimulus bill in 2009.

At least in 2008, many Americans put up a fight about it. They tried to melt the Congressional switchboard calling their representatives to urge against these massive appropriations. Today America is so slavish and afraid because of coronavirus that even Trump’s “anti-socialist” supporters are eager to get their checks.

The Federal Reserve Is Crypto’s Best Friend

And the $2 trillion stimulus package at the center of all this drama is dwarfed by the money the Federal Reserve is pumping into the banking system. Top White House economist Larry Kudlow says it’ll amount to $4 trillion. And Congress doesn’t actually have any of the money for its spending bill. It’s borrowing all of that, so the Fed will have to create most of it out of thin air. Just like the $4 trillion it’s creating to shore up banks. That will make the entire monetary expansion $6 trillion in total.

The entire adjusted monetary base is currently $3.3 trillion. So the monetary-political complex is about to triple the money supply in the coming months. That’s what they did in the wake of the 2008 financial crisis. Quite more than doubled it actually. And that crisis not only gave us Bitcoin but saw it rise in price so dramatically until 2017, it became the greatest investment in world history by ROI. That’s how highly sought after something like Bitcoin is for merchants and investors.

Expanding the fiat money supply at such breakneck speed will not necessarily make cryptocurrencies like Bitcoin more valuable. But it will drive monetary inflation that causes dollars to depreciate against Bitcoin, driving its nominal value higher. Though, the result of this exercise in fiscal and monetary madness will likely be increased demand for crypto. People looking for an inflation shelter will have a powerful instrument in the intensely deflationary cryptocurrencies like Bitcoin. Bullish.

* Disclaimer: This article is the opinion of the author and does not represent professional financial or investing advice.

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Publication date: 
03/26/2020 - 14:38
Disclaimer

The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.